Synlait slashes debt as revenue soars

INCREASED sales and improved dairy commodity prices have underpinned an almost 40% increase in Synlait’s full year revenue, and its debt has been slashed by $131 million.

Synlait’s revenue rose 39% to $758.9 million for the year to July, earnings before interests, tax, depreciation and amortisation was up 6% to $89 million and aftertax profit rose 11% to $38.2 million.

Synlait confirmed its total average milk price for the 201617 season was $6.30 per kilogram of milk solids, including an average valueadded pre mium payment of 14c.

Synlait’s forecast milk price of $6.50 for the current 201718 season remained unchanged. This was 25c below Fonterra’s farm gate milk price forecast.

Synlait chief executive John Penno said the increase from the previous season’s $3.91 would be well received by its Canterbury milk suppliers, with the premium payments up from $5.7 million a year ago to total $8.9 million.

He said 2017 was ‘‘a year of consolidation ahead of an expected period of solid growth’’.

‘‘We own and control every step in our value chain, right from differentiating the milk supply behind the farm gate through to managing market access for our customers,’’ he said.

Synlait shares rose 25c, or 4.7% following the announcement to a record $5.50; now 42% up on a year ago.

Craigs Investment Partners broker Peter McIntyre said overall the result was ‘‘slightly better than expected’’ and beat the expectations of both the market and Craigs.

‘‘The key variance was from a combination of higher infant formula volumes and lower operating expenses reinvestment, of around $1 million,’’ Mr McIntyre said.

Synlait’s chairman, Graeme Milne, said the company’s shareholders had supported this year’s growth focus in September 2016 when $97.6 million was raised to invest in the business.

Mr Milne said Synlait’s current balance sheet was ‘‘in a very good position’’, as net debt was down from $214 million to $83 million and, alongside retained earnings, was well placed to fund its growth strategy.

Total sales volumes were 21% up on last year’s 116,402 tonnes, to 141,393 tonnes, due to increased milk supply and having carry over stock from last year sold through.

Synlait’s canned infant for mula volumes increased 17% to 18,776 tonnes, Mr Penno said.

‘‘Our attention is on accelerating our infant formula business, and preparing to launch into new highreturning dairy categories,’’ Mr Penno said.

Synlait was also working to reinvigorate its ingredients business, and add value by systematically moving milk products into consumer packaged formats, he said.

‘‘We intend to increase margins and operational efficiency, as well as canned infant formula volumes in full year 2018 to 30,000 to 35,000 tonnes, as a result of our preparation in full year 2017,’’ Mr Penno said.

Synlait’s partnership with The A2 Milk Company had continued to grow in volume and value and both companies remained confident that registration of their infant formula with the China Food and Drug Administration would be received before January 1 next year, Mr Penno said.

‘‘We continue to be excited about the potential of our partnership with Munchkin Inc and their range of Grass Fed infant formula products.

‘‘Once we’ve completed the US Food and Drug Administration registration, it will be one of a very small number of imported infant formulas in that market,’’ Mr Penno said.