Synlait Milk posts $28 million in first-half profit

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Dairy processor Synlait Milk reported first-half profit of nearly $28 million, but continued impacts from the Omicron outbreak are expected to hamper growth in the coming months.

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

Sales rose 19% to $790.6 million, driven by ingredient volumes and higher raw material prices, and the company’s net debt fell 19% to $391.8 million. dollars.

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 difficult 18 months.

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Synlait Milk's first-half profit jumped 338% to nearly $28 million.  (File photo)

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Synlait Milk’s first-half profit jumped 338% to nearly $28 million. (File photo)

“While the job is not yet complete, we have taken great steps in the right direction in resetting our leadership and rebuilding our profitability and balance sheet,” Penno said.

The stronger-than-expected result comes after the company reported a loss of $28.5 million in the last fiscal year due to lower orders from its biggest customer, The a2 Milk Company.

A2 Milk suffered a drop in demand for its high-end infant formula in China, forcing Synlait to shift production to lower-margin products, sell assets and restructure its business, cutting its workforce by 15% .

Synlait chief executive Grant Watson said the latest results showed momentum was building, but more work was needed to get the company back to strong and sustainable growth.

“Improving our systems, tools and processes will improve our ability to execute with excellence. It’s an important opportunity and it will be our goal for the second half.

The Omicron outbreak in New Zealand and greater labor shortages may limit Synlait's ability to operate at normal production levels in the second half.  (File photo)

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The Omicron outbreak in New Zealand and greater labor shortages may limit Synlait’s ability to operate at normal production levels in the second half. (File photo)

An update to its full-year forecast shows Synlait expects its after-tax result to return to “solid profitability” this year.

However, growth is not expected to continue at the same pace in the second half due to the Omicron outbreak and greater labor shortages which may limit its ability to operate at normal production levels.

Continued disruptions to global supply chains due to the pandemic and geopolitical issues could also restrict access to raw materials and its ability to export products.

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