1 Apr 2016

Synlait reports higher demand for formula

7:53 pm on 1 April 2016

Stronger demand for infant formula has meant a strong turnaround for Synlait Milk, meaning a bonus payout for its dairy farm suppliers.

Infant formula

Photo: 123rf

Small Canterbury-based dairy company Synlait Milk reported a net profit of $10.2 million in the six months to the end of January, compared with a loss of $6.4m for the same period last year.

The result included unrealised foreign exchange losses of $2.1m. Revenue also rose 8 percent to about $213m.

Chief executive John Penno said the company's partnership with infant formula maker a2 Milk was helping the business.

He said there had been in-house activity in the half-year.

"We've commissioned our new spray dryer and are well into migrating our infant formula production to that new dryer," he said.

Mr Penno expected infant formula to help growth for the full-year result.

Analysts are picking a profit around $28m for the year.

Bonus for farmers

Over half of Synlait's suppliers will get a bonus this season of 11 cents per kilogram of milk solids.

Mr Penno said nutritional product sales had increased by 155 percent and farmers would benefit.

"About half of our farmers receive a payment and on average I think it's going to land at about 11 cents per kilo of milk solids, that's very meaningful for the individual farm," he said.

"It doesn't make up for the very low milk prices that are being caused by the low international commodity price, but it is helpful at times like this."

All of the farmers have the ability to produce differentiated milk if they choose, he said.

"If they supply us with specialist milk like a2, or producing under grass-fed, or the 'lead with pride' protocol, then they earn premiums based on this.

"We see our ingredient powder sales being relatively stable into the future, they may even fall away as we develop our value-added powders."

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