Chinese dairy firms fill up GEA order book in Q1

By Guy Montague-Jones

- Last updated on GMT

Related tags: China, People's republic of china, Investment

GEA is seeing “dramatic increases” in orders from the Chinese dairy market as local companies seek to improve standards and meet higher local demand.

For the first quarter of 2011, the equipment supplier said today that total orders were up 23 per cent on the same period last year.

GEA chairman Jürg Oleas explained that the improved order intake is thanks to strong demand for food process technology, especially from Asia.

Axel Wolferts, head of investor relations at GEA, underlined the importance of China and the Chinese dairy market in this growth story.

Wolferts told that while mature markets are stable, GEA is seeing “dramatic increases” in orders from China.

And the Chinese dairy industry has been a big contributor to the order book despite a series of highly publicised food safety scandals.

Food safety drives Chinese investment

In fact, the struggles to improve the safety record of the industry have fueled demand for new equipment.

Wolferts said: “Local companies want to regain the trust of consumers and so need to operate to high standards. Western style equipment makes it much easer to secure higher standards.”

With a rapidly growing appetite for dairy in China, local companies have the incentive to invest in order to get back consumer trust and not lose out to foreign competition.

And it is these local players rather than major international companies who are filling up the GEA order book. Wolferts said around 80 per cent of large orders are not from multinationals but local producers.

In China, it is not just processors who are driving demand. The Chinese government is paying subsidies to dairy farmers to buy Western style equipment. GEA expects to benefit from this initiative – the equipment supplier believes it can triple 2010 sales of milking equipment in China over the next three years.

Meanwhile, in more developed markets GEA is beginning to see demand recovery, especially in North America. Wolferts said energy efficient solutions are in high demand as energy prices and food prices put margins under pressure.

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