Synlait Milk buys Pokeno site for new factory, flags $260M investment

Tuesday 27th February 2018

Synlait Milk has conditionally bought a site in Pokeno in Waikato where it plans to spend $260 million developing its second nutritional powder manufacturing factory.

The Rakaia-based milk processor's acquisition is subject to Overseas Investment Office approval, and the company said it will know the commissioning date for the factory once it's got consents and approvals. The first dryer at the Pokeno site is expected to have annual capacity of 40,000 metric tonnes, matching dryer three at its Dunsandel site.

The increased capacity is needed to match growing demand for infant formula product from Synlait customers including a2 Milk Co, New Hope Nutritional, Bright Dairy and Munchkin, and the company wants to attract Waikato dairy farmers to supply the new facility.

"As well as helping us to meet our forecast infant formula demand, we see Pokeno as an opportunity to balance our exposure to a single powder manufacturing site and single milk supply pool at Synlait Dunsandel in the South Island," chief executive John Penno said in a statement. With the addition of Pokeno, we will have a national portfolio of added-value capability to leverage for our future growth."

Last November, Synlait said it was looking to buy land in the North Island to develop a second manufacturing site. Its Dunsandel factory in the South Island has about 200 contracted milk suppliers.

Synlait's shares have more than doubled over the past 12 months with the milk processor buoyed by its association with a2, however that outlook grew cloudy when the milk marketing company announced a new supply arrangement with dominant dairy company Fonterra Cooperative Group. That deal prompted a joint release from a2 and Synlait stating the new relationship doesn't change Synlait's exclusive infant formula supply arrangements with a2.

The stock last traded at $6.92, having slipped 3.9 percent so far this year.

(BusinessDesk)

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