Synlait Milk chief executive Leon Clement. Photo / NZ Herald
Synlait Milk chief executive Leon Clement. Photo / NZ Herald
Synlait Milk chief executive Leon Clement is confident the New Zealand dairy sector will be resilient in the face of the rapidly worsening coronavirus pandemic.
"Ultimately, people need food. We are seeing lots of shifts in terms of how people source that food, but people still need to eat," Clementtold the Herald.
But Clement said the sector could see a shift away from the food service products typically bought by restaurants and bakeries to more the more retail-oriented consumer products that can be bought online.
The dairy company, a2 Milk's biggest supplier, said it was witnessing pressure on its broader supply chain, particularly container space availability and shipping schedules as a result of the outbreak.
Synlait said it was seeing no "material short-term impact" from Covid-19, although the outbreak "represents some downside risk going forward."
The milk processor reported net profit of $26.2 million in the six months to January 31, down from $37.3m a year earlier, and slightly below its forecast rate for the half.
Last month, it lowered its annual forecast for net profit to between $70m and $85m in the 12 months ending July 31, at best a flat result from the $82.2m reported the year earlier.
Synlait said it "remains comfortable with its FY20 earnings guidance range" and reiterated plans to play suppliers $7.25 per kilogram of milk solids in the 2019-2020 season.
The company's sales of consumer packaged infant formula increased 22 per cent to 21,571 tonnes over the half year. Clement said a2 Milk's growth contribution to Synlait had not changed.
"Demand indications from The a2 Milk Company suggest Covid-19 had a positive impact on consumer-packaged infant formula sales in the first two months of the 2020 calendar year," Synlait said.
Clement said he was confident of Synlait's legal position as it awaits a Supreme Court hearing over a covenant dispute with one of its neighbours at its new plant at Pokeno.
"We don't see this as issue that will prevent us from operating on this site," he said.
"We will either reach a reasonable settlement or get a court outcome, but I don't think it will stop us from running our operation."
Synlait shares dropped 12c to $4.50 while the broader market was weaker while its part-owner, a2 Milk bucked the trend with a 48 cent gain to $16.27.
