Synlait Milk will develop its second nutritional powder manufacturing factory for an estimated initial capital investment of $250 million at its new Pokeno site in Waikato, which will be commissioned for the 2019/20 season as it aims to keep up with growing demand for infant formula product.

"Forecast customer demand" prompted Synlait to boost the capacity for its first nutritional spray dryer at Pokeno to 45,000 metric tonnes, up from its initial plan for 40,000 tonnes, the company said in a statement.

The Rakaia-based milk processor has the capital required to fund the new nutritional spray dryer — which will be capable of producing a full suite of nutritional, formulated powders including infant-grade skim milk, whole milk and infant formula base powders — through a combination of cashflow and an increased bank revolver facility, it said.

Initially, Synlait Pokeno will produce infant-grade ingredients while regulatory registration is obtained for infant formula base powder production, the company said.

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"Our immediate focus is on establishing the nutritional spray dryer and associated services, including a wetmix kitchen and warehousing," chief executive John Penno said in the statement.

"But additional capacity and capabilities may be added in future as Synlait seeks to develop the site to a similar level as Synlait's Dunsandel site over time," Penno said.

Milk supply will be sourced from the Waikato region from June 1, 2019, the company said,

"We've had a really positive response from dairy farmers looking to supply Synlait, so we're confident of securing sufficient milk for the 2019/20 season," David Williams, Synlait's milk supply manager, said in the statement.

On Tuesday, shares of Synlait slipped 0.5 per cent to close at $10.65.