Investments lower profit
Strong earnings growth strongly demonstrates the strength of our core infant and lactoferrin businesses. Graeme Milne Chairman
Listed dairy company Synlait has seen a 9 per cent fall in net profit as it carries the cost of investments in new dairy factories.
However, the company says demand has been strong during the pandemic and it expects that will continue in the coming year.
Although revenue rose 27 per cent to $1.3 billion, Synlait made a net profit of $75.2 million for the year to July 31, and it expects a similar, if not slightly better, result next year.
Chairman Graeme Milne said this year’s lower profit reflected investments in new facilities and recent acquisitions, including its new Po¯keno factory and its Dunsandel Advanced Dairy Liquid Packaging facility, which are expected to start delivering earnings from the 2022 year.
The company has also recently bought Christchurch cheesemaker Dairyworks for $112m, which will fit in with its other cheese company, Talbot Forest.
Synlait’s earnings before interest, taxes, depreciation and amortisation (EBITDA) jumped 13 per cent to $171.4m.
Milne said Synlait’s financial performance had been resilient when viewed against the backdrop of Covid-19, with strong earnings growth ‘‘strongly demonstrating the strength of our core infant and lactoferrin businesses’’.
Lactoferrin sales soared 46 per cent to 30 metric tonnes and consumer-packaged infant formula sales rose 15 per cent to 49,180 MT.
Infant formula volumes were expected to be similar next year, although higher than normal stock levels in the supply chain would mean lower demand for the first half of the year. But the company said its guidance had to be subject to ‘‘the unpredictable effects of Covid-19, with consumer behaviour, channel dynamics and supply chain disruptions all subject to change’’.
Synlait was also finalising a long-term supply agreement with a new, multinational customer for packaged products, ‘‘which is expected to have a positive impact on earnings from FY23’’.
Its forecast for next season’s milk price has begun with a base price of $6.40 per kilogram of milk solids, up from $6. Synlait’s final milk price for the 2019/20 season was $7.30 per kilogram of milk solids MS, including a base milk price of $7.05 and incentive payments.
‘‘As always, commodity prices through the next few peak months will be critical to this season’s milk price.’’