Synlait Milk says annual profit more than doubled on sales of higher-margin products

Underlying profit was between $32-33 million in the year ended July 31.

Synlait Milk [NZX: SML], the NZX-listed dairy company, says annual profit more than doubled on sales of higher-margin products.

Underlying profit was between $32-33 million in the year ended July 31, from $12.2 million a year earlier, the Rakaia-based milk processor said in a statement. Net profit, which includes the reversal of a year-earlier $1.7 million loss related to inventory financing, was between $34 million and $35 million, up from $10.6 million the previous year, it said.

Synlait is on track to produce its largest profit since listing in 2013, even as dairy prices on the GlobalDairyTrade auction remain depressed due to a global oversupply and weak demand. The company raised $75 million of new capital in its initial public offering and has used those funds to repay debt and build new plant to enable it to ramp up production of value added products. Its gross profit per tonne jumped to between $880-890 in the latest year, from $593 a year earlier.

"Our IPO growth projects added the capability and capacity to execute our strategy of making more from milk," chairman Graeme Milne said. "The completion of these projects has enabled us to keep pace with growth and customer demand."

Nutritional sales of canned infant formula products underpinned the latest earnings, with a nearly fourfold increase in canning volumes to 16,000 metric tonnes, from 4300 the year earlier, the company said. Across all categories, 2016 volumes increased to 116,402 metric tonnes from 97,803 a year earlier.

"Canned infant formula volumes have grown steadily since we commissioned our consumer packaging facility in the 2015 financial year," managing director John Penno said. "These value-added products generate stronger margins than commodity products, improving our product mix and spurring an overall higher gross profit per MT."

The company's net debt fell to about $214 million in the latest year, from a peak of $262 million the year earlier due to the funding of the construction of a third spray dryer. Its operating cashflow in the latest year was about $100 million, from $16.3 million a year earlier, it said.

The company will publish its full earnings on September 19.

Shares in Synlait, which is 39% owned by China's Bright Dairy, last traded at $3.46 and have gained 9.5% this year.


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