Shares in Synlait Milk hit a record closing high as it unveiled
"confidence" in the dairy market, forecast a rise in milk prices next season,
and revealed a NZ$56.5m deal to acquire packaging group New Zealand Dairy
Shares in Synlait Milk closed up 1.8% at ZN$4.02, their
highest finish since the New Zealand-based milk processor was listed in July
The gain followed the group's announcement that it would,
though the acquisition of New Zealand Dairy Company, be able "to substantially
lift its blending and canning capacity" to exploit an improved dairy market.
Synlait flagged "increasing confidence that dairy commodity
prices are stabilising", after a 2014-16 downturn blamed largely on a downturn
in imports by Chinese buyers, in favour of running down inventories.
"Synlait is feeling positive about the current market," said
Dr John Penno, the group's chief executive.
"We start the [2017-18] season with some confidence that
supply and demand are more balanced," he added, as the group NZ$6.50 per
kilogramme of milk solids in its forecast for milk prices paid to producers
The forecast compares with a current estimate of NZ$6.00 per
kilogramme of milk solids for the payout for this season, but is in line with a
2017-18 forecast last week from Fonterra, New Zealand's biggest processor.
John Wilson, the Fonterra chairman, said that the
co-operative's forecast price rise "reflects the strong fundamentals supporting
global dairy markets," evident in a recovery in world prices, and which had
come despite larger than expected milk output in New Zealand, the top exporter.
"Stronger production in March and April has partly offset
lower peak milk production and collections are now expected to be down 3% for
the season, a much better outcome for our farmers than had been anticipated
earlier in the year."
'Room to grow'
Synlait, based at Canterbury on New Zealand's South Island,
said it had agreed to buy New Zealand Dairy Company for NZ$33.2m, although
total investment would reach NZ$55.2m on completion, expected in October, of a blending
and canning operation that NZDC is building.
"This purchase will allow us to meet current demand, as well
as provide some room to grow with our customers' needs," Mr Penno said.
NZDC will also come with a high specification sachet
packaging line "suitable for infant formula and milk powders", a key market for
Synlait, which was founded in 2008 and listed in 2013, is
39% owned by Bright Dairy, a subsidiary of China's part state-owned Bright Food