Synlait announces record half year profit

Page 1 of 2
SYNLAIT MILK LIMITED NZX: SML
ANNOUNCEMENT ASX: SM1
21 MARCH 2018
SYNLAIT ANNOUNCES RECORD HALF
YEAR PROFIT
Synlait Milk (NZX: SML; ASX: SM1) has reported a half year net profit after tax (NPAT) of
$40.7 million for the six months ending 31 January 2018.
This is compared to $10.6 million for the same period last year (H1 FY17).
Synlait’s Managing Director and CEO, John Penno, says the strong earnings growth of $30.1
million has been driven by increases in manufacture and sales of our highest margin
products, as well as improved margins and earlier sales of our ingredients products.
“The growth trajectory of canned infant formula has continued with total consumer
packaged volumes almost tripling from the same period last year and up 36% on the second
half of last year,” he says.
“Our relationship with The a2 Milk Company™ continues to strengthen where we remain
their exclusive manufacturer for the important Australia, New Zealand and China market.”
“We have also renegotiated our supply agreements with New Hope Nutritionals and with
Bright Dairy, which provides for four-fold volume growth over a five-year period. However,
we don’t expect this to impact sales until FY19,” he says.
In the six months to 31 January 2018, Synlait has invested $34.5 million in capital
expenditure throughout New Zealand. The major components of this were the Synlait
Auckland blending and canning facility ($11.2 million) the new wetmix kitchen at Synlait
Dunsandel ($18.4 million). Synlait also established a new research and development centre
in Palmerston North.
“Both of these projects are critical for keeping up with customer demand, and give us the
ability to expand on our infant formula business,” says Mr Penno.
Staff growth can also be partly attributed to infant formula growth, with an increase of $3.5
million in employee costs.
“The increased employee spend also reflects the continued investment into capability for
research and development, business development and leadership to support continuing
growth and diversification,” says Synlait’s Chairman, Graeme Milne.

Page 2 of 2
Synlait has appointed three new members to its Senior leadership team in H1 FY18. Dr.
Suzan Horst will be Director of Quality, Regulatory and Laboratory services, Deborah Marris
is General Counsel and Head of Commercial, and Hamish Reid is Chief Sustainability Officer
and General Manager of Brand.
Synlait’s cash flow generation of $204.3 million for the 12 months ended 31 January 2018
has fully funded the capital expenditure program and has enabled the reduction of debt to
low levels.
Total Net Debt for H1 FY18 was $49.7 million, a substantial reduction from $147 million at
the same time in FY17.
“This leaves the company well placed to fund our expansion plans. At Synlait Dunsandel we
expect to spend $125 million on an advanced liquid dairy packaging facility, and at Synlait
Pokeno we will spend $260 million to establish our new nutritional powder manufacturing
facility,” says Mr Milne.
Synlait entered into an agreement to buy land in Pokeno in February and is now proceeding
to settlement, in accordance with the agreement, following satisfaction of all of the
conditions.
“We are also ready to begin to develop new categories and are focusing on developing
opportunities in everyday dairy,” says Mr Penno.
Synlait’s spend on research and development has grown from $2.25 million in FY16 to $4.75
million in FY17 and is forecast at $7 million in FY18.
“While our research and development investment is dwarfed by other companies, the highly
targeted nature of our efforts are matched to the significant market opportunities we’ve
identified. We will realise the value many times over with the returns we achieve.”
“It’s all part of the strategy designed to gain access to the highest returning categories,
products, markets and customer segments in dairy,” says Mr Penno.
ENDS
Synlait’s FY18 Interim Report and accompanying presentation can be found at
www.synlait.com/investors/
.

For more information about Synlait, visit www.synlait.com
or contact:

Dan Walraven
Communications Manager, Synlait Milk
P: +64 27 836 7532
E: daniel.walraven@synlait.com

---

Synlait Milk Limited Interim Report
FY
18
TO DATE

LEADERSHIP UPDATE
|
PG 4CONTENTS
SIX MONTH HIGHLIGHTS
$147m
DEBT DOWN
NET DEBT H1 FY17
$10.6m
NPAT H1 FY18
$40.7m
NET DEBT H1 FY18
$50m
PROFIT UP
NPAT H1 FY17

