Chinese owner committed to expand big Tassie dairy

Chinese owners commit to expansion promise for Tasmania’s big VDL dairy


Dairy
Moon Lake Investment's owner Lu Xianfeng at one of his Van Diemen's Land Company farms in Tasmania.

Moon Lake Investment's owner Lu Xianfeng at one of his Van Diemen's Land Company farms in Tasmania.

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Concerns about the Chinese company's finances and plans force Moon Lake Investments to quell speculation about its Tasmanian dairy farms

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The Chinese-born owner of the nation’s biggest dairy farming operation and one of Australia’s oldest agricultural businesses assures sceptics he will keep his foreign investment commitments to expand the Tasmanian operation.

Moon Lake Investments says the company was keeping long-term commitments made by billionaire Lu Xianfeng who paid $280 million to buy the dairy operations at Van Diemens Land (VDL) Farms, in North West Tasmania in late 2015.

Mr Lu’s acquisition, at a reported $60m premium above the next nearest bidder, came with a promise to the federal government to spend about $100m expanding the dairy, including employing 95 extra staff.

Moon Lake managing director, Sean Shwe, said the company remained “very positive about the long-term future of dairy investments”, and would go ahead with further planned investments as opportunities in the milk market allowed.

However, he confirmed the decision to buy VDL farms was followed by a continued slide in global milk prices.

Milk production up

Despite that downturn, the company had maintained its workforce (about 150 staff), increased milk production, opened export markets to China and planned to transition three large dairies to high quality organic farms.

“We are already exporting some 10,000 litres of fresh milk a week from Tasmania to develop markets in China,” Mr Shwe said.

The company held its nerve during the dairy price slump and was now benefitting from a progressive upturn in the market, including meeting production and supply commitments to local milk processors.

He said any critical look at the activities of Moon Lake overlooked what had happened with the world-wide industry downturn, which had forced the closure of other dairy farms and some milk processing in Australia.

VDL has a herd of 30,000, including about 20,000 milkers on 25 farms and produces almost 100m litres of milk a year,

We are already exporting some 10,000 litres of fresh milk a week from Tasmania to develop markets in China - Sean Shwe, Moon Lake Investments

The VDL company’s history dates back to 1824 when its first directors from the wool and textile industry in London were granted 350,000 hectares of land in the newly settled island colony by King George IV.

Too much debt

However, The Australian Financial Review has reported Mr Lu’s swift purchase of the Van Diemen’s Land Company was funded entirely through debt, and before VDL was even acquired he was moving to on-sell the historic asset to raise some cash.

The plan to was blocked by Chinese regulators.

Tasmanian Independent federal MP Andrew Wilkie, who wanted an Australian consortium to buy VDL when it was sold by its previous New Zealand management, said the media revelations suggested Mr Lu’s claims, made to gain approval for the Moon Lake takeover, were not the commitment the government had expected.

“Those who opposed the sale were right all along,” Mr Wilkie said.

He said “naive politicians”, including the federal and Tasmanian governments and opposition parties “jumped on the bandwagon and claimed selling VDL to another foreign buyer would be great for the economy and generate jobs.

However, Mr Shwe argued the company had maintained its commitments to the Tasmanian community and it planned to keep delivering on those commitments.

New markets took time to develop, and “we have to work carefully with the regulatory authorities both in Australia and China”, he said.

“The company’s value adding strategy has not changed.”

The board was finalising its 2017-18 capital expenditure plan this month.

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