Shareholders in Australia and NZ didn’t take to the annual results from Kiwi milk processor Synlait Milk yesterday.
They sold off the shares by more than 7% at one stage after the release of the July 31, 2017-18 results – which though very solid, contained the added news that the company had cut its estimated 2018 milk price – joining the giant Fonterra in doing so.
The shares ended 6.2% lower at $10.94.
Synlait reported an almost doubling its net profit for $7NZ4.6 million, from $NZ39.5 million thanks to higher infant formula sales.
That was on turnover up from $NZ759 million to $NZ879 million.
The company said its final average total milk price for the season just finished had been set at $NZ6.78 per kilogram of milk solids (kgMS).
Bu Synlait cut its forecast milk price for 2018-19 to NZ$6.75 kg from a previous forecast of $NZ7.00/kg.
Synlait said the fall was mitigated to some extent by the New Zealand dollar which has been weakening (like the Aussie) against the US currency as trade worries between America and China rattle market confidence.
“However, the forecast of $6.75/kg anticipates that there will be an improvement in commodity prices in the medium term,” the company said optimistically, although the latest global dairy products auction saw a 1.3% fall in the average price this week. That took the fall since June 5 to more than 14%.
Last November, Synlait completed its second “wetmix” kitchen at Dunsandel, and the same month commissioned its new Auckland blending and consumer packaging facility, both of which company the company said yesterday, allowed it to increase its finished infant formula capacity.
Synlait also announced that it has entered into a conditional agreement to acquire selected Talbot Forest Cheese assets. This includes property, plant, and equipment at a new 12,000 MT Temuka site, the consumer cheese brand (Talbot Forest Cheese) and customer relationships.
“The proposed acquisition builds on our existing portfolio of high-quality, flexible dairy manufacturing capabilities that can be tailored to meet customer needs,” according to Synlait’s new CEO, Leon Clement.
The company said this “investment is expected to be in the range of $NZ30 – $NZ40 million, which reflects incentives for various conditions to be met.”
Synlait said its partnership with The a2 Milk Company (a2MC) has continued to grow and an extended supply agreement signed in July provides Synlait with a minimum five-year term through to July 2023. Synlait will continue as the exclusive manufacturer of the a2MC’s infant formula for the Australia/New Zealand and China markets.
“This agreement is really positive for both companies as it strengthens the relationship and provides certainty for all,” says Mr. Clement.
Synlait has also been working to secure product registration in China for New Hope’s Akara and Bright Dairy’s Pure Canterbury brands.
It says both applications have been lodged with the State Administration for Market Regulation (SAMR – the replacement organisation for the China Food and Drug Administration) and it is expected these will be granted in due course.