CHIEF FINANCIAL OFFICER UPDATE
|
PG 14FINANCIAL STATEMENTS
|
PG 19
ANNOUNCED
INVESTMENT IN LIQUID
MILK FACILITY IN
DUNSANDEL
$125m
ACQUIRED SITE
TO ESTABLISH
OPERATIONS IN
POKENO
ACHIEVED CFDA
REGISTRATION FOR
THE a2 MILK COMPANY’S
TM
INFANT FORMULA
COMMISSIONED
NEW WETMIX KITCHEN
AT SYNLAIT DUNSANDEL
SYNLAIT AUCKLAND +
SYNLAIT PALMERSTON NORTH
OPENED
FOODSTUFFS SOUTH ISLAND
CONTRACT WON TO MANUFACTURE
FRESH MILK + CREAM
PG 1
Synlait Milk Limited Interim Report 2018
I

TO SUCCEED
INGREDIENTSINFANT NUTRITION
MANUFACTURING
EXCELLENCE
DIFFERENTIATED
MILK SUPPLY
RESEARCH + CATEGORY
DEVELOPMENT
OUR CATEGORIES
OUR VALUE CHAIN
Synlait Milk Limited Interim Report 2018
PG 2
I

WE WILL LEVERAGE OUR UNIQUE VALUE CHAIN IN
EACH CATEGORY TO BUILD SUCCESSFUL BUSINESSES
THAT CONTRIBUTE TO OUR LONG-TERM SUCCESS
EVERYDAY DAIRYADULT NUTRITION
REGULATORY
CAPABILITY
QUALITY TESTING
LABORATORY
CONSUMER
PACKAGING
PG 3
Synlait Milk Limited Interim Report 2018
I

LEADERSHIP UPDATE
Graeme Milne
CHAIRMAN
John Penno
MANAGING DIRECTOR AND CEO
Synlait Milk Limited Interim Report 2018
PG 4
I

Synlait is all about making the
most from milk.
Compared to other half year milestones, we have come
a long way in a much shorter space of time and with the
momentum of growth constantly increasing, our FY18 update
is both about solid progress against our ambition and the
opportunities that lie ahead.
A SUCCESSFUL GROWTH STRATEGY
Our strategy is to manufacture high value dairy products by
collaborating with New Zealand’s best dairy farmers, and
the most innovative international brand owners, to target the
most discerning consumers in leading markets.
It is a strategy designed to gain access to the highest
returning categories, products, markets and customer
segments in dairy.
This strategy quickly led us from dairy ingredients into infant
formula ingredients and finished consumer packaged infant
formula products.
Over the past ten years, we have grown from a new entrant
to one of the leading manufacturers in the global paediatrics
industry, supplying ingredients to multinational infant formula
companies and consumer-ready infant formula to innovative
new entrant brand owners.
Wherever we can, we differentiate our product offering
by working with our farmers to produce milk
that delivers benefits for consumers. We
then manufacture our products from
those milks, streaming them into
the final consumer product that
our business to business (B2B)
customers currently market and sell.
We have been in a cycle of continual investment in research
and development (R+D) focused on product development
for our customers, investment in state-of-the-art plant and
equipment, and building a world class team, enjoying an
annual compounding growth rate of 27% by volume and 38%
by revenue since 2009.
High rates of return on capital are achieved by maintaining
low cost structures through scale, high rates of plant
utilisation, high yield and high quality.
Strong cash flow from operations
is being channelled towards
diversification and a business
strategy that will thrive in the
years ahead.
We have a flourishing R+D and market development program,
we’re building scale with value-added manufacturing
capacity and we’re maintaining a strong balance sheet with
an expectation of organic and acquisitive growth in areas that
support our strategy.
We will continue investing in the right kind of manufacturing
capacity to support growth in infant formula volumes to meet
customer demand.
However, we are also ready to begin to develop a new
category, and are focusing on developing
opportunities in everyday dairy – the dairy
products consumed straight out of the
pack or bottle at home each day.
By targeting these products in the
New Zealand domestic market, we
believe we will also create high
value export opportunities.
LEADERSHIP UPDATE
PG 5
Synlait Milk Limited Interim Report 2018
I

