Milk powder price rises encourage spending on new dairy equipment

By Guy Montague-Jones

- Last updated on GMT

Related tags: Milk

GEA Group has reported a surge in orders from the dairy industry in recent months as rising milk powder prices and a recovery in global demand give processors the confidence to invest.

Fonterra has just put in a €40m order with GEA for a new milk powder plant in New Zealand. GEA said the new order comes on the back of a rush of business from the dairy sector that came in at the tail end of 2010.

Jürg Oleas, CEO of GEA, called recent demand for dairy processing equipment “quite dynamic”.

Notable recent projects include Danone Baby Nutrition investing €50m in its production facility in Cork. A new drying line is to be built at the site in expansion plans that will triple capacity to 100,000 tonnes annually and result in 40 new jobs.

Other recent orders include one for an evaporator and a spray dryer from Yotsuba, a big Japanese dairy company, and another from the Chinese dairy manufacturer Mengniu.

Why are dairy processors investing?

Axel Wolferts, head of investor relations at GEA, told that high milk powder prices and the recovery in global dairy demand have persuaded dairy companies to make capital investments.

“Currently the milk powder prices are at a very high level which explains on the one hand why customers are willing to invest into new plants and process lines. In addition the global demand for dairy products is further rising, especially in the emerging markets.”

Wolferts added that dynamism in emerging markets has been beneficial to the New Zealand industry and to some extent the Australian one as well. This is because Asia, and China in particular, have turned to these countries to meet domestic demand for dairy products.

When asked about themes and trends in the latest demand spurt, Wolferts cited expansion of production capacity, energy efficiency and the obtainment of high quality and hygiene standards.

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