Synlait forecasts new season payout at $6.50kg/MS, buys Auckland canning plant

Tuesday 30th May 2017

Synlait Milk has forecast a payout for the 2017/18 season of $6.50 per kilogram of milksolids, matching Fonterra Cooperative Group, while separately announcing the $33.2 million purchase of the Auckland-based milk powder canning operations of New Zealand Dairy Co.

The Dunsandel-based milk processor made both announcements to the NZX this morning, with Synlait expecting its total spending on the canning plant will rise to $56.5 million once the NZDC factory is commissioned in October.

"The facility will be infant formula capable and will enable Synlait to substantially lift its blending and canning capacity", said managing director John Penno. "The acquisition will also provide Synlait with a high specification sachet packaging line suitable for infant formula and milk powders." The purchase "will allow us to meet current demand, as well as provide some room to grow with our customers’ needs," he said.

The forecast milk price for the coming dairy season is a response to "increasing confidence that dairy commodity prices are stabilising", said Penno. “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."

An update on the final payout price for the 2016/17 will be published on June 16 with a final milk price for the season due in late September, along with any further update to the 2017/18 season outlook.

The NZDC plant will be Synlait's second blending and packaging site and will "begin to mitigate some risk we have faced as a single site manufacturing company”, Penno said. An associated company, which owns the land and buildings in which NZDC operates, is also included in the deal. Synlait will be seeking both New Zealand and Chinese regulatory authority approvals for the new facility.

Synlait shares closed yesterday at $3.95 and have risen 29 percent in the last 12 months.

(BusinessDesk)

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