Synlait exceeds other forecast payouts

John Penno.
John Penno.
Continuing high international commodity prices have resulted in Synlait Milk bumping up its forecast milk price from $8kg/ms to between $8.30 and $8.40 for the 2014 season.

The Mid Canterbury-based milk processor has also lifted its advance rates for the season effective from January, to be paid February, from $5kg/ms to $6.40.

The company's 2014 financial year performance continued to improve and, assuming market conditions prevailed, net profit after tax would be in the range of $30 million to $35 million, significantly ahead of the prospectus forecast of $19.8 million, chairman Graeme Milne said.

Craigs Investment Partners broker Peter McIntyre said it was great news that the company had outperformed its prospectus guidance.

However, it was having to pay farmers more for product, which would probably impact a little on earnings. Synlait shares were also down a little yesterday, having opened at $3.950 and reaching a low of $3.800.

Mr McIntyre expected there would be a lot of happy Synlait suppliers in Canterbury.

''I don't think there would be too many complaints around [its] performance,'' he said.

Last month, dairy giant Fonterra unexpectedly left its forecast milk price unchanged at $8.30 and slashed its dividend by 22c, blaming the disparity between very high milk powder prices, and those for cheese and casein.

At that time, Synlait Milk said the international dairy commodity price differentials continued to favour its milk powder and anhydrous milk fat dominant product mix.

Federated Farmers dairy chairman Willy Leferink said Synlait was ''joining the fray'' to be in the same ballpark as Fonterra.

Before Christmas, Westland Milk Products lifted its in-season forecast to $7.90-$8.30kg/ms, while Open Country operated a continuous payout and both Miraka and Tatua would be highly competitive.

For farmers, that level of farm gate competition was positive with other processors getting closer to joining the market and it should keep Fonterra ''on their toes'', Mr Leferink said.

Yesterday, Synlait managing director John Penno said the company was confident of delivery on its infant formula and nutritional products strategy, despite challenges associated with Chinese government regulatory reform.

In the short term, those regulatory changes would continue to cause considerable disruption in the Chinese market and the company might not achieve its forecast target of 10,000 metric tonnes of infant formula and nutritional sales this financial year.

However, it remained confident those changes would validate the strategy of its business over time and would underpin its ability to meet its long-term targets through expected volume growth from key customers in that market, Dr Penno said.

A focus for the company this year was on the execution of its growth initiative projects to support the development of its infant formula and nutritionals business.

Those projects included a lactoferrin plant and a blending and canning facility.

Commissioning of the lactoferrin plant was expected in late February and commercial production should start in early March, Dr Penno said.

While that was a little behind the planned commissioning date, the company expected to exceed its forecast two metric tonnes of lactoferrin sales in this financial year.

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