Pengxin's Milk NZ unit triples sales, profit after buying farms

Shanghai Pengxin's Milk New Zealand Holding unit tripled its sales and profit last year after acquiring a controlling interest in Canterbury-based Synlait Farms and agreeing to extend its land holdings with farm acquisitions in Northland and near Taupo.

Profit rose to $32.8 million in the 12 months ended June 30, from $11.1 million a year earlier, according to the Auckland-based company's annual report. Sales, mostly from milk, rose to $29 million from $10.3 million.

Pengxin entered the New Zealand dairy market with the controversial purchase of the Crafar farms in 2012 and has since acquired 74 percent of Synlait Farm Holdings to gain control of 3942 hectares of prime dairy farms in central Canterbury.

It also agreed to acquire farms valued at $70 million in Northland, subject to approvals, and is awaiting Overseas Investment Office approval to buy the 13,800ha Lochinver Station near Taupo, reportedly worth $70 million.

The Chinese company is having its milk processed for the Chinese market, having signed a supply and purchase agreement with Miraka for ultra-heat treated milk.

It hired one of New Zealand's most experienced dairy industry managers in Gary Romano to oversee New Zealand operations after he left Fonterra Cooperative Group in the midst of last year's whey protein scare, and signed a sharemilking agreement with state-owned Landcorp, the nation's biggest farmer.

In its latest year, property, plant and equipment is valued at $412 million, up from $146 million a year earlier. Total assets were $495 million while liabilities, including borrowings of $192 million, were $214 million.

Milk New Zealand turned to positive cash flow from operations of $2.36 million in 2014, from an outflow of $1.16 million a year earlier.

Investment activity slowed to $74.9 million, including a $57.6 million cash component for Synlait Farms and other property and equipment of about $9 million. In 2013, Investments amounted to about $160 million, including $146 million on property and equipment.

Sales of milk were $28.8 million, up from $9.2 million, while livestock sales fell to $237,993 from $1.1 million.

Because of its farming operations, Milk New Zealand owns shares valued at $23 million in Fonterra and $827,569 in Ballance Agri-Nutrients, the fertiliser cooperative. It also holds 41,380 shares in Canterbury's Central Plains Water, valued at $1.9 million, via Synlait Farms.

(BusinessDesk)