Open Country Dairy's new Waikato factory will provide extra jobs for the region.
Open Country Dairy (OCD) has started work on a new plant that will increase its processing capacity in Waikato.
The country's second largest dairy processor will build the factory at Horotiu, near Affco's meat processing plant. Both OCD and Affco are owned by agribusiness company Talley's Group.
OCD chairman Laurie Margrain confirmed that activity had begun on the site but was tight lipped about the factory's details.
"I can't confirm the details, we're keeping many of our options fluid, we are building processing capacity and the exact nature and type of that capacity to some extent is not yet confirmed, some parts are and some are not."
The site would create new job opportunities for the region, but it was too early to say how many as that would depend on the factory's final configuration's. It would also mean OCD can take on more Waikato suppliers.
Margrain said the factory was being built because OCD had been short of capacity in Waikato for some time.
"We have taken a very calm and pragmatic view about when we should extend capacity in the Waikato in terms of what conditions the market was in and what condition the industry was in and because we are very prudent in how we invest capital, we have taken our time in making these decisions."
He expected the site would start processing milk by the spring of 2018.
Waikato Federated Farmers president and OCD supplier Chris Lewis said the company told farmers about the new plant at its latest round of supplier meetings.
"With their forecasted payout and the signal from their board that they are going to build another plant, it must show as level of confidence in the dairy sector and it shows there is a good future out there and they are willing to show that and compete for that."
Lewis said the plant would be different to what OCD had built in the past and would better compliment its product range. Suppliers had reacted positively to the project, he said.
OCD is the second largest global exporter of whole milk powder and also produce proteins, milk fats and cheeses. The dairy company posted a record annual profit last year even as revenue fell.
According to BusinessDesk, OCD's profit increased 16 per cent to $34.4 million in the year ending September 30, 2015. Revenue slid 24 per cent to $688m while the cost of sales sank 28 per cent to $620.5m, according to its accounts.
The company did not pay a dividend and has previously said it was investing in infrastructure for future growth. Its payments for milk fell 36 per cent last year to $480.2m, while receipts from customers declined by a lesser 19 per cent to $707.4m.
The value of the company's inventories rose 28 per cent to $159.3m.
Open Country made $14m of loan repayments last year, compared with the year earlier when it received a loan advance of $71m.