Synlait is exploring the possibility of accelerating investment in its processing capability to meet burgeoning demand for canned infant formula.
The Mid Canterbury-based dairy processor yesterday reported underlying net profit after tax of $12.3million for the first half of the financial year, up from $400,000 for the corresponding period last year.
The improved performance was primarily attributed to increased nutritional sales in canned infant formula.
Nutritional product sales for the six-month period were 7498 metric tonnes, meaning a 155% increase on the previous 2946 tonnes, and accounted for 16% of total sales volumes in the six-month period.
Chairman Graeme Milne said an almost four-fold increase in canned infant formula sales in full-year 2016 was expected, compared to full-year 2015.
That growth was expected to push production capacity over the next 12 months.
A decision on bringing forward the investment was expected to be made before the end of the 2016 financial year.
Revenue rose 8.1% to $213.5million, earnings before interest, depreciation and tax (ebitda) were up from $2.8million to $32.1million and net debt increased from $278million to $292million.
Synlait's core strategy was to partner with leaders in the infant formula industry and the adult nutrition industry, Mr Milne said.
The half-year results demonstrated the early success of that strategy and the company was pleased with its pace of execution, he said.
A partnership with United States-based infant and toddler company Munchkin Inc, to produce Grass Fed infant formula, was expected to be launched in Australia and New Zealand in May.
The first trial batches of Grass Fed had been manufactured for clinical studies in the US, a necessary step in getting the product approved by regulatory authorities for sale in the United States, Synlait managing director John Penno said.
Synlait was also the sole manufacturer of The a2 Milk Company's "fast-growing'' a2 Platinum range of infant formula.
Synlait expected premium payments to its farmer suppliers to double this financial year to $6million, mainly on the back of the infant formula sales.
More than 50% of suppliers would receive a premium payment.
In the half-year report, Mr Milne and Mr Penno said they were mindful the success the company was enjoying was occurring in the midst of the most significant downturn the dairy industry had seen in decades.
For the second year, the company was advancing its suppliers a higher proportion of the final milk price than would be normal, to help support them through a "very difficult'' period of cash flow.
