Processor cuts annual loss; on target for 2012 profit

Synlait Milk reduced its annual loss by almost $8.6 million last year as it gallops towards profitability this year.

The joint-venture milk processor made a loss of $3.1m in the year to July 31, compared with $11.7m the previous year.

In a statement, Synlait Milk chief executive John Penno said the company was on track to make a profit this year.

In the year to July 2011, revenue was just shy of $300m, up almost 30 per cent although increased expenses squeezed its operational margin to break even.

Its 2010 operational surplus was almost $7m, last year it fell to $35,000.

The better bottom line was mainly due to a more than $11m drop in finance expenses and not having the one-off costs involved with its 2010 capital raising.

Chinese Bright Dairy bought 51 per cent of Synlait Milk for $82m after Synlait unsuccessfully appealed for Kiwi investors to help fund the second-stage development of the Dunsandel processing factory.

During the year the company breached banking covenants for loans with its two banks, but they waived the breaches. It has $74.8m of bank lending. The company has 30 per cent equity in its $248m of assets.

In his report Penno said the company was angling for the future. Synlait Milk’s growth and drive into valueadded products was critical to its future.

In December, the company launched its Canterbury Pure baby powder in Shanghai which sells for almost $90 a kilogram.

‘‘Having spent the last three years establishing the business we are pleased with the result. Compared to some of our other New Zealand competitors we finished the year in a much stronger financial position, and we remain on target to post a profit for the 2012 financial year.’’

As well as large sums of investment being put into the company, about 30 of Synlait’s 101 employees were working solely on new rather than existing business, he said.

Farmer suppliers got a record payout of $7.66 for a kilogram of milksolids, up $1.45 on the previous year.

Meanwhile, the company’s base price for ingredients improved as well, Penno said.

‘‘It was a key turning point early in the financial year with price premiums being consistently achieved. They have continued to grow throughout the period.’’