Murray Goulburn plans to build a new plant in western Victoria as it aims to further tap Asia's growing appetite for infant formula.
The plant in Koroit will allow the dairy co-operative to fulfil newly signed supply agreements with US and Indonesian formula makers, and to increase production of its own Devondale Natra Start formula for export to countries including China.
Rival dairy producers Bega and A2 Milk are among those to have already targeted China, where demand for safe product has soared in the wake of a 2008 melamine infant formula scandal which killed six babies and hospitalised more than 50,000.
"Devondale Natra Start infant formula will provide a world-class, Australian product to our consumers, 100 per cent controlled by MG from farm gate to shelf," Murray Goulburn managing director Gary Helou said in a statement.
"We expect there will be strong consumer support for Devondale Natra Start, particularly in China, where Devondale is already a trusted, leading liquid and consumer milk powders brand."
Investors warmed to the news, lifting Murray Goulburn shares more than 2.5 per cent against the backdrop of a 1.4 per cent decline in the benchmark S&P/ASX200.
Murray Goulburn units closed up 2.86 per cent, or 6.0 cents, at $2.16.
Murray Goulburn, which listed on the Australian Stock Exchange in 2015, on Tuesday said it was investing an initial sum of between $260 million and $300 million in the Koroit plant, 300km west of Melbourne.
A dryer capable of processing 45,000 tonnes of powder each year will, alongside an existing 18,000-tonne unit in Cobram, allow it to fulfil the new contracts with US-based Mead Johnson Nutrition and Indonesia's Kalbe Nutritionals.
The dryer will be operational in 2019 and a second 45,000-tonne unit could be added if, as expected, there is sufficient demand.
The Melbourne-based co-operative also counts Japan and Vietnam among its key Asian markets.
Mead Johnson Nutrition, the maker of Enfamil, will have an on-site packaging unit so the plant can supply finished products for sale across the Asia Pacific region.
"We look forward to developing the relationship further in the future for the benefit of consumers across the Asia Pacific region," Mead Johnson Nutrition chief executive Kasper Jakobsen said.
Murray Goulburn in February announced its first results since listing on the Australian Securities Exchange, unveiling a 22.5 per cent drop in first half profit because of weaker global dairy prices.
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