Fight on to save Amelca
By Robert Harris
DAIRY farmers are mounting a desperate bid to rescue Amelca, the new Derbyshire-based dairy company, which went into receivership last Friday.
Unless they succeed, at least 150 farmer investors face heavy losses just three months after the factory opened.
It is understood that the companys bank, the Bank of Scotland, refused to extend an overdraft facility to cover additional running costs.
Farmers expecting a premium milk price and good returns on their processing investment were shocked at the news. Amelca received ringing endorsements from DEFRA secretary, Margaret Beckett, and NFU president, Ben Gill, at the official opening on May 20.
The £20m plant, at Dove Valley Park, Foston, was designed to process milk from local farms into cheese, liquid milk and cream for nearby outlets. A 1p/litre premium over the areas average ex-farm milk price was planned.
At least 150 farmers invested about £4.5m, averaging £20,000 apiece, though some founder farmers had stakes worth up to £400,000. Private investors accounted for a further £4.5m. The bank loan amounted to £11m.
One shareholder, Dib Atkinson, who farms with husband, Fergus, at Nunsfield farm, near Ashbourne, Derbyshire, said producers were "absolutely devastated" by the news. "The timing was very perverse – orders were really starting to build, and would have taken all the milk in October. But the bank wouldnt listen." A 12-month deal to supply a major cheese broker had also been secured.
About 25 farmers were supplying the factory last week, though numbers were expected to rise to about 70 by October and to 150 during 2003.
"We did not even have the chance to refinance the project, the bank just took the view that the business was not going forward," Mrs Atkinson said.
She and other farmers are talking to potential new partners to raise the finance to buy the business, but time is short. Four dairy companies have reportedly toured the site in the past few days.
"We need to put something together quickly," Mrs Atkinson said. "We have to help farmers who borrowed to invest, and who are owed for six weeks milk."
A spokesman for the Bank of Scotland defended the banks position. "Over recent months, we really have been trying to support Amelca. Unfortunately, we are now at a point where this can no longer continue."
He dismissed rumours that the bank, which also lends to fledgling processor United Milk, was worried about its exposure in the dairy sector. "We judge each case on its own merits."
But analyst David Pattison of Plimsoll Publishing said: "It is not usual to see a business closed so quickly. You would expect a couple of years grace, you expect a new business to finance with debt."
However, another observer said that, while Amelcas business proposition appeared "very robust", the financial plan did not. "The biggest issue for a new-build project is, does it start on time? If not, it can soon put cash flow out."
Launched two years ago, Amelca struggled to raise finance. This, a change of site and the foot-and-mouth outbreak put the planned start date back by six months. Operating losses topped £1.3m by Dec 2001, and rose steeply by a further £407,000 in the first quarter of 2002 as staff numbers built and equipment was commissioned.
The delayed opening meant Amelca had to sell milk from some suppliers into weak markets.
But the original target of processing 300m litres by 2006, producing a profit of £12m from sales of £114m, remained in place.
Receiver Bob Maxwell of Deloitte and Touche hopes to sell Amelca as a going concern.
"It is a fantastic site, one of the best in Europe, which complies with all future EU legislation. If there is competitive interest we will get a good price."
But preferred and secured creditors – including the bank – are first in the payment queue. "The chances of shareholders getting anything back are slim," Mr Maxwell said.
Express Milk Partnership arranged collection from most of the beleaguered producers from last weekend, paying the 16.5-17p/litre expected from Amelca. *