NZ Dairies: Russians backing us

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New Zealand Dairies says its debt-restructured Russian owner is firmly behind the Studholme milk processor, which will look at expansion opportunities down the track.

NZ Dairies independent director Richie Smith said the owner Nutritek was "absolutely" behind the South Island investment, as a debt restructure by the Russians neared completion. He downplayed a report citing "unnamed sources from Singapore" that suggested otherwise.

Nutritek was a substantial way through a debt restructuring process, though he did not know if that included any capital raising by the Russian-based company, Mr Smith said.

Nutritek Overseas owns most of NZ Dairies, although a stake is held by Neliec Holdings, a Nutritek subsidiary based in Cyprus.

Mr Smith said Nutritek had been in a "standstill process" while reorganising its debt and creditors, but that process was very close to being completed.

"It's nothing unusual within the worldwide scene of what's happened [during the recession] ... it is basically giving the creditors agreement, or saying to the financiers we need to restructure the debt, let's all work together." Nutritek has restructured 65 per cent of its debt portfolio, the babyfood producer said.

NZ Dairies itself had sorted out issues including last year's buyback of shares from some minority shareholders.

In March or April the board would look at issues such as the addition of an extra milk-drying unit, Mr Smith said, though that would cost tens of millions of dollars.

"We've got capacity to expand. We've got the [space and] infrastructure in place to put an extra dryer in ... we've got a number of options there."

Nutritek's big interest was infant formula, and while the existing dryer could make that formula a new dryer might be able to turn out "finished infant product" in packaging as opposed to bulk product.

NZ Dairies chief executive Aidan Johnstone said the Studholme plant near Waimate in South Canterbury had been at full production particularly when the season had peaked at the end of October. The company had less than 10 per cent of the milk processed from the region, which was still dominated by Fonterra.

"We're basically shipping out product as fast as we can make it. [Most is going] to China at the moment, China is driving the whole market at the moment," Mr Johnstone said.

- © Fairfax NZ News