Synlait posts $10.6m halfyear profit
SYNLAIT Milk has posted a halfyear aftertax profit of $10.6 million and signalled it is on track to deliver ‘‘modest’’ improvements in fullyear profit.
The result for the six months ending January 31 was up slightly on the $10.2 million profit for the same period last year.
In a statement, chairman Graeme Milne said the company had made good progress towards its strategy in the period. Strong sales growth had driven an improvement in earnings and the company’s gross margin was $43.7 million, $2 million higher than the same period last year, mainly due to higher volumes of canned infant formula.
Synlait also decreased net debt from
$292 million to
$147 million, driven by operational cash flow and $97.6 million of new equity raised from its rights issue in October last year.
Managing director and chief executive John Penno said Synlait remained confident with its infant formula business and the evolving regulatory environment in China. Its infant formula business had returned to strong growth since January 31 and that was expected to continue into FY18. It was believed that would generate a modest improvement on its FY16 result.
In their interim report, Mr Milne and Mr Penno said the company believed the Chinese infant formula market would grow, from the 2017 calendar year, to more than one million metric tonnes/annum, which was more than double the total volume of infant formula five years earlier.
There was a strong and growing appetite for imported infant formula in China. In the 12 months to July 2016, the total imported value was 350,000 metric tonnes.
Regulatory change and overstocking of some brands had meant the past six months had been a period of considerable uncertainty for the infant formula industry.
However, as stocks had cleared and greater regulatory clarity had emerged for customers, order growth volume had resumed.
Orders received gave confidence that the company would end the year close to its target volumes of 18,000 metric tonnes of finished infant formula, with the increasing run rates between now and the end of the year.
To meet expected growth in demand, Synlait was in the process of appointing a fourth shift to its blending and consumer packaging facility which would see it capable of operating at full capacity from June.
Plans for a second blending and consumer packaging facility would be announced in the coming months.
Investment in a second wet mix facility was under way to double the infant formula base powder capacity of Synlait’s Dunsandel site to 80,000 metric tonnes by November.