The new dryer at Horotiu will be the group’s seventh, with space at the site, next to sister company Affco’s meat processing plant, for further dryer development.
The Horotiu plant will initially be about half the capacity of the existing Open Country plants at Waharoa, also in Waikato, and in Southland and Whanganui.
Open Country is signing dairy farmers at a steady rate to supply milk to the new factory and has other farmers keen to supply if the group has capacity to service them.
It operates in only the three regions and is strongly committed to them but could easily expand outside them if it wished, Margrain said.
Horotiu is the priority for now and it is also well advanced in investment to add more value to its milk, though he wouldn’t give detail on new products.
Margrain said Open Country has the most conservatively-geared balance sheet of any milk processing group in New Zealand and the published accounts confirm it is very strong, though annual earnings were significantly lower than the year before.
Open Country, the second-biggest processor after Fonterra, does not pay dividends, with all profits reinvested in the business.
At the last September 30 balance date Open Country had total assets of $702.4 million. Total liabilities were $298.5m, including $81.5m in borrowings.
That is a ratio of debt to total debt plus equity of 42.5%; the ratio of interest-bearing debt alone was a low 11.5%.
The company brought in more from finance income ($7.06m) than it paid in interest costs ($3.25m) over the course of the 2016-17 year, as it also did the previous year.
The balance sheet strength allowed Open Country to fully pay farmers for their milk earlier than other processors, Margrain said.
The company is forecasting a milk payout for this season of between $6.25 and $6.55 a kilogram of milksolids.
In the latest year revenues exceeded $1 billion for the first time, up from $818.8m.
However, Open Country’s cost of milk from farmers grew by a greater amount as the international milk price spiked higher. That showed up in the operating cashflow statement with payments during the year up to $852m from $508m.
The operating cashflow balance reduced to $46.9m from $84.6m.
The rising milk price affected group margins, leaving the after-tax profit at $23.05m, down from $62m previously.
Margins varied year-to-year depending on the level of contracted sales at a given time and whether the milk price was rising or falling, Margrain said.
Margins had recovered during the first few months of the current year.
Open Country is 76%-owned by Talleys Group, which is also the 100%-owner of Affco.
Singapore-based Olam International is the second biggest shareholder, with a 15% stake. It bought about $230m of product from Open Country during the latest year.
