Blog: Katy AskewProgress at Synlait but challenges remain

Katy Askew | 28 August 2014

New Zealand dairy group Synlait Milk revealed today (28 August) it has hit the "major milestone" of receiving regulatory clearance to begin exporting finished product from its new NZ$28.5m (US$23.9m) dry blending and consumer packaging plant.

The New Zealand Ministry of Primary Industries confirmed the site meets the country's food safety requirements and has signed off on the facility.

Synlait said the plant, which was constructed in just nine months, will enable the group to meet growing demand for "total product integrity from grass to glass".

"Today is an important day for our business. We now have an integrated facility on one site that gives us full manufacturing control and delivers on the needs of consumers looking for nutritious and safe food," MD Dr John Penno said.

"The packaging plant provides further support for our value added strategy of supplying high quality finished infant formula and nutritional products to our customers."

While this may be a milestone on Synlait's strategic journey, it is still a long way away from the finish line. One significant snag is the site still does not have clearance to begin exporting to that most coveted of infant formula markets - China.

"Documentation required to support Synlait Milk's application for registration as an exporter of finished infant formula to China was sent to the Chinese regulatory body today by MPI," Synlait said.

Penno added the company is working with authorities in New Zealand and China to achieve registration "as soon as possible."

Synlait, which produces a range of products including the Platinum brand of infant formula in partnership with A2 Milk Co., got the green light for initial shipments of this product to China in July.

However, it could take some time for the advantage of the new plant's processing capacity of 30,000 metric tonnes per annum to lift the group's results.

And, according to a profit warning issued earlier this year, an immediate lift would be a significant boon for Synlait.

In May, the company revised its profit guidance from NZ$25-30m to NZ$17.5-22.5m, citing a "reduced advantage from a favourable product mix in the second half of the year" and the impact of currency exchange.

Synlait is due to report its full-year numbers in September. With a depressed outlook for fiscal 2014, the question now becomes whether Synlait will be able to leverage this increased capacity to take advantage of the opportunity in China during 2015.

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