22 Sep 2014

High prices boost Synlait profit

5:50 pm on 22 September 2014

Synlait Milk says its annual net profit rose 70 percent to $19.6 million, mostly as a result of high global prices for its dairy products.

Revenue for the year ended July was $600 million, 43 percent more than the year earlier and well ahead of its $524 million forecast.

The profit is in line with its prospectus forecast, though the dairy company had earlier signalled that its profit might fall short of expectations.

Synlait Milk managing director John Penno said the second half result was much weaker than the first.

"It was very much a year of two halves. In the first half ... we saw the nutricinals and infant formula business developing as we would've expected with significant growth over the previous year.

"Then through the second half of the year when the impact of the regulatory change really started to come into effect, we saw much lower profitibility in the company.

"Part of that's because we did take some provisions against stock that was clearly not going to be moved through that period and so we had some downgrades and some provisioning to take into account the downturn in the market.

"It's pleasing to report that we see the regulatory changes settling down, the market returning to normal and many of the customers who disappeared for six months coming back into the market in the early part of this financial year."

John Penno said the company has a conditional agreement to take a 25 percent stake in Sichuan New Hope Nutritional Foods, which is responsible for the ownership, sale and distribution of the Akara brand of infant formula in China.

Mr Penno said it is a small investment, which would create an integrated supply chain for the manufacture, packaging, supply, distribution and sale of Akara to consumers there.

Details of the conditional offer, including the price, would be disclosed in due course, he said.

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