IMPROVING UNDERLYING BUSINESS
PERFORMANCE
In recent years, we have been working hard to improve the
systems and processes, and operational performance we use
to manage our rapidly growing business.
These efforts are beginning to demonstrate tangible
performance improvements with greater plant throughput,
lower levels of downgraded product and significantly lower
inventory delivering improved margins on ingredient products
and a stronger balance sheet.
Integrated Business Planning
(IBP) has replaced our sales and
operational planning process
and now sits at the heart of our
business driving our monthly
planning and monitoring rhythm.
IBP has us focused on a three-year timeframe considering
new categories, product and customer development, product
demand, manufacturing and supply chain, and workforce
planning. Changes to the plan are integrated through our
budgeting and financial forecasting processes.
Management of our manufacturing team was restructured
over the past 12 months placing commercial managers
over each major process. These managers have
been given responsibility and resources to
drive performance measured by quality,
safety, throughput, yield and cost.
We have worked with them to align
reporting through a system of
balanced scorecards with targets
and gap analysis.
We are rolling out Integrated Work
Systems (IWS) across manufacturing
and supply chain. IWS is a continuous
performance improvement process developed by Procter
and Gamble. Combined with our restructured management
and reporting system, we expect IWS to deliver about 15,000
metric tonnes (MT) of additional production at Synlait
Dunsandel in FY19 compared to FY17.
GROWING OUR PARTNERS’ INFANT FORMULA
BUSINESSES
Total sales of finished infant formula were 16,800 MT in the
first half of this financial year (H118), representing 165%
growth on H117, and 35% growth on H217.
Our relationship with The a2 Milk Company™ continues to
strengthen and we remain their exclusive manufacturer for
the important Australia, New Zealand and China markets.
Our R+D team is currently working on developing additional
products for other markets as we support their strategy for
regional growth.
Synlait received Chinese Food
and Drug Administration (CFDA)
approval in September 2017 for The
a2 Milk Company’s™ China-label
range of infant formula, comprising
stage 1, 2 and 3 products.
This allows these products to continue being
imported and sold in China.
We have renegotiated our supply
agreements with New Hope
Nutritionals to manufacture their
Akara and E-Akara range of infant
formula and with Bright Dairy to
manufacture their Pure Canterbury
infant formula range.
LEADERSHIP UPDATE
Synlait Milk Limited Interim Report 2018
PG 6
I

Over the next five years we expect these products will
become an important part of our infant nutrition portfolio.
They will offer a disproportionate contribution to earnings
as the new agreements reflect the value of being allocated
one of the limited CFDA registration slots available to us
as a manufacturer.
Securing these agreements has cleared the way to proceed
with CFDA registration of the New Hope Nutritional and
Bright Dairy infant formula brands. However, while we are
confident registration will be achieved and these processes
are well underway, the time taken to negotiate these
agreements means we expect registrations to be progressively
granted in late FY18 and the first half of FY19. This is well after
the deadline of 1 January 2018, which is when unregistered
products can no longer be imported. We anticipate that this
will delay significant orders for these products into early FY19.
A slower than expected process to receive regulatory approval
to begin the sale of Munchkin’s Grass Fed™ infant formula
in the U.S. market is also delaying expected manufacturing
volumes.
While we remain excited about the potential of our
partnership with Munchkin, and confident of eventual
approval from the U.S. regulatory authorities, significant
increases in manufactured volume has been later than we
initially anticipated.
Overall we expect modest growth in sales of canned infant
formula in H218 compared to H118, before stronger
growth resumes through FY19 as regulatory
approval is gained for Akara, E-Akara
and Pure Canterbury for China, and
progressed for Munchkin Grass Fed™
in the U.S.
Our infant formula ingredient
business is continuing to develop
with growing volumes of infant-
grade skim milk powders (SMP),
whole milk powders (WMP), growing
up milks and base powders being
supplied to local and multinational
infant formula manufactures customers.
We are also experiencing growing
demand for infant formula-grade
lactoferrin powders. This is
resulting in price increases which
has restored profitability to this
business unit.
Over the past year, we have made two investments to expand
our infant formula capacity.
In November 2017 we commissioned our new Wetmix kitchen,
which allows us to blend sufficient wet infant formula base to
operate both Dryer Two and Dryer Three simultaneously on
infant formula base powder. This provides sufficient capacity
for 80,000 MT per annum of base infant powder from total site
production, which is some 145,000 MT of milk powder and
cream products.
Also in November we commissioned our new infant formula
blending and consumer packaging facility in Auckland. This
was acquired partially finished in May 2017 and lifts our
blending and consumer packaging capacity to 70,000 MT
from 35,000 MT per annum.
As we look forward we can see an ongoing requirement to
continue building capacity for the manufacture of infant grade
ingredients and base powders.
It has also become important to mitigate the single-
site risk we face with the large concentration
of manufacturing and milk supply at our
Dunsandel site for our branded infant
formula customers.
Following a search over the past year,
in February 2018 we announced that
we had entered an agreement to
purchase 28 hectares of industrial
land in Pokeno in the northern
Waikato region.
The site was selected for optimum long-
term development and operating costs.
LEADERSHIP UPDATE
PG 7
Synlait Milk Limited Interim Report 2018
I

