25 Sep 2013

Synlait beats profit forecast despite sales miss

7:06 am on 25 September 2013

Synlait Milk has beaten the annual profit forecast in its prospectus with an $11.5 million result.

The outcome compares with a forecast of $10.8 million for the 12 months to the end of July, although the prospectus was issued as recently as June.

The result compares with the previous year's net profit of $4.4 million.

Synlait managing director John Penno said all areas of its business advanced during the year, although its sales of nutritional products missed the target due to market disruption caused by regulatory changes in China, which affected infant formula sales.

Total sales of $420 million for the year missed the prospectus forecast by 1.5%.

"The infant formula volume was down a little and that brought our forecast revenue down a little on what we had expected," Mr Penno said.

"(However) we see ourselves on track for achieving the ongoing performance improvements that we've got set out for 2014 and achieving those forecasts that we set out in the offer document."

The company was well-positioned to take advantage of the new regulations, which focussed on quality standards, product pricing and a consolidation of brands.

Value-add focus

Mr Penno said Synlait was focusing on its value-added milk powder and nutritional powder business and on growing the company through moves such as its lactoferrin plant, a blending and canning facility, a product-testing laboratory and extra warehousing.

He said the company expected to meet its profit target of $19.7 million for the 2014 financial year.

Because of its growth focus, Synlait will not pay any dividends for the past year or for the current year.

Synlait produced 46 million kg of milk solids last season and paid its suppliers an average of $5.89 per kg of milk solids.

The company raised nearly $70 million from its float.

Federated Farmers dairy vice-chair Andrew Hoggard said the Synlait profit lift and the latest Fonterra payout boost had set the scene for a big results fortnight for most dairy farmers.

The other dairy co-operatives, Tatua and Westland, are due to announce their results next week and privately owned dairy company Open Country has already fully paid out its suppliers for the 2012-13 season.