Interflour first for Vietnam
A company owned by WA grain growers and Indonesia billionaire Anthony Salim has opted to go it alone in a $90 million project to develop South-East Asia's first major malting plant.
Intermalt had been in talks about a local partner taking up to a 35 per cent share in the plant in Vietnam, where the race is on to quench a growing thirst for beer.
It is understood the talks involved Sabeco, the biggest brewer in Vietnam, but did not progress because of speculation the Vietnamese Government was preparing to sell off the State-owned enterprise.
The speculation was confirmed last week when Sabeco announced plans to sell a 53 per cent stake.
A host of the world's biggest brewing companies are reportedly lining up for a share, including Thai Beverage, SAB Miller, Heineken and Asahi.
Jockeying for control of Sabeco won't impact on plans to have Intermalt - wholly owned by the CBH and Salim joint venture company Interflour - in full production by the end of next year.
The plant is being built on the 27ha site of Interflour's Cai Mep Agri Port in Vietnam.
Cai Mep already boasts a Panamax vessel berth with high-efficiency discharge capacity, a flour mill that doubled production capacity to 1000 tonnes a day in 2012, 60,000 tonne storage silos and a new 160,000 tonne warehouse.
The mill sources all its Australian wheat from WA growers and soon those shipments will include malt barley to help slake the demand of brewers tapping into what has emerged as one of the biggest global beer markets.
Interflour chief executive Greg Harvey said finance for the project was locked away with no plans to bring in another partner.
Mr Harvey said the plant would produce 110,000 tonnes of malt in its first year, but was being built with capacity to produce 220,000 tonnes a year.
"Site work has started and we are building up the silo space that we need to house the barley to be used in making malt," he said.
"We are very confident we will go straight into full production and the second phase will come on soon after. We had planned to go to 220,000 tonnes in year three, but now we're considering it earlier."
It is estimated the Vietnamese beer market is growing by up to 16 per cent a year, with about 3.5 billion litres consumed in 2014.
Heineken has been one of the major brewers staggered by sales growth of up to 20 per cent in some years, with Vietnam on target to overtake the US as its biggest market.
Intermalt already has memorandums of understanding and offtake agreements in place with the biggest players in Vietnam, where drinking the top local brews and brands like Heineken and Carlsberg is a status symbol in the bars of Ho Chi Minh City.
"We have a number of supply contracts and agreements with all of the established international brewing companies that operate in Vietnam," Mr Harvey said.
"We think by 2020 the malt business in Vietnam will have a total demand of about 450,000 tonnes and our stage two will be 220,000 tonnes so we are being pretty modest here.
"That production would replace imported malt."
Mr Harvey said there were a lot of advantages in being able to produce malt for the local market in Vietnam.
"We can combine shipments of wheat and barley from WA. And if barley production is having a bad year in WA we can also combine it with our shipments from North America or even Europe," he said.
"We have a world-class grain port and we are well and truly on track to top three million tonnes of import there this year. We wanted to be in grain processing in Vietnam and the next obvious one after wheat was barley.
"It will mean more tonnes through our port, bigger shipments and potentially it adds another 260,000 tonnes of demand in the WA market."
Interflour first started looking at the merits of building a malt plant in 2010 but put it on hold when CBH entered the race to buy Joe White Maltings from Glencore in 2013.
The CBH bid eventually fell short of Cargill's $420 million offer for JWM plants in six States, including one at Forrestfield next to the CBH Metro Grains Centre. JWM supplies markets in South-East Asia.
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