Sunday, March 3, 2024

Synlait doubles its profit

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Synlait Milk nearly doubled its annual profit on a near 16% increase in sales. An increase in high-value finished infant formula sales – making up 28% of total sales, up from 13% a year earlier – drove the gains.
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The after-tax profit for the year-ended July 31 was $74.6 million, up from $39.5m a year earlier. 

Revenue rose to $879m from $759m.

The improvement was gratifying in that it was achieved during a year of large investment, chairman Graeme Milne said.

Synlait’s higher-value sales mix resulted in the gross profit per tonne rising to $1294 from $792, a 63% lift.

It also announced a new Everyday Dairy business category, based on the deal to provide Foodstuffs South Island with all its private label fresh milk and cream from April next year from the new production facility at Dunsandel.

Adding to this Synlait has a conditional agreement to buy selected assets of the Talbot Forest Cheese business in South Canterbury, including new production plant. The investment, in two stages and involving between $30m and $40m, is expected to be completed in August next year.

The Everyday Dairy category is a $2 billion market in New Zealand and Synlait will also target overseas markets, new chief executive Leon Clement said. 

The acquisition will cement Synlait as a company with high-quality, flexible dairy manufacturing capabilities tailored to meet customer needs and with diverse revenue streams. 

The acquired business will have a variety of cheese products.

Synlait is also building its new processing plant at Pokeno, in Waikato, and working to recruit milk supplies for the 2019-20 season. It reports a positive response from dairy farmers.

The A2 Platinum infant formula made for A2 Milk Co is Synlait’s flagship product and in July the parties signed a supply agreement through to July 2023. 

Synlait is exclusive infant formula maker for A2 in the Australian/NZ and Chinese markets.

It is also working to secure registration in China for the Bright Dairy and New Hope infant formula brands it makes.

Another customer is the United States-based Munchkin group, which is still working its way through the registration process for its Grass Fed infant formula in the US.

Grass Fed is selling well for Munchkin in Australia.

Synlait’s final average milk price for the 2018 year was $6.78/kg MS, made up of a base price of $6.65/kg MS and a seasonal and value-add premium payment of 13c.

That is well up on the 2017-year average of $6.30/kg MS, made up of a base $6.16 and premium 14c.

For this season Synlait’s new forecast is $6.75/kg MS, down from an opening forecast of $7.

Clement said declining commodity prices are putting pressure on the opening figure, helped by an offset from the lower dollar. 

The new forecast anticipates a medium-term improvement in commodity prices.

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