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Synlait's half-year profit up 3.8 per cent

NZN 28/03/2017 Tina Morrison

Synlait Milk, the NZX-listed dairy company, posted a 3.8 per cent lift in first-half profit as higher sales offset increased investment in people and business development.

Profit increased to $10.6 million in the six months ended January 31, from $10.2m, a year earlier, the Rakaia-based company said on Wednesday.

Sales jumped 35 per cent to $288.7m. The year-earlier earnings included a $2.9m unrealised foreign exchange loss.

Synlait said its lift in sales had also delivered a $2m increase in gross margin as it sold higher volumes of canned infant formula.

The company used some of its operational cash flow and $97.6m of new equity raised from a rights issue in October to halve its net debt over the past 12 months to $147m, and it expects to halve debt again by the end of the financial year, giving it more scope to consider acquisitions amid industry consolidation. Its overhead costs rose by $4.7m.

"Strong sales growth has driven an improvement in our earnings," said Synlait chairman Graeme Milne. "As we have prepared for our next phase of growth, we have built our team and balance sheet strength."

The company said it continued to expect growth in gross margin, driven by increased sales of ingredients and infant formula, which will be largely offset by increased costs as it prepares for its next growth phase.

It reiterated that it expects "modest" growth in full-year profit, followed by a higher rate of profit growth in its 2018 year and beyond.

Synlait listed in 2013 and hasn't yet paid a dividend. Its shares last traded at $3.50 and have gained 15 per cent over the past year.

The company said changes in Chinese infant formula regulations require that each manufacturing site will be able to register a maximum of three brands, which means its pending investment in a new infant formula blending and consumer packaging facility will be on a stand-alone site.

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