China Dairy Corporation will effectively float about 13 per cent of its company on the ASX through a new Hong Kong holding subsidiary in mid-January, selling 75-100 million shares as Chess Depositary Interests (CDIs) for 20c-25c each to raise about $20 million.
In Melbourne yesterday to spruik the listing, CDC chief executive Youliang Wang promoted his 10-year-old dairy company as one of the best and fastest-growing agribusinesses in China, bestowed favoured status by the all-powerful central Ministry of Agriculture.
Based in the major northwest city of Harbin and with long-term rights to graze 17,800ha of pasture land in fertile Heilongjiang province, CDC already owns more than 40,000 dairy cows.
More than half of its cows are rented out to local farmers to rear, breed from and milk under a novel lease-and-supply deal, with CDC exclusively buying the resulting raw milk from its farmers to distribute to six other dairy processing firms.
It is a model that has seen revenue and profits for CDC exceeding 20 per cent growth each year, with the company now capitalised at $150 million on annual revenue of $79m, and profits after tax of $38m for 2015. But Mr Wang, who together with chairman Enjia Liu owns 52 per cent of the company, has ambitions after its Australian listing to move further into downstream value-adding processing of milk in China and to acquire an Australian dairy processing partner.
“The plan (for the $20m capital raising) is to focus more on providing liquid milk products for Chinese children and to establish a dairy research centre in Mongolia,” Mr Wang told The Australian. “After listing, we hope to establish co-operation with a local Australian dairy processing company that can help us both on a technical level as we move into manufacturing more value-added dairy products in China, and hopefully provide us too with Australian-produced dairy product exports such as cheese and yoghurt.”
Mr Wang denied claims CDC was interested in buying Australian dairy farms.
He also said he was not certain Australian dairy farmers, who unlike their Chinese counterparts own their own land, would be open to the same cow-lease and milk sale deal that works so well for CDC in Heilongjiang.
“This listing on the ASX is a very important move for the company; Australian dairy brands are very well known in China and the recent China-Australia Free Trade Agreement also means dairy exports from China will now enter China tax-free,” Mr Wang said.
“This is one of the major reasons we chose Australia as the place for us to list; the other points are that the time difference is very slight, we want to learn from your manufacturing technology as we grow and process more milk in China, and we hope to find a partner to source more Australian dairy products too.”
Mr Wang said the recent axing of China’s one-child policy, as well as the emergence of a new generation of parents who have grown up drinking milk and eating cheese, would see demand for dairy products in China continue to soar.
Current dairy consumption in China is just 30 litres of milk a year, a tenth of that in other developed nations.
“We have a very god reputation with our clients for high milk safety and nutritional standards; it is why we were one of the few companies that didn’t suffer in 2008 during the China (melamine) milk scandal,” Mr Wang said. “The motto of CDC is that quality is the life of our company; we will continue that philosophy as we move further into downstream processing, continue our high growth rate and look to attract a good Australian dairy brand to partner with us.”
Source: The Australian
