Synlait bolsters testing of milk in wake of Fonterra’s WPC scare last year

John Penno
Synlait Milk 12-month price history (NZX.com)

Synlait Milk [NZX: SML], the dairy processor which counts China's Bright Dairy Food as a cornerstone shareholder, says costs for its planned expansion of its laboratory and administration will more than double as it allows for expansion and ramps up testing of its products.

The Rakaia-based company's expanded laboratory and administration centre will cost $21 million, up from projected cost of $8.4 million. The new laboratory will include microbiological testing to help "insure it can achieve the ever increasing quality standards require by the world's most demanding customers," the milk producer said in a statement.

Last month Synlait said China sales of infant formula and nutritional products may fall short of its 10,000 metric tonne target because stricter regulations had caused "considerable disruption" in that market.

New Zealand's biggest dairy producer and exporter Fonterra Cooperative Group spooked dairy markets last year with a precautionary recall of whey protein concentrate thought to be contaminated. Later tests proved the bacteria found were harmless.

China is particularly sensitive to dairy safety concerns after melamine-tainted infant milk formula caused the deaths of six children and sickened 300,000 others in 2008.

The expansion of its Dunsandel-based administration facility is in anticipation of the company's growth, and cements Synlait headquarters in the South Canterbury town, it said.

Synlait reiterated its forecast for earnings to be between $30 million to $35 million, up from its prospectus forecast of $19.8 million. The company listed on the New Zealand stock exchange in July last year.

The shares fell 1.4 percent to $3.65.

The company expects both the new laboratory and administration facilities to be completed by February 2015.

(BusinessDesk)

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