A2 milk boosts Synlait first-half profit

  • 31/03/2016
Synlait said the result highlights the success of its partnership with A2 Milk (Getty)
Synlait said the result highlights the success of its partnership with A2 Milk (Getty)

By Fiona Rotherham

South Island dairy processor Synlait Milk has boosted first-half underlying profit on a 358 per cent 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 January 31, from $400,000 a year earlier, the Rakaia-based company said.

Revenue rose 8.1 per cent to $213.5m and was underpinned by volume growth of 8.9 per cent, improved product mix to higher value canned infant formula sales, and a lower US dollar rate that made up for softer dairy commodity prices.

"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 increased by 155 per cent on a year ago and accounted for 16 per cent of total sales.

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.

"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.

More than 50 per cent of Synlait's suppliers will receive a premium payment worth around $6m 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 per cent 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.

It said profitability is on track to be a record this financial year.

NZN

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