Synlait announces $98m rights issue

Canterbury milk processor Synlait has announced a rights issue to raise about $98 million in the next few weeks as it pursues a $300 million capital investment programme.

The company this morning reported a net profit of $34.4 million for the year to July 31, triple last year’s figure of $10.6 million.

Revenue was $546.7 million, up 22% on a year earlier.

“Synlait is a growth company,” said chairman Graeme Milne. “Our 2016 financial year performance highlights the progress we’ve made since our IPO in 2013 toward our aspiration of making more from milk.

“We are continuing this momentum with an accelerated pro-rata entitlement offer to eligible shareholders to raise approximately $98 million in support of our next growth phase. Investing in further capital projects to expand our capability and capacity will put us in a strong position to pursue customer, product and market development opportunities in the coming years.”

Synlait’s biggest shareholder, China-based Bright Dairy with a stake of 39%, has committed to invest in the rights issue to maintain its stake.

The offer of two new shares for every nine held, priced at $3 a share, is underwritten through investment banking firm First NZ Capital.

Synlait shares last traded at $3.62, valuing the company at $529 million.

Synlait also confirmed a total milk price of $4.02 a kg of milk solids for the 2015/16 season and upgraded its forecast for the current season from $4.50-5.00 a kg. 

Managing director John Penno said the company was aware that low commodity prices had affected local farmers.

“For the second consecutive year our milk price is below the breakeven price for most of our milk suppliers but our updated forecast of $5.00 kgMS for the current 2016 / 2017 season is encouraging.

“Our response to date has been to support our suppliers with higher than normal advanced payments, which we are able to do given our strong operating cash flow in the 2016 financial year. We’re also promoting opportunities to earn premiums, which totalled $5.7 million in the 2016 financial year.”