The Canterbury processor has started hiring for a fourth operating shift to provide round-the-clock production to meet forecast 2017 sales of nutritionals and ingredient products.
Demand for infant formula means the canning unit will be moving towards capacity over the next 12 months and a decision on expanding that capability will be made by the end of the financial year, chairman Graeme Milne and managing director John Penno said.
Synlait’s after-tax profit for the six months ended January 31 was $12.3 million, up from just $419,000 at the same time a year earlier. Operating cash-flow was $3.97m for the half-year, compared to an outflow of $62.5m previously.
The group’s core strategy of partnering with international leaders in the infant formula and adult nutrition industries was beginning to transform earnings, Milne said.
Nutritional sales totalled 7498 tonnes during the half year, up from 2946t a year earlier. The latest figure made up 16% of total sales volumes, up from 7%.
Penno highlighted the partnership with infant formula distributor and retailer A2 Milk. Synlait was its sole manufacturer and expected the relationship “will grow deeper over time’’.
Synlait was also working with United States company Munchkin on a Grass Fed-brand infant formula. Trial batches had been made for clinical studies in the US as part of the regulatory approval process. Launch of Grass Fed is expected in the New Zealand and Australian markets in May this year.
For the year ending July 31, Synlait expects a near four-fold increase in canned infant formula sales, from the 2015 year and said it was on track for profitability in advance of anything achieved so far.
Directors also forecast significant debt reduction by year-end.
Borrowings at January 31 were $293m, making up 44% of total assets of $659.5m. A year earlier, borrowings of $278m made up 50.6% of total assets of $548.7m.
Penno said the prolonged milk price downturn continued to “hit home’’ for suppliers. Synlait would support them by advancing a higher proportion than normal of the final milk price.
More than half of its suppliers would also receive premium payments for added value milk production. About $6m would be spent on premiums this financial year.
