A recent hike in the price of milk was designed to generate profits to build a new dairy factory, according to sources who spoke to Times of Malta.

Malta Dairy Products, the company behind milk producers Benna, recently announced a second increase in the price of milk in the space of six months, saying that it can no longer absorb the rising costs required to produce milk.

The move was described by the agriculture ministry as “not justified”, saying that the matter will be investigated by the consumer affairs and competition regulator.

Sources told Times of Malta that the price hike is the latest move in a long-standing tug of war between Malta Dairy Products and the government, which owns a 30 per cent share in the company, over its future direction.

According to sources, the government is accusing the company of failing to reinvest its pre-COVID profits, with shareholders instead squandering money and leaving the company’s finances in dire straits.

The company is believed to have been profitable until the pandemic hit in 2020, when sales dropped drastically due to the dip in tourist arrivals. Inflation and rising costs in the last three years have dealt a further blow, with the company currently running at a loss.

MDP plans to leave Ħamrun

One particularly contentious issue in the dispute is the company’s factory, which is in dire need of maintenance and new equipment. The factory is currently located in Ħamrun, but MDP is looking to move to new premises, also because the site’s ground rent has expired.

Last year, the government pledged to convert the factory’s site into a large garden, complete with underground parking. However, there is speculation that developer Joseph Portelli has set his eyes on the site for a potential development linked to Ħamrun Spartans football club.

Sources say that MDP has been insisting the government finance the construction of a new factory for the company, something that the government has refused to do. The government, on its part, believes that the company should have set aside rainy-day funds for this project.

Although the government has refused to finance the project, it has instead offered the company a tract of land in Luqa on which the factory could be built.

The government, like any investor, retains the prerogative to assess its position and determine whether to continue its involvement or explore alternative options- MDP spokesperson

Sources told Times of Malta that MDP has so far refused to involve local investors who expressed an interest in investing in the company and potentially part-financing the construction of a new factory.

Instead, the company announced a new price hike in recent weeks, hoping that this will make it profitable again, with profits going towards a new factory.

The situation has led the government to mull an exit from the company.

MDP: Rising input costs forced us to raise prices

Replying to questions sent by Times of Malta, a Malta Dairy Products spokesperson said that the decision to increase milk prices was “not taken lightly” and carried out in response to “the mounting input costs that MDP has been grappling with”.

The spokesperson said that throughout the years, the company had received promises of support from various governments, “particularly in relation to relocation”, as well as interest from several private investors.

Asked about the government’s possible exit from the company, the spokesperson said that “the government, like any investor, retains the prerogative to assess its position and determine whether to continue its involvement or explore alternative options”.

The spokesperson stopped short of confirming or denying whether the increase in milk prices had been driven by a need to finance a new factory, saying that “specific information cannot be disclosed”, as board discussions are confidential.

“Rest assured, the board operates with the overall well-being of the company in mind, striving to ensure the long-term sustainability of MDP to continue supplying high-quality dairy products to our valued customers,” the spokesperson added.