The Synlait Milk Ltd (ASX: SM1) share price could be on the move this morning following the release of its full year results.
How did Synlait perform in FY 2019?
For the 12 months ended July 31, the dairy processor reported a 16% increase in sales volumes to 149,730 MT, a 17% jump in revenue to NZ$1,024.3 million, and a 10% lift in net profit after tax to NZ$82.2 million.
Once again, thanks to its arrangement with A2 Milk Company Ltd (ASX: A2M), the key driver of its growth was infant formula. Infant formula volumes grew 21% to 42,907 MT in FY 2019.
Synlait Chair, Graeme Milne, said: "The combination of an increase in profit to $82.2 million, plus a total average milk price of $6.58 per kgMS for the 2018/2019 season, achieved off a revenue that exceeded $1 billion for the first time, is a very pleasing result to be able to announce for Synlait."
The company's CEO, Leon Clement, was equally pleased with its performance during the 12 months. He said: "Three things stand out for me in terms of our performance. Firstly, we delivered a strong financial result, supported our customers to grow and create value, while improving our operational efficiency."
"Secondly, we invested in our future by bringing on new facilities and people capability that position us well for continued growth. Finally, we clarified and focussed our direction with a new purpose, ambition and strategy, that aligns our people and stakeholders to a common goal. In summary, our team delivered a strong result, invested in our future, and clarified our direction," he added.
Outlook.
Management appears confident that FY 2020 will be another year of solid profit growth. It advised that it expects "FY20 profits to continue to grow, with the rate of profitability increasing at least at a similar rate to that of FY19 over FY18."
This is expected to be driven by strong growth in infant formula volumes, a full year of operation of the advanced liquid dairy packaging facility, continued progression of the Everyday Dairy strategy, a full year of operation of the expanded lactoferrin facility, and a contribution from Synlait Pokeno, which will be commissioned shortly.
Should you invest?
With its earnings per share coming in ~45.9 NZ cents, I estimate that its shares are changing hands at 21x earnings now. I think this is reasonably good value given its current growth profile and could make it worth considering.
Though, I would still choose a2 Milk Company ahead of it at this point, especially after the recent pull back in the infant formula and fresh milk company's shares.