It is also close to two large ports for imported ingredients and
within 50 km of our new Auckland canning site. Considering
long-term milk, ingredient and finished product transport
costs, there was a considerable advantage to this site
compared to similar options we considered further south.
The immediate availability of
gas and electricity for energy,
fresh water for processing and
sustainable wastewater treatment
through the local municipal scheme
also reduces the capital and long-
term costs of developing and
operating the site.
We have advanced plans for the initial development and
intend to proceed once we have secured planning consent.
This will also inform our timeline for commissioning Synlait
Pokeno, however we are attempting to bring our new site to
life as quickly as we can to meet growing customer demand.
We are pleased with the levels of enquiry that we have
received from local farmers since announcing the Pokeno site
purchase. We have several conversations underway and are
confident of securing sufficient milk for our immediate plans
and into the future.
EVERYDAY DAIRY AS A NEW CATEGORY
With our infant formula business continuing to mature, we
h
ave begun to develop everyday dairy opportunities, which we
believe to be an exciting new category and market for Synlait.
The New Zealand domestic market is small relative to the
amount of milk produced on New Zealand dairy farms, it
requires only 5% of total milk production.
However, we estimate the
wholesale value of everyday dairy
in New Zealand to be $2 billion,
making it a meaningful target
category for Synlait.
In De
cember 2017 we announced an agreement with
Foodstuffs South Island to become their exclusive
manufacturer of private label fresh milk and cream from
early 2019. To support this contract, and open up new
export opportunities, we are investing $125 million in a new
advanced liquid dairy packaging facility at Synlait Dunsandel.
Milk is a wonderful food nutritionally and it’s consumed
globally. It has a good mix of healthy fatty acids in its cream,
and the phospholipids that form membranes around the fat
globules in cream develop and protect our brain cells. The
amino acids in the casein and whey proteins contained in
milk are fantastic for muscle growth and recovery. It’s
also a wonderful source of minerals, particularly
calcium, which we need for bone growth
and protection.
LEADERSHIP UPDATE
Synlait Milk Limited Interim Report 2018
PG 8
I

We are proud to be producing
consumer milk products for our
customers. There are literally
millions of children and families
who are healthier and happier
because they are consuming
products we manufacture from the
milk we collect from our farmers.
For the last 50 years, New Zealand has manufactured
much of our milk into milk powder in order to preserve
and to concentrate it for storage and shipping. Much of
our milk powder has been sold to places where fresh milk
isn’t available, or is very expensive, but most of it is then
reconstructed back into liquid milk.
Traditionally reconstitution was done in the home, with
families buying milk powder and then mixing it with water to
provide drinking milk in one form or another. This is still the
dominant way infant formula is delivered and used.
Over the years milk powder reconstitution has increasingly
been done on an industrial scale. Milk powder is being
blended with water in factories, then the milk is packaged in
bottles or cartons as pasteurised or ultra-heat treated (UHT)
long life milk.
The current industry structure supports the dairy
manufacturing sector to produce some of
the highest quality milk powder in the
world at huge scale, and this powder
is shipped to in-market businesses that reconstitute it and
manufacture it in consumer packs for distribution, often in
the form of long life milk and fermented drinks.
But there have been three important changes underway
challenging the underlying assumptions shaping current
infrastructure.
Firstly, the cost of shipping dairy or infant formula in its
whole form has markedly reduced relative to the cost of
manufacturing spray dried milk products. Secondly, wealthy
consumers are increasingly prepared to pay a premium for
product from places like New Zealand. And finally, the world is
waking up to the environmental cost of industrial processes.
Producing milk, using huge amounts of water and energy to
dry it and package it, only to ship it to factories in Asia where
the milk powder is blended with water again and packaged
for distribution just doesn’t make sense anymore.
We have learnt through our infant formula business that
significant value that can be created by manufacturing the
final consumer packaged products within the company.
This starts by providing fresh
milk through Foodstuffs South
Island’s extensive network of New
World, PAK’NSAVE, Four Square
and On The Spot stores in their
Pams and Value banded
products.
LEADERSHIP UPDATE
PG 9
Synlait Milk Limited Interim Report 2018
I

