Synlait Milk talks down threat of dry Canterbury conditions

Friday 16th January 2015

Synlait Milk, which plans to take a quarter stake in Sichuan New Hope Nutritional Foods Co to gain a direct interest in a Chinese infant formula brand, has talked down the threat of dry conditions in Canterbury, saying its farmer suppliers have reliable access to irrigation water.

The Rakaia based milk processor hasn't seen a drop in milk production as parts of east and south Canterbury experience extreme dry conditions, and is monitoring conditions closely, it said in a statement. Managing director John Penno said most of its suppliers in mid-Canterbury are irrigated with reliable water sources, and those who aren't are largely in high rainfall areas.

"It's tough for them at the moment, but most of them are upbeat and share our view that the weather we're experiencing is not unusual and they are expecting low levels, if any, of lost production at this stage," Penno said. "We have reviewed the factors at play and do not expect it to have much of an impact on our milk supply."

National Institute of Water and Atmospheric Research (Niwa) data shows the soil conditions in east and south Canterbury is between severely and extremely drier than normal, while the outlook for rain remains light, and water restrictions have been imposed in parts of South Canterbury.

Synlait's board will review the milk price at it next meeting in late January, and will update the market afterwards as shareholders will want to know how weather conditions and the milk price will impact the business.

The shares fell 1 percent to $2.97, and have dropped 27 percent over the past 12 months.

BusinessDesk.co.nz

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