Amelca out to woo the City
By Robert Harris
DAIRY farmers are showing strong support for new dairy processing business Amelca, but the City is proving harder to convince.
With its first share offer deadline nearing, managing director Len Jackson says farmers are on course to apply for at least £3m-worth of shares, with founders and some City money accounting for a further £1.5m of investment in the proposed factory at Hilton, Derbys.
"We intended to get 150 producers on board. I am sure we will get at least that," said Mr Jackson this week. "Farmers are looking to a secure future as far as prices are concerned."
Although the company is trying to raise £9.6m through the offer to enable the project to go ahead in full, a minimum of £6.6m would be enough to get it off the ground.
The company had said that all applications were to be in by 5pm next Monday (Dec 11). But Mr Jackson said this was the first date Amelca could close the offer. "If we are reasonably close to the target, we would leave it open for the full 40 days, which would take us to Dec 20."
That will give the company more time to raise the rest of the money, he added. "Our presentations have been well received in the City. I believe more money will come in. I am 80% sure that we will eventually reach our £9.6m target." A further £19m is being loaned by the Bank of Scotland and Lloyds TSB.
Unlike other UK dairy plants, Amelcas factory will produce several products, including liquid milk, cheese cream and whey. "This will enable us to cope with seasonal fluctuations and volatility in milk supply, and to take advantage of the market by switching between milk and cheese production," said Mr Jackson. The factory will use about 175m litres in 2002, rising to 300m litres in 2006.
It is in the middle of the densest milk field in the UK, with over 1bn litres produced locally, which will cut transport costs and help fund Amelcas promised 1p/litre premium for farm milk over a local basket of competitive prices, said Mr Jackson. That is worth £10,000 a year to a 1m litre producer.
Farmers should also benefit in the longer term. As a guide to investors, Amelca directors suggest turnover will hit £114m at full capacity in 2006, producing a profit of almost £12m and earnings per share of over 53p.
The company is avoiding a clash with major processors by ignoring the big retailers and targeting small and medium-sized retailers, convenience stores and garage forecourts, which have a combined milk market share of over 1bn litres a year.
Service, traceability and the less price-sensitive nature of these sectors will secure premium prices, said Mr Jackson. *
Amelcas multi-product factory will reduce costs, overcome seasonal milk fluctuationsand allow the company to target best markets, says Len Jackson.