Synlait first-half profit jumps on boom in A2 Milk infant formula sales

Thursday 31st March 2016

Synlait Milk, the South Island dairy processor, boosted first-half underlying profit on a 358 percent increase in canned infant formula sales, mainly to specialty milk marketer A2 Milk.

Underlying net profit was $12.3 million for the six months ended Jan. 31, from $400,000 a year earlier, the Rakaia-based company said in a statement. Revenue rose 8.1 percent to $213.5 million and was underpinned by volume growth of 8.9 percent to 46.356 metric tonnes (MT), improved product mix to higher value canned infant formula sales, and a lower US dollar rate that made up for softer dairy commodity prices.

“We’re glad to deliver a solid result for the first half of FY16. Our significant investment in customer and product development, people, plant, and operating systems in recent years is beginning to transform our earnings,” said chairman Graeme Milne.

Synlait’s strategy is to partner with leaders in the infant formula and adult nutrition industries.

Nutritional sales for the first half were 7,498 MT, a 155 percent increase on a year ago and accounted for 16 percent of total sales. Ingredients were steady at 38,858 MT, down 2 percent on the same period in 2015.

Synlait said is was expecting an almost four-fold increase in canned infant formula sales for the full year compared to the 2015 financial year.

Chief executive John Penno said the result highlights the success of its partnership with A2 Milk.

“As the sole manufacturer of their fast-growing A2 Platinum range of infant formula, it’s a good example of a strong customer relationship providing a positive return to our bottom line.”

Synlait’s partnership with US-based Munchkin Inc to produce Grass Fed infant formula is expected to be launched in New Zealand and Australia in May. The first trial batches have been manufactured for clinical studies in the US.

More than 50 percent of Synlait’s suppliers will receive a premium payment worth around $6 million above the farmgate milk price this financial year, due to its specialty milk programmes including A2 milk. Its number of milk suppliers has grown by 28 farms to 201 to deal with increased demand but production is expected to be down 5 percent on last year.

In February Synlait cut its forecast farmgate milk price for this season to $4.20 per kilogram of milk solids from $5/kgMS.

“The impact of prolonged low dairy commodity pricing, however, continues to him home for our suppliers,” Penno said. “We remain committed to supporting them where we can and for the second year running we’re advancing a higher proportion of our final milk price than would be normal.”

Synlait has forecast profitability is on track to be a record this financial year.

Statutory net profit was $10.2 million, or 6.99 cents per share, in the first half, from a loss of $6.4 million, or 4.39 cents, a year earlier when Synlait's bottom line was hurt by unrealised foreign exchange losses.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

No comments yet