SYNLAIT MILK LIMITED ANNOUNCEMENT
NZX: SML ASX: SMl
29 NOVEMBER 2016
SHA REHOLDER S PLEASED W ITH SYNLA IT'S STRONG FY16 PER FORMANCESynlait Milk's (NZX: SML ; ASX: SM1) Annual Meeting of Shareholders today highlighted their record FY16 profit of $34.4 million showed their value added strategy is successful.
Held in Christchurch, the meeting commenced at 1pm and Synlait's Chairman Graeme Milne outlined how the company had grown rapidly and profitably since listing inJuly 2013.
"When we listed on NZX in2013, we commenced a $250 million capital expansion programme to support our value added focus and growth strategy. The financial year ending 31 July (FY16) demonstrated the full benefit of this approach and delivered our strongest performance to date," said Mr Milne.
He also pointed out shareholder value had been created through the execution of Synlait's strategy, resulting in a total shareholder return {TSR) of 55%since the initial public offering in 2013.
"We remain a growth company and will continue investing our profit into the business to pursue profitable growth opportunities."
Synlait's new growth phase was launched in September alongside a pro-rata rights offer, which was completed inOctober and raised $97.6 million in new equity.
It also facilitated Synlait's dual listing on the Australian Securities Exchange (ASX) as a foreign-exempt issuer, commencing on 25 November 2016.
"Our new growth phase willsee us invest approximately $300 million over three years to add more infant formula, consumer packaging and spray drying capacity, as well as value added cream capability and infrastructure requirements. The equity we raised in October will be used to pay existing debt and contribute towards this new capital expansion programme," said Mr Milne.
A key infrastructure requirement was to invest in an initial second site, which Mr Milne expected to be identified before the end of the 2017 financial year (FY17).
John Penna, Managing Director and CEO, discussed Synlait's record profit in FY16being the result of an almost fourfold year on year increase in canned infant formula volumes from 4, 300metric tonnes (MT)to 16,000MT.
"Our ingredients business performed well in FY16,but our canned infant formula business played a major role and we expect it will continue to do so as our most established value added part of our company," said Mr Penna.
"We expect the proposed Chinese regulations will likely moderate canned infant formula growth in FY17,and therefore we expect onlymodest growth in our FY17earnings over FY16."
Mr Penna outlined to shareholders that Synlait willcontinue investing in growth opportunities for new and existing products, customer development and internal systems and processes.
"Investment in customer and market development willalso support volume growth to reduce reliance upon the China market. Combined with a focus on developing value added cream and adult nutrition opportunitiesfor the business, we're also focusing on making more from milkbeyond infant formula."
Earlier today Synlait announced an increase to their forecast milkprice from $5.00
kgMS to $6.00 kgMS.
"We've responded to shift of prices in the global dairy market. Our increased forecast milkprice willbe well received byour 200 Canterbury milk suppliers, who willnow have a higher cash flow than they had planned for at this stage in the season," said Mr Penna.
A change in Synlait's Board of Directors was announced with the appointment of Ms Min Ben as the fourth Bright Dairy-appointed Director. Ms Ben joined Bright Dairy in 2001and is currently their PR Director. Ms Ben replaces Ms Li Ke, who resigned
from Bright Dairy to pursue other interests inSeptember 2016.