The corporate farmer supplies raw milk to Synlait Milk, which has forecast a payout of $8 a kg milksolids (MS) this season, up from the expected final figure of $5.80 for the season ended May 31.
With much more favourable climatic conditions, a larger peak cow herd size and greater milk volume, Synlait Farms could be looking at revenue of more than $44 million in the current year, compared to the previous season’s figure of $32.5m, which will have an impact on profitability.
Synlait Farms has been working on capital-raising plans since its shares went on the Unlisted platform in early March. From early sales at about $1, the shares were trading at $1.60 at the time of writing, providing a much stronger market to raise new equity.
Cameron Partners and Empire Management are advising the company on the capital raising.
In its results presentation for the year ended May 31 Synlait Farms said the capital raising was aimed at providing liquidity for shareholders at fair value, repaying debt, and providing funds for future growth.
Forecast trading conditions for the current year would not change that, Brook said.
An investor presentation in March suggested an equity raising could get about $36m but that wasn’t the figure being looked at now, he said.
The board of directors was meeting on Friday but was not expecting to make any final decisions.
Synlait Farms had borrowings of $126m at balance date, financing total assets of $220m. The company’s equity level was $79.3m, or just 36% of total assets.
It earnings before interest and tax (Ebit) of $7.94m were nearly all taken up by interest costs of $7.51m and the company can be expected to be targeting an Ebit figure at least three to four times higher than interest costs.
Synlait Farms made an after-tax loss of $555,000 in the May 31 year.
Among growth projects, Synlait Farms will be considering irrigation development as part of the Central Plains Water scheme.
The company was just getting into the milking season after a mild winter, Brook said.
That was a change from the cold winter last year and with cows in great condition and the Synlait Milk payout forecast the season could be a “boomer”.
The share price gain was pleasing, Brook said.
