“The board remains confident that these investments will drive an improved return for shareholders over the long term,” he said.
The key priorities were to fill the processing capacity of the Pokeno facility in northern Waikato, integrate Dairyworks and Talbot Forest Cheese and commission, and obtain product verification from the long-life facility at Dunsandel.
“Synlait has a track record of delivering high returns on capital by investing in a differentiated value chain to meet customer needs, and we are confident that our recent investments will be no different,” he said.
“We do have a strong and profitable business, but we acknowledge there are market headwinds and unused capacity that will restrict our short-term financial performance until fully utilised.”
Synlait’s share price has fallen from a peak of $9.50 a year ago to $5.40 currently, down 44%.
It briefly bottomed out at $4.40 in mid-March because of the covid-19 outbreak and recovered to $7.50 in mid-April before slowly declining to the present position.
Its current guidance for FY2021 is a net profit after tax similar to, or slightly improved on, the FY2020 $75 million, although that result was down 9% on FY2019.
A further update will be provided with the half-year results in mid-March.
Like its main customer, A2 Milk, Synlait has not paid a dividend since listing in 2013 while it ploughed all profits back into growing the company.
Elsewhere in the annual report chief executive Leon Clement said the Pokeno site had removed single site and milk pool risk for the company.
Facilities were built in front of the demand curve and complementary businesses were acquired, but the foundations of a more diverse Synlait had been laid.
Synlait is still waiting for the Supreme Court appeal decision regarding the development of the Pokeno site, but the company remained confident of a favourable outcome.
“We consider it unlikely that an adverse decision would result in a materially negative impact on our ability to continue to operate at Pokeno.”
