A disagreement over the direction of Australia’s largest dairy farm, Tasmania’s Moon Lake Investments (MLI), has seen the resignation of its entire board.
Former deputy chair Dr David Crean and non-executive directors Keith Sutton, Rob Poole, Bruce Donnison and Simon Lyons resigned en masse on Tuesday.
In addition, the chief executive of Moon Lake's subsidiary company, VDL Farms’, Evan Rolley will not extend his contract beyond June 30, 2018.
PLANS REJECTED Dr Crean said the resignations were in response to Moon Lake’s owner Chinese businessman Xianfeng Lu’s rejection of the board’s advice on corporate governance and the need for millions of dollars in farm upgrades.
The board requested a $2 million investment to build dams and irrigation to drought-proof the 24 north-west Tasmanian properties, which Dr Crean said was rejected by Mr Lu.
“Given we had a material risk in front of us – it was a one-in-a-20-year dry season - we had to buy in extra feed,” Dr Crean said.
“It’s about protecting the profit of the business.”
For the past three months, Dr Crean said the board tried to persuade Mr Lu to commit to on-farm capital expenditure of $4 million annually for three years.
He said the money was needed for wallaby fencing, new laneways and feedlots.
“Everyone of the managers on the farms would tell you, straight away, the capex (capital expenditure) we were proposing is necessary,” Dr Crean said.
“The wallabies are prolific - they eat any pasture you grow.”
EXPERT ADVICE Dr Crean said the board was offering advice, based on expert information, which was being ignored by Mr Lu.
“We said, ‘what are we here for?’" he said.
Dr Crean said Mr Lu had essentially taken back control of the company.
“He will be chief executive of everything,” he said.
“He will run the farms with a general manager, which the (former) board considers totally inadequate. We need a well credentialled chief executive, who has the unanimous and strong support of the board.”
Dr Crean said the board could not get answers, as to why Mr Lu was rejecting its advice.
“We were commissioned, as a board, to provide fearless and fair advice and we took our obligations, according to corporate law,” Dr Crean said.
“The recommendations coming out of our meetings were rejected, mainly over the last three or four months.”
AUSTRALIA’S LARGEST Moon Lake, which bought the historic Van Dieman’s Land (VDL) company in 2015, has a herd of between 28,000 and 30,000 cattle.
It produces around 100 million litres of milk, processed by Fonterra, which is sold into the Chinese market.
Moon Lake was created by Mr Lu specifically to buy VDL and he promised an additional $100 million investment, over five years, with the aim of increasing job numbers from 140 to 235.
Mr Lu declined to comment directly on Dr Crean’s claims.
But in an earlier statement Mr Lu said the Foreign Investment Review Boad (FIRB) had approved the corporate restructure of Moon Lake, and its sister company Van Dairy.
Van Dairy was set up in April 2016 to export dairy products to China.
NEW DIRECTION The restructure allowed ownership to be transferred to Chinese Ningbo Xianfeng New Material Co Ltd (APlus).
APlus is listed on the Shenzhen Stock Exchange.
Mr Lu said the board of APlus had given careful consideration to the appropriate governance structure for the group.
“As part of the restructure an Australian holding company will be set up to coordinate the Australian operations and to ensure alignment with overall strategic goals,” Mr Lu said.
“Moon Lake and its sister company Van Dairy will be moved under control of the new holding company,” Mr Lu said.
The strategic goal for the group was to become a fully vertically integrated dairy business, with quality dairy products sold both internationally and domestically.
“We are of the view that the corporate governance structure of the Australian operations needed to change in order to best achieve these strategic goals in an effective and efficient manner,” Mr Lu said.
Mr Lu said the restructure would provide greater access to capital for investment beyond the farm gate, mainly in the production of new value-added dairy products in Australia.
Earlier this month, Moon Lake announced that Van Dairy would commence export of organic UHT milk and yoghurt to China by mid-year.
COMPANY HISTORY: Moon Lake Investments Pty Ltd was set up to acquire the assets of the Van Diemen’s Land Company in Tasmania.
The sole owner of Moon Lake Investments was Mr Lu, through his private company Hong Kong Siming Investment.
Van Dairy is a sister company of Moon Lake and was set up in April 2016 to export dairy products to China.
Mr Lu is the founder and largest shareholder of Ningbo Xianfeng New Material Co. Ltd (APLUS).
APLUS manufactures a range of sun-shading materials and products which are sold in 68 countries worldwide.