19 Sep 2017

Infant formula pushes up Synlait profit

2:19 pm on 19 September 2017

Canterbury-based dairy company Synlait Milk has made a strong full year result, helped by big increases in profit margins and sales growth.

Brighter Future - Dairy. Dairy farming family the Mathieson's, Ewen, Dianne and Melissa talk about the boom and bust of their industry since 2008 and how they got through some of the tougher times.

Photo: RNZ / Rebekah Parsons-King

The specialty milk producer's profit rose 11 percent to $38.2 million in the year ended in July, driven by strong growth in infant formula sales, but offset by increased investment in research and development.

Revenue rose 39 percent to $759m, reflecting increased sales volumes and stronger commodity prices, which were passed on to farmers in the form of an increased farmgate milk price.

Managing director John Penno said the company had also been able to position itself for future growth, helped by a near $98m capital raising.

Chief executive John Penno said Synlait had made a significant investment in research and development of new product categories as part of a plan to launch its own consumer retail brands.

"Focusing on new product development for existing and new customers and markets, improving production processes and reducing production costs will lift our earnings in the short to medium term," said Mr Penno.

He said the company had no plans to compete with its wholesale customers in the infant formula business, such as the A2 Milk Company, which had contributed to sales growth in volume and value over the past year.

"We expect to announce further plans in due course. These plans will allow us to keep up with medium to long term infant formula demand, as well as signal new high-returning product categories we intend to move into in the coming years," he said.

Synlait's forecast milk price of $6.50 per kilogram of milk solids for the current 2018 dairy season remained unchanged.