Synlait Milk to take 25% stake in New Hope Nutritional

Synlait Milk plans to take a 25% stake in Sichuan New Hope Nutritional Foods Co to gain a direct interest in a Chinese infant formula brand, the National Business Review reports.

Profit rose 70% to NZ$19.6 million in the 12 months ended July 31, from $11.5 million a year earlier, the Rakaia-based company said in a statement. Sales rose 43% to $600 million. Gross margin widened to $77.1 million from $65.1 million. The company had previously cut its earnings forecast twice.

Profit was within the guidance of between $17.5 million and $22.5 million Synlait gave in May, when it said earnings growth would be less than previously forecast because of a strong currency and an unfavourable product mix. Profit still met its prospective financial information target. Its shares have fallen 16% this year as the NZX 50 Index gained 9% and last traded at $3.30, up from its $2.20 listing price last year.

The company is still awaiting registration under China's new food safety regulations, which require manufacturers to take responsibility for branded product sold to consumers. New Hope Nutritional sells the akaraTM branded infant formula range in China and is in turn owned by New Hope Dairy, a shareholder in New Zealand's PGG Wrightson.

"It is our desire, as the manufacturing company, to develop a close association with our Chinese brand owners to reassure consumers that these brands are produced from a reliable, vertically integrated company that is prepared to stand behind the quality of the product," managing director John Penno said. "This approach has been signalled by Chinese officials as a future requirement for the export of retail-ready infant formula to China."

Synlait Milk's volume of milk grew to 49.9 million kilograms of milk solids (kgMS) in 2014 from 46.8 million kgMS a year earlier. Manufactured volumes rose to 96,492 tonnes from 91,229 tonnes. The company paid an average $8.31 per kgMS to its suppliers.

NZD 1 = US$0.81