This will only utilise about one-third of the capacity for the
advanced liquid dairy packaging facility we are building in
Dunsandel.
The other two-thirds of capacity in our $125 million facility
will provide capacity for branded domestic and export focused
products, shipped as food service and consumer packaged
milk, cream, dairy beverage and infant formula products.
The plant has been configured with a focus on developing
innovative new products for both the domestic and export
markets. We see our channels to market developing through
our traditional business to business model, and potentially by
developing our own portfolio of branded products
This is a new journey for Synlait.
It is like the moment we decided to
pursue the infant formula category
a decade ago. We firmly believe
that in the years to come it will
prove to be just as important.
INNOVATION FOCUS CONVERGING ON
SYNLAIT PALMERSTON NORTH
We have always invested heavily in R+D with much of this
innovation focused on new product development for our infant
formula customers, and on our unique lactoferrin
manufacturing process. It’s been practical
hands on innovation around differentiated
milk streaming, unique farm systems,
high-specification manufacturing and
recipe formulation.
Of course we also have some traditional research and
development underway, but arguably we haven’t had enough,
and perhaps what we have done hasn’t been sufficiently well
focused on clearly identified market opportunities.
The appointment of Dr Roger Schwarzenbach as General
Manager of Technical and Innovation signalled our intention
for a larger and more focused research and development
effort. This effort is both supporting our existing ingredient
and infant formula businesses, and helping us prepare for the
everyday dairy and adult nutrition categories we intend to
move into.
Already our spend on research and development has grown
from $2.25 million in FY16 to $4.75 million in FY17 and is
forecast at $7 million in FY18. We intend to lift this to 1.5% of
revenue within the next few years, which will see it double
again. While this investment is dwarfed in comparison to other
companies, the highly targeted nature of our efforts are matched
to the significant market opportunities we’ve identified and in
return we will realise the value many times over.
We have decided to base the first
Research and Development Centre
beyond Dunsandel in Palmerston
North because it has allowed us to
partner with Massey University.
Importantly, this partnership secures ongoing
access to their FoodPilot™ pilot plant and
equipment they have on site, which are
ideally suited for the products we are
looking to develop.
LEADERSHIP UPDATE
Synlait Milk Limited Interim Report 2018
PG 10
I

Above all else great research and development comes from
great people working together collaboratively in effective
teams. Being located in the heart of the Massey University
campus is allowing us to attract great people to our team,
and for those staff to work alongside technical and scientific
experts and students at the University. It also provides a base
for our technical and manufacturing people from Dunsandel
and Auckland when they are bought in to be part of projects
running on the FoodPilot™ plant.
BUILDING THE BEST TEAM IN THE WORLD
The momentum and success
created by the step change in
our leadership team capability in
FY16 and FY17 continues to drive
greater performance as a business,
but also as an organisation
responsible for the careers of more
than 600 people.
It was with great pleasure we announced in January Dr Suzan
Horst would be joining the Senior Leadership Team (SLT) as
Director of Quality, Regulatory and Laboratory Services from
1 April 2018.
One of the best in her field globally, Suzan’s executive
experience with large multinational dairy companies like
FrieslandCampina and Nutreco B V will complement the
breadth of leadership and commercial capability in the
SLT. Her role carries significant responsibility across our
value chain with oversight of food safety systems and risk
management programmes.
We also welcomed Deborah Marris to the SLT as our General
Counsel and Head of Commercial in March. With an extensive
international legal career featuring senior roles based in New
Zealand, China, the United Kingdom and India, Deborah has
the skills, foresight and experience we need in this area.
Lastly, we began working with Hamish Reid in late 2017 to
better understand our ambitions around sustainability. As it’s
transpired, Hamish has played a pivotal role in this on-going
discussion and has taken on the role of Chief Sustainability
Officer to focus on our aspirations in this area. Hamish is
also our General Manager of Brand and we will leverage his
deep experience in food and beverage marketing to continue
evaluating potential consumer brand opportunities.
LEADERSHIP UPDATE
Dr. Suzan Horst - DIRECTOR OF
QUALITY, REGULATORY AND LABORATORY
SERVICES
Deborah Marris - GENERAL COUNSEL
AND HEAD OF COMMERCIAL
Hamish Reid - GENERAL MANAGER OF
BRAND AND CHIEF SUSTAINABILITY OFFICER
THREE SIGNIFICANT APPOINTMENTS TO THE SENIOR LEADERSHIP TEAM IN H1 FY18
PG 11
Synlait Milk Limited Interim Report 2018
I

Across the business we continue