Synlait profit best so far
Canterbury-based dairy company Synlait has reported its best ever performance with an aftertax profit of $38.2 million, an increase in revenue and a large amount of debt paid off.
Farmers were queuing up to supply the company, Federated Farmers North Canterbury spokesman Michael Woodward, who is himself a Synlait farmer, said. ‘‘There is a waiting list to get on board. The next logical step is for them to expand into the North Island because it’s peak cow or on the decline in Canterbury, and they need the extra milk.’’
The part-Chinese owned company said it was preparing to launch new ‘‘consumer packaged’’ dairy products as well as accelerate its infant formula business.
Revenue for the 2016-17 year lifted by 39 per cent to $759m, while debt was reduced from $214m to $83m. Demand for higher margin products such as infant formula grew, with a hike in volumes of 17 per cent to 18,776 tonnes and margins before tax increasing by $10m.
Synlait’s 200 farmers will receive an end-of-season payout for 2016-17 of $6.30 per kilogram of milksolids, made up of a $6.16 kgMS average base price and a seasonal and average value added premium payment of 14c kgMS.
Its forecast milk price of $6.50 kgMS for the current 2017-2018 dairy season remains unchanged. This compares with Fonterra’s $6.75.
The better prices for farmers come on the back of a poor 2016 year when the final payout was only $3.91 kgMS. Woodward said the improvement was a ‘‘shot in the arm’’ for farmers during a wet spring and would allow them to do more much needed on-farm work.
Synlait chairman Graeme Milne said the company was now in a good position to fund its growth strategy.
Chief executive John Penno described the 2016-17 year as one of consolidation.
‘‘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.’’
It was confident that the infant formula which it manufactures in partnership with the a2 Milk Company would be registered by the China Food and Drug Administration (CFDA) before January 1 next year.
It was also in the process of having its Munchkin and Grass Fed infant formula products registered in the United States, which if successful would make it one of a small number of imported infant formulas in that market.
Synlait has bought a second site in Auckland which will double blending and consumer packaging capacity and has also doubled the capacity of its wetmix kitchens in Dunsandel. These investments would relieve capacity constraints for the second half of the 2018 financial year. It was also investing in three sachet packaging lines in Dunsandel to offer a range of infant formula sachet formats.
In coming years Synlait intended to increase spending on research and category development from 1 per cent of revenue to 1.5 per cent.
Penno forecast canned infant formula volumes would rise in the 2017-18 financial year to between 30,000 and 35,000 tonnes.