The 39 per cent Chinese-owned dairy company said it wanted to use the land for three reasons:
– To give it greater security over water rights. Synlait will inherit rights to irrigation water and the purchase will allow it to dispose its factory waste water on to the land.
– To develop a rail siding which will allow containers to be shipped direct from Dunsandel to Lyttelton and will cut out 16,000 truck movements a year.
– To use the land for farming trials and research.
The land deal comes on top of other big investments that Synlait has made recently, including $260m for its Pokeno infant formula plant, $112m for cheese supplier Dairyworks and between $30m and $40m for Talbot Forest cheeses. The OIO has yet to give consent to the Dairyworks deal.
As an exporter it is exposed to the impacts of Covid-19; the latest update it provided came in last month’s full year earnings guidance. Clement then said there had been no material short-term impact on its financial performance but there was “some downside risk”.
As a result it forecast an annual net profit of between $70m and $85m, a lower range than previously expected.
“We are not currently experiencing any supply chain disruption; however, we are monitoring the situation very closely and felt it prudent to front foot potential impacts,” Clement said.
A fuller update will be provided on March 19, the day the half year results are announced.
Meanwhile, a Supreme Court hearing has been set down for April 29-30 to hear a Synlait appeal against a Court of Appeal decision that said its Pokeno factory is in breach of covenants.
