Synlait said sales volumes were down 28 percent. Photo: RNZ
Dairy company Synlait Milk posted a sharply reduced first half profit on lower sales volumes, technical problems with a new planning system, and higher costs.
Synlait chief executive Grant Watson said a key factor in the 28 percent fall in sales volumes had been problems associated with its new software system, SAP, which had caused considerable disruptions to supplies.
"[This] significantly impacted our ability to release and ship products to customers during the first half of the financial year."
Key numbers for the six months ended January 2023 compared to a year ago:
- Net profit $4.8m vs $27.9m*
- Revenue $769.8m vs $790.6m
- Adjusted profit $8.9m vs $15.7m
- Forecast base milk price for 2022/23 $8.50 per kilo of milk solids
- Full year forecast profit $15m-$25m
* Includes $11.9m gain from the sale of leaseback property in Auckland
He said the disruptions had nearly halved sales volumes in the first four months of the financial year, which had significantly hit profit, although SAP was now working better and exports of ingredients were getting back to normal.
"Implementing SAP was the right decision. However, our readiness was not where we needed it to be."
Watson said the company benefited from a better mix of products, and growth in the advanced nutrition and consumer operations, while it was making progress with the fledgling foodservice business.
Synlait has been diversifying its product range and customer base to reduce its reliance on its biggest customer A2 Milk, for whom it makes infant formula.
Watson said Synlait continued to contend with high labour costs, raw material shortages, and other challenges, and was also facing the process of renewing its registration to make products for the Chinese market, and getting production up and running at its Pokeno factory.
The company recently warned of a substantial fall in full year profit to between $15m to $25m on the back of reduced demand, higher costs, and supply chain disruptions, which has put its financial recovery back a year.
"Our full financial recovery is slower than planned. The focus remains on paying down debt and delivering sustainable, profitable diversified growth. We have yet to deliver on this," Watson said.
