Synlait eyes NI expansion
Synlait plans to expand into the North Island with a second powder drying plant, and is seeking farmers to supply it with milk.
However managing director and chief executive John Penno would not be drawn on where the plant would be sited. This month the Canterbury-based company opened a new $55 million blending and packaging plant in Auckland, bringing total canning capacity to 64,000 tonnes a year.
‘‘We’ve got to take into account where sites and milk are available, and freight issues,’’ Penno said.
Federated Farmers dairy group chairman Chris Lewis said it would make sense to build it in Waikato, because of its proximity to Auckland and milk supply. He knew of a potential site in Tokoroa, but had not heard anything official. He welcomed the competition, noting it had forced Fonterra to maintain its prices and other companies to ‘‘sharpen their pencils’’.
The part-Chinese-owned company reported its best ever performance this year, with an after-tax profit of $38.2 million, an increase in revenue and a large amount of debt paid off. Penno said he did not envisage taking on the same number of suppliers as in Canterbury where there were about 200.
‘‘We’ve always found the ability to get the amount of milk we require, as an infant formula manufacturer we don’t need huge amounts of milk because there are a lot of other ingredients in the process. We’ll be looking for a very small amount of milk.’’
Building a new plant was something the company approached with caution, because it was conscious there was more capacity available now than in the past and milk supply might not keep growing. It was also conscious of its exposure to China, but had diversified into other countries with products such as Munchkin Grass Fed infant formula products in the United States.
Penno, a co-founder of Synlait, will step down as chief executive sometime in the next 12 months.
‘‘Until I leave it will be business as usual, I have the opportunity to stay on as a director and the future will be getting involved in entrepreneurial, start-up businesses.’’
Synlait had a record profit year in FY17 of $38.2 million and the company also raised $97.6 million in a capital raise completed in October.
This has enabled debt to be reduced by $131.3 million to $82.6 million, establishing an excellent base for the next phase of growth. Its investment in research and development had increased from $2.25m last year to $4.75m this year, and was forecasting a spend of $7m next year.