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Synlait more than triples 2016 profit

NZN 18/09/2016 Tina Morrison

Listed dairy company Synlait Milk has more than tripled annual profit, although it warned growth in the coming year would be more modest.

Net profit increased to $34.4 million in the year ended July 31, the Rakaia-based milk processor said.

It was in line with guidance of between $34m and $35m, and up from $10.6m the previous year, it said. Revenue jumped 22 per cent to $546.9m.

Synlait posted its largest profit since listing in 2013 when it raised $75m to invest in new plant and ramp up production of higher-margin products.

The company said it planned to raise a further $98m in a rights offer to expand its infant formula manufacturing, consumer packaging, infrastructure requirements and value-added cream manufacturing.

"Synlait is a growth company. Our FY16 performance highlights the progress we've made since our IPO in 2013 towards our aspiration of making more from milk," said chairman Graeme Milne.

"We are looking at investing approximately $300 million in capital growth projects over the next three years to solidify this position and continue pursuing profitable opportunities to make more from milk."

Under the rights offer, eligible shareholders will be entitled to acquire two new shares at $3 apiece for every nine existing shares up to 32.5m new shares will be available.

The company's largest shareholder, China's Bright Dairy, intends to participate in the offer to maintain its 39 per cent holding.

The shares last traded at $3.62, and have gained 15 per cent this year.

The company warned that its profit expectations for the 2017 financial year "show only modest growth" due to likely disruptions from proposed Chinese regulations aimed at reducing the plethora of brands in the market.

Separately, Synlait revised up its forecast 2016/17 milk payment for farmer suppliers to $5 per kilogram of milk solids from $4.50/kgMS, reflecting recent improvements in dairy commodity prices. It confirmed a total milk price of $4.02/kgMS for the 2015/16 season.

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