) announced that it has signed an agreement with New Zealand-based
Fonterra Co-operative Group Ltd. for the development of a proposed
dairy farm hub in China. The alliance, pending regulatory approval
in China, will leverage Fonterra's expertise in dairy nutrition and
farming in China.
Upon approval, Abbott Labs and Fonterra will form a joint
venture to invest a combined $300 million into the farm hub. The
hub will contain up to five dairy farms and more than 16,000 dairy
milking cattle in production. Abbott Labs expects the development
of the first farm to be complete and operational in the first half
of 2017 while the remaining farms will commence production in
The alliance is a step forward in Abbott Labs' strategic
decision to invest in China in the long term. Abbott Labs expects
to invest $400 million in its China operations in 2014.
In Jun 2014, Abbott Labs opened a state-of-the-art nutritional
manufacturing facility in Jiaxin. In addition, it opened two
research and development centers in Shanghai earlier in the
China is a key emerging market for Abbott Labs. We note that
Abbott Labs' international nutrition sales were adversely impacted
by a supplier recall initiated in Aug 2013 in China and two other
markets for certain pediatric nutritional products. Although there
were no quality issues with the recalled products and the supplier
subsequently determined the products were safe for consumption,
sales were disrupted.
Abbott Labs, a large-cap pharma, currently, carries a Zacks Rank
#2 (Buy). Other large cap pharmas which look attractive include
Johnson & Johnson
). All three carry a Zacks Rank #2.
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