Murray Goulburn has denied claims the termination of its contract with infant formula manufacturer Mead Johnson Nutrition will affect its investment plans. 

Interim chief executive David Mallinson said the company’s strategic intentions had not changed. 

The dairy giant has three driers that currently supply its nutritionals products in Australia. 

The installment of pharmaceutical-grade driers in Koroit – location under review – will enable the company to expand its export potential. 

Mr Mallinson said the contract was terminated due to a change in China’s regulations, which required both manufacturers to re-address the agreement. 

“It’s just a small bump in the road,” he said. 

Mr Mallinson said at most, the planned development may be “pushed out 12 months”. 

EARLIER: The agreement that sewed the framework for Murray Goulburn’s Koroit factory expansion has been frayed. 

Further doubt surrounds the planned $260 to $300 million development following an announcement that Murray Goulburn’s contract with Mead Johnson Nutrition (MJN) had been terminated. 

The contract was to be the dairy giant’s launch-pad into pharmaceutical-grade infant formula, exporting nutritional powders to the Asia Pacific region and China.

The development would make MG the leading competitor for infant formula in Australia, a position that chief executive David Mallinson said it still intends to achieve. 

The nutritional company entered into an agreement with the dairy giant early 2016 and plans were made in March to construct two driers at a new plant in Koroit.

Each drier would be able to produce 45,000 tonnes a year and the first was to be operational in 2019. 

Mr Mallinson confirmed the location of the development was under review on Friday due to $50 million in unforeseen infrastructure costs.

On Monday, Mr Mallinson told suppliers that negotiations with MJN had ceased on mutual grounds. 

My Mallinson said it would review its nutritionals investment strategy adding that approximately 90 per cent of MG’s existing nutritional sales were destined for markets outside of China.

MG’s supply agreement with Indonesia’s Kalbe Nutritionals – to buy significant minimum annual volumes over a long term – remains.

“MJN views MG as a valued partner and we continue to have an excellent relationship with them,” he said.

“MG remains committed to developing a leading B2B nutritionals business for all export markets and we will continue to assess the best possible way to invest for future growth in this business.”