Synlait Milk posts $28m first-half profit

Friday, 1 April 2022

Dairy processor Synlait Milk has reported a first-half year profit of almost $28 million, but the ongoing impacts of the Omicron outbreak are expected to hamper growth in the next few months.

After tax profit grew to $27.9m in the six months to January 31, from $6.4m in the same period last year and included an $11.9m gain from the sale and leaseback of the land and building at its Auckland site.

Sales rose 19 per cent to $790.6m, driven by ingredients volumes and commodity price increases, and the company’s net debt fell 19 per cent to $391.8m.

Synlait chairman Dr John Penno said the result reinforces the focus and hard work put into getting the Canterbury-based processor back on track after a challenging 18 months.

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Synlait Milk ’s first-half profit jumped 338 per cent to almost $28 million. (File photo)

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New Zealand’s Omicron outbreak and wider labour shortages could limit Synlait’s ability to operate at normal production levels in the second half of the year. (File photo)

“While the job is not yet done, we have made some big steps in the right direction as we reset our leadership and rebuild our profitability and balance sheet,” Penno said.

The stronger than expected result comes after the company reported a loss of $28.5m in the last financial year due to a slump in orders from its largest customer, The a2 Milk Company.

A2 Milk suffered a drop in demand for its premium infant formula products in China, forcing Synlait to shift its production to lower margin products, sell assets and restructure its business, reducing staff numbers by 15 per cent.

Synlait chief executive Grant Watson said the latest result showed momentum was building, but more work was needed to return the business to strong, sustainable growth.

“Improving our systems, tools and processes will improve our ability to execute with excellence. This is a significant opportunity and will be our focus for the second half.”

An update to its full year guidance shows Synlait expects its after tax result to return to “robust profitability” this year.

However, growth is not expected to continue at the same rate in the second half due to the Omicron outbreak and wider labour shortages which could limit its ability to operate at normal production levels.

Ongoing disruptions to global supply chains because of the pandemic and geopolitical issues could also restrict access to raw materials and its ability to export product.