Danone to invest in Russian dairy farms

MOSCOW (Reuters) - French food group Danone will co-finance the construction of new dairy farms in Russia, partnering local firm Damate, with the aim of securing long-term milk supplies in the fast-growing market, the companies said on Friday.

The world's largest yoghurt maker said it would provide financial support to the construction of several dairy farms in the central Tyumen region and the Bashkortostan Republic.

All milk produced by the farms will be sold to Danone's factories, according to a joint statement. Danone has more than 20 plants in Russia and is the leading producer of milk and dairy products.

They did not detail the size of the planned investment.

Damate earlier announced plans to invest a total of 14.4 billion roubles ($448.7 million) until 2017 into the construction of dairy farms in those regions.

Naum Babaev, Damate's founder and board chairman, told Reuters the Russian firm would bear the bulk of the construction costs and the size of investments had yet to be finalised.

"Danone will part-finance the construction... but its share won't be large," Babaev said. "What interests Danone as our partner is quality milk, stable volumes and price of supplies."

Damate plans to sign a supply agreement with Danone for at least eight years, he said, adding the parties were currently finalising the pricing.

Danone has invested a total of more than $1.6 billion in Russia, including the acquisition of dairy firm Unimilk in 2010. Emerging markets account for about half of Danone's total sales.

($1 = 32.0911 Russian roubles)

(Reporting by Maria Kiselyova, editing by Jason Bush and Elaine Hardcastle)