Canterbury milk company Synlait has reported a big jump in profit, a day after Fonterra reported its profit had more than halved.
Synlait’s first-half net profit was up by 79 percent due to to strong earnings from its milk powder and cream products business.
Net profit for the six months to January rose to $12.1 million while sales rose by 61 percent to $284.9 million.
Despite that, Synlait said its earnings from infant formula and nutritional products were lower than expected because of regulatory changes in China and the product recall caused by Fonterra’s botulism scare.
Synlait said it now expects its full-year result will be between $25 million and $30 million.
That’s still higher than the $19.8 million prospectus forecast issued in June last year.
Even though the company won’t meet its infant formula and nutritional volume targets for this financial year, managing director John Penno is still confident Synlait will meet its long-term objectives.
He said Synlait expects to be supplying infant formula ingredients and finished products to four of its six target customers in 2015.
Mr Penno expects the resulting volumes will account for as much as 30 percent of Synlait’s total production next season and the additional milk supply needed to meet this has already been secured.
As well as the botulism scare and China’s regulatory changes, the high kiwi dollar has affected the company’s performance.
Mr Penno says China is a very dynamic market at the moment.
«The Chinese Government at a very high level is trying to ensure that the (infant formula) product finding its way to customers is of a very high standard, has been manufactured in an appropriate way, and they’re also trying to encourage their local industry to take back a good part of the market that’s been lost.»
However, Mr Penno says the Chinese changes have been well signalled and that Synlait has responded to them.
«For example, the way that we’ve configured our manufacturing plant is absolutely in line with the way that the Chinese regulators have been signalling for quite some time, that they would expect to see an infant formula plant configured. And so we’ve been able to use that as we’ve planned and developed the business and now we’re seeing the regulations follow up.»
Source: RadioNZ
