SML
22/09/2015 08:40
FLLYR
PRICE SENSITIVE
REL: 0840 HRS Synlait Milk Limited (NS)
FLLYR: SML: Synlait poised for earnings growth - 2015 Annual Results
Synlait Milk has reported an underlying net profit after tax (NPAT) of $12.2
million for the financial year ending 31 July 2015 (FY15), compared with
$19.6 million in FY14.
Reported after tax profit was $10.6 million after accounting for unrealised
foreign exchange losses, which will be unwound in future periods.
Revenue for the period was $448.1 million compared to $600.5 million in FY14,
largely due to decreases in dairy prices.
The underlying NPAT, while within market guidance, was down on expectations
due to lower than anticipated lactoferrin sales and Synlait's Board of
Directors choosing to prioritise payments to milk suppliers in a period of a
very low milk price.
"FY15 has been an extremely busy year. We've continued to develop our
existing ingredients and bulk nutritionals business, as well as bringing
lactoferrin to market and increasing production volumes of finished infant
formula in retail-ready cans," said Chairman Graeme Milne.
"At the same time, we've continued our investment in our nutritional capacity
and capability with our $250 million growth initiatives programme nearing
completion."
"All of this has been in a global operating environment where milk prices
have fallen to unsustainably low levels and this is reflected in our FY15
revenue. Our suppliers are an important part of our business and we've
prioritised paying them higher advances and final payments for their milk,
relative to our earnings, in what has turned out to be the first of probably
two very challenging years on farm."
Mr Milne added there will be an initial focus in FY16 on commissioning
Synlait's third large scale spray dryer and new quality testing laboratory in
October, but that focus will shift towards developing nutritional and infant
formula products with key customers to leverage the increased capability and
capacity.
"Based on the expected increase in volumes from both dryer three and our
blending and consumer packaging facility, profitability will be in advance of
anything achieved to date," said Mr Milne.
Managing Director and CEO John Penno says the strategy to make more from milk
requires innovation both on farm and throughout the manufacturing process.
"We are poised for earnings growth through our value added strategy. We now
have the customers, people, manufacturing capability and milk suppliers to
deliver a significant increase in our overall volumes, particularly the
volume of finished infant formula," said Mr Penno.
"Once we complete our growth initiatives, we will have one of the largest and
highest specification infant formula production sites globally with an
integrated supply chain from source to our customers. This integration is
valuable to consumers who want to know where their products come from and how
they're made," said Mr Penno.
A highlight for Mr Penno was moving customers up the value chain with infant
formula, consumer-ready and nutraceutical products accounting for 55% of
total powder volumes in FY15, a 15,000 MT increase on FY14 volumes.
"At this stage we estimate our sales volumes will lift to approximately
122,500 MT this financial year, up from 97,700MT in FY15. A significant
increase in our value added consumer packaged infant formula products, as
well as modest growth in our infant formula base powder business, will
contribute to this," adds Mr Penno.
Synlait paid its milk suppliers a total average milk price of $4.54 per kgMS
for the 2014 / 2015 dairy season. This price consists of a $4.48 per kgMS
base milk price and a $0.06 per kgMS average payment for seasonal and value
added premiums.
The forecast milk price for the 2015 / 2016 season has also been revised from
$5.50 per kgMS to $5.00 per kgMS.
"Pricing has continued to be volatile and as always, we will continue to keep
a close eye on the market and keep our suppliers updated," said Mr Penno.
"Our milk supply is increasingly differentiated before it leaves the farm
gate. The value added products we make are distinguished by the milk they are
manufactured from. Special milk programmes like a2 Platinum(R) and Grass Fed
are examples of this, as is certified Lead With Pride(TM) milk."
"Our suppliers receive a premium payment, on top of their base milk price,
for milk that goes into value added products. More than half of our suppliers
will attract a premium payment this season because of the value they're
creating on their farm."
In accordance with Synlait's Dividend Policy, Synlait's Board of Directors
have determined that no dividend will be payable to shareholders for the
financial year ending 31 July 2015.
The Synlait Milk Limited Annual Report 2015 can be found online at
www.synlait.com/investors.
End CA:00270509 For:SML Type:FLLYR Time:2015-09-22 08:40:17
