Meat processor enters dairy market

A New Zealand meat processing company has announced its plans to invest in a dairy products venture, posing a potential competitive threat to Fonterra.

Affco Holdings is forming a wholly owned subsidiary called Dairy Trust to develop, own and manage a small number of dairy plants around New Zealand.

The company said it had identified the New Zealand dairy sector as an area with potential. "New Zealand dairy products enjoy a first-class reputation globally for quality and price competitiveness and the Affco board regards it as an attractive sector for investment," Affco chairman, Sam Lewis said.

Dairy Trust will acquire three sites from Affco, where it will construct and operate dairy facilities. Dairy Trust also proposes to acquire a fourth site in Southland.

Dairy Trust will also seek a listing on the NZX during 2008. The plan is likely to give the share market a new listing at a time when Fonterra is engaging in a lengthy debate about its future capital structure.

Affco's role in Dairy Trust will be as an investor only. Dairy Trust will operate with its own management and board and will have a much wider shareholding base than Affco's.