Deloitte Top 200: Best Growth Strategy - Synlait

By Graham Skellern

Canterbury dairy processing company Synlait has a simple philosophy. It is dedicated to making more (added value) from milk.

Leveraging that philosophy has earned Synlait the title of Best Growth Strategy in the Deloitte Top 200 awards.

Synlait has developed a range of nutritional milk products that provide genuine benefits for health and wellbeing. It wants to be a world leader in the manufacture of specialised milk powders for infant formula, base paediatric powders for blending into finished infant formula, and for its own finished infant formula products.

Synlait's strategy is to supply leading global food companies that own great brands.

The strategy targets the highest returning markets, customers and products available to New Zealand dairy that provide scope through market size or expected growth. During the 2016 financial year, Synlait made "credible progress" along that path.

It developed closer partnerships with several key customers.

The Top 200 judges described Synlait as a "huge success story" in a very tough environment over many years, and paid tribute to the leadership of managing director John Penno who had the driving vision for the company.

"Synlait has gone through tough times and turned itself around. It's had a successful IPO, successful capital raising and successfully located external investors and has industry leading profitability measures.

"Synlait is the winner because the judges found its growth strategy based on selling selected products to leading brands around the world. The company has developed close relationships with food manufacturers around the world in international markets to the extent that they call themselves co-dependent with their customers.

"It's interesting to note Synlait has announced a six-year partnership with another finalist, A2.

"Synlait is known for its innovative pricing and payment mechanisms for its suppliers, an important part of its New Zealand presence. Synlait's revenues following this strategy have reached $546 million, up 22 per cent on last year. Its profitability is $34 million, up 324 per cent on last year."

Synlait is the winner because its growth strategy based on selling selected products to leading brands around the world.
The Top 200 judges

"It's hard to argue with a growth strategy that produces those sort of numbers," says judge Sandy Maier who is a leading independent director.

Penno says "in addition to the increase in profit, it has also allowed us to increase investment in improving the business, and reaffirm our commitment to developing the same business to business strategy in our specialty ingredients and cream products categories".

During the 2016 financial year, Synlait completed a series of projects -- a second large scale infant formula dryer, a large-scale infant formula consumer packaging facility, on-site warehousing, and a quality testing laboratory to ensure the company has the capability to continually monitor the hygiene of its processes, and test all the ingredients and finished products.

Watch: Best Growth Strategy finalist - The A2 Milk Company:

Video

Over the past year sales of infant grade milk powder grew from 24,500 MT in 2015 to 27,000 MT, nutritional base powders from 4300 MT to 5400 MT, and canned infant formula products increased from 4300 MT to 16,000 MT. Synlait expects to increase total production from 120,754 MT to 127,500 MT this financial year.

Synlait holds a current registration for manufacture for China, which is continuing to reform its infant formula regulatory framework. Synlait has entered a six-year partnership with fellow finalist, The A2 Milk Company, to develop and manufacture its A2 Platinum infant formula.

Finalist: The A2 Milk Company

The A2 Milk Company is concentrating on producing premium branded, nutritional dairy products for targeted markets in New Zealand, Australia, the US, China and Britain.

The company is a pioneer in developing A1 protein-free products from naturally occurring cows' milk. All A2 branded products contain only A2 beta-casein protein rather than the A1 and A2 protein found in conventional cows' milk products.

Its Platinum infant formula has a compelling consumer proposition as the only infant formula that exclusively contains the A2 beta-casein protein. It is selling well in Australia and New Zealand and making strong inroads in the Chinese market.

The judges said A2 Milk Company was a finalist in the Best Growth Strategy category because it succeeded in setting out to produce, market and sell branded A1 protein-free dairy products in a global market.

Watch: Best Growth Strategy finalist - Ryman Healthcare:

Video

Over the years it has grown from an IP portfolio into a group with substantial knowhow in sales and finally into a very sophisticated and successful global company.

A2 Milk Co reported a 127 per cent increase in total revenue for the 2016 financial year, jumping from $155m to $353m.

Infant formula accounted for 61 per cent or $214m of that revenue -- compared with $42m in 2015. The net profit was $30m in 2016, well ahead of the loss of $2m in 2015. Following a capital raising during the first half of the 2016 financial year, A2 Milk Co had $69m cash on hand.

Finalist: Ryman Healthcare

Ryman Healthcare is well-established in New Zealand, having built 30 retirement villages with five more under way, catering for a total of 10,000 residents.

Now Ryman is eyeing the Australian market. The company bought its third site in Melbourne during the 2016 financial year and is planning to secure two more sites over the next 12 months.

Managing director Simon Challies is confident of Ryman meeting a target of five villages open in Melbourne by 2020.

"We have also set ourselves a long-term target of matching our build rate in New Zealand over the Tasman.

"We see huge potential in Melbourne where the market is more than 20 per cent larger than our home market in New Zealand."

The judges selected Ryman as a finalist in the Best Growth Strategy category because of its "long, distinguished record of success".

Since first appearing in the Deloitte Top 200 in the year 2000, it has been nominated 13 times and won four different categories including Best Growth Strategy in 2011. Judge Sandy Maier said what stood out this year was Ryman's Australian growth strategy. Its operating cashflow grew 34 per cent to $312 million for the year ending March 31, and its underlying profit was $158m, up 16 per cent.

The company re-invested $369m, and during the 2016 financial year built a record 900 units and beds. It completed the Weary Dunlop and Bruce McLaren villages in Melbourne and Auckland. Ryman is now a $4.8 billion company by market cap.

- NZ Herald

Top 200 2016 rankings: Synlait 63, A2 Milk Company 92, Ryman Healthcare 113.

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