What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The company also achieved double digit growth in profit margins and revenue increasing 39% to $759 million.
Chairman Graeme Milne says the outstanding results were achieved alongside several initiatives to prepare for future growth.
“Our shareholders supported this growth focus in September 2016 when we successfully raised $97.6 million to invest in our business,” says Milne.
Milne says Synlait’s current balance sheet is in a very good position with net debt down from $214 million to $83 million, and along with retained earnings, the company is in a good position to fund its growth strategy.
Demand for higher margin products continued to rise, with finished infant formula volumes growing 17% to 18,776 MT and margins before tax increasing by $10 million.
“We will continue to grow both top and bottom lines at pace. We see considerable opportunities to solidify our current ingredient and infant formula positions, and to enter new categories. A more profitable, more diversified and lower risk business is our goal and we will make good progress towards this in FY18,” says Milne.
Innovating across the value chain has allowed Synlait to develop strong customer partnerships with category-leading customers and according to chief executive John Penno, FY17 was a year of consolidation ahead of an expected period of solid growth.
“We own and control every step in our value chain, right from differentiating the milk supply behind the farm gate through to managing market access for our customers. We guarantee an unrelenting focus on quality, integrity and value in this system, offering a powerful point of difference for our customers and their consumers,” says Penno.
“Our attention is on accelerating our infant formula business, and preparing to launch into new high returning dairy categories. We are also working to reinvigorate our ingredients business, and add value by systematically moving our milk products into consumer packaged formats.”
Synlait’s partnership with The a2 Milk Company has continued to grow in volume and value and both companies remain confident that registration of their infant formula with the China Food and Drug Administration (CFDA) will be received before 1 January 2018.
Synlait confirmed that their total average milk price for the 2016-17 season is $6.30/kgMS, consisting of a $6.1/ kgMS average base price and a seasonal and average value added premium payment of 14c/kgMS.
Synlait’s forecast milk price of $6.50/kgMS for the current 2017-18 dairy season remains unchanged.
