Synlait lifts milk price forecast

Last updated 09:51 28/01/2014

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High dairy commodity prices have seen Synlait Milk lift its forecast milk price for the season.

The NZX-listed company said in a market announcement this morning that it was lifting the price from $8 a kilogram of milksolids to between $8.30/kg and $8.40/kg.

The Canterbury milk processor also lifted its advance rates for the season, effective from January, to be paid in February, from $5/kg to $6.40/kg. Synlait Milk said in a market announcement this morning.

Synlait's milk price forecast was now in line with Fonterra's forecast milk price at $8.30/kg.

Synlait Milk chairman Graeme Milne said it was the company's policy to pay its contract milk suppliers a competitive market price.

The company's full-year financial performance continued to improve and it expected to beat its prospectus forecast by more than $10 million, Milne said.

Assuming current market conditions continued, Synlait's final net profit would be in the range of $30m to $35m, ahead of the $19.8m forecast in the company's prospectus, he said.

Milne said he expected Synlait Milk would benefit from earnings growth in its value-added categories and a "favourable product mix" for the rest of the financial year.

Managing director John Penno said that despite challenges associated with Chinese government regulatory reform the company was confident of delivering on its infant formula and nutritional products strategy.

In the short term, regulatory changes would continue to result in "considerable disruption" in the Chinese market, Penno said.

Therefore, Synlait might not achieve its forecast target of 10,000 tonnes of infant formula and nutritional sales this financial year, he said.

"However, we remain confident that these changes will validate the strategy of our business over time and will underpin our ability to meet our long-term targets through expected volume growth from our key customers in this market," he said.

Business development continued in key markets outside China, Penno said.

Production of milk powders as infant formula ingredients for two new multi-national companies were expected to begin in the second half of the financial year, he said.

Synlait Milk expected to commission its lactoferrin plant next month, with commercial production starting in March.

While this was behind schedule, the company expected to exceed its forecast 2 tonnes of lactoferrin sales in this financial year, Penno said.

A further update on Synlait Milk's full-year financial forecast is expected when it announces its half-year results on March 27.

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Synlait's shares last traded at $3.95.

- Stuff

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