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Synlait more than doubles profit

NZN 11/08/2016 Tina Morrison

Synlait Milk says annual profit has more than doubled on sales of higher-margin products.

Underlying profit was between $32 million and $33m in the year ended July 31, from $12.2m a year earlier, the Rakaia-based milk processor said on Friday.

Net profit, which includes the reversal of a year-earlier $1.7m loss related to inventory financing, was between $34m and $35m, up from $10.6m the previous year, it said.

Synlait is on track to produce its largest profit since listing in 2013, even as dairy prices remain depressed due to a global oversupply and weak demand.

The company raised $75m of new capital in its initial public offering, and has used those funds to repay debt and build new plant to ramp up production of value-added products.

Its gross profit per tonne jumped to between $880 and $890 in the latest year, from $593 a year earlier.

"Our IPO growth projects added the capability and capacity to execute our strategy of making more from milk," chair Graeme Milne said.

"The completion of these projects has enabled us to keep pace with growth and customer demand."

Nutritional sales of canned infant formula products underpinned the latest earnings, with a near fourfold increase in canning volumes to 16,000 metric tonnes, from 4300 the year earlier.

Across all categories, 2016 volumes increased to 116,402 metric tonnes from 97,803 a year earlier.

"Canned infant formula volumes have grown steadily since we commissioned our consumer packaging facility," managing director John Penno said.

"These value-added products generate stronger margins than commodity products."

The company's net debt fell to about $214m in the latest year, from a peak of $262m the year earlier due to funding of the construction of a third spray dryer. Its operating cash flow in the latest year was about $100m, from $16.3m a year earlier, it said.

Shares in Synlait, which is 39 per cent owned by China's Bright Dairy, last traded at $3.46 and have gained 9.5 per cent this year.

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