A new pricing agreement with A2 Milk Co was one factor in the lower margins as was a fall in higher-margin sales to China-based customers compared to the same period a year earlier.
Synlait’s after-tax profit for the six months ended January 31 was $37.3 million, down 9.6% from $41.3m previously. Revenues rose to $471m from $439m.
The dairy processor also spent heavily on expansion during the period, with $200m being spent on four major projects, notably the new plant at Pokeno and the new liquid-milk plant at Dunsandel.
The projects are both on track and the company is confident of good Waikato supply levels for the Pokeno plant, chairman Graeme Milne and chief executive Leon Clement said.
Though half-year earnings are down, full-year profit growth is expected, from last year’s $74.6m. The second-half growth will not be quite as strong as that for the same period last year.
Synlait expects to sell between 41,000 and 45,000 tonnes of canned infant formula for the year.
Clement said the higher volumes of powders, creams and lactoferrin achieved in the first-half were produced off the same capital base as the previous year, highlighting efficiency improvements.
The company has just completed an $18m expansion of the high-value, high-quality lactoferrin plant at Dunsandel and is already seeing increased demand, Milne and Clement said.
Synlait is also pushing environmental advances, with more than 60 farmers now accredited to the Lead With Pride programme and now supplying 17% of total milk volume. The programme rewards farmers achieving greenhouse gas emission targets.
Reductions in water consumption and nitrogen loss on-farm are also being sought and Synlait is also investigating methane reduction, with a pilot on-farm inhibitor trial planned later this year.
