Synutra Acquires Dairy Processing Assets, to Add to New Revenue Streams from Milk Protein-Based Nutritional Products
The demand for milk protein-based nutritional products has grown steadily in neighboring East Asian markets, and Synutra anticipates that this market will experience similarly strong growth over the next two to three years in China.
14/11/06 Synutra International, Inc., one of China's leading manufacturers of dairy-based nutritional products for infants, children and adults, announces that it finalized a transaction last week to acquire land use rights, plant buildings, and equipment from the Finance Department of Zheng Lan Qi (County) of the Autonomous Region of Inner Mongolia in China. With these assets, Synutra will build a new facility capable of processing 120,000 tons of fresh milk per year, producing 40 tons of milk fat per day, manufacturing milk protein-based food ingredients and producing packaged nutritional products, including protein bars, for the retail market.
Dr. Willie W. Wu, Synutra's Vice President for Sales and Marketing, said, "The nutritional power bar launch will enable Synutra to enter another fast-growing category in China's dairy market, the milk protein-based nutritionals segment. The target customer group for the milk protein-based nutritional products is similar to that of Synutra's existing products, which will allow us to leverage our existing manufacturing and marketing capabilities and vast distribution network."
The demand for milk protein-based nutritional products has grown steadily in neighboring East Asian markets, and Synutra anticipates that this market will experience similarly strong growth over the next two to three years in China. With the newly acquired assets, the Synutra management team estimates that the Company's nutrition bars production capacity will reach 50,000 tons per year in three years.
According to the terms of the transaction, Synutra will retrofit the acquired assets, which also include fresh milk collection centers throughout the county of Zheng Lan Qi, and begin operations in the processing and production facilities in the next two to three quarters. The transaction involves an investment of RMB 31 million (approximately US$3.9 million) from Synutra and a RMB 30 million (approximately US$3.8 million) cash subsidy from the local government to Synutra as an incentive payment rewarding the Company's commitment to local economic development. The details of this transaction have been disclosed in the Form 8-K current report filed with the U.S. Securities and Exchange Commission on November 9, 2006.
