Managing director John Penno said the new forecast was in response to increasing confidence dairy commodity prices were stabilising.
“We start the season with some confidence that supply and demand are more balanced and this forecast reflects an expectation of dairy prices remaining at current levels,” he said.
Synlait was at $6.25/kg MS for the 2016-17 season and would make an update on June 16, followed by a final price in late September with an update on the new season’s price.
Synlait also announced the $33.2 million purchase of the New Zealand Dairy Company packing facility and related testing laboratory at Mangere, Auckland.
It would spend a further $23m on expanding the facility and seeking NZ and Chinese registration for blending and canning of infant formula and milk powders.
The doubling of canning and sachet packing capability for Synlait had been previewed in September as part of $300m in capital expenditure over three years, plus a rights issue for $89m of new equity.
At the time it said the existing Dunsandel, Canterbury, canning plant was nearing its full capacity so the company and its customers needed a doubling of capacity to about 60,000 tonnes a year.
An undisclosed majority of that blending and packaging would be A2 infant products on behalf of the A2 Milk Company, now an 8% shareholder in Synlait, acquired in March for $48m or $3.27 a share.
Synlait also packed for its majority shareholder, Bright Dairy of China (39%), and was expected to soon announce a new line to be packed for another minority shareholder, Munchkin of the United States (3.87%).
After the latest announcements on Tuesday Synlait’s share price rose to $4.
“The production line will be very similar to the blending and canning plant already in operation at our Dunsandel site with the same scale, high standards, equipment and build specifications,” Penno said.
Commissioning of the new facility was scheduled for October.
“This purchase will allow us to meet current demand as well as provide some room to grow with our customers’ needs.
“Having a second blending and packaging site will also begin to mitigate some risk we have faced as a single-site manufacturing company.”
The NZ Dairy Company was a privately owned firm headed by dairy product processing specialist Dr Jan Werkman.
It pioneered in NZ the Nutravac vacuum blending system that removed the need for mechanical stirrers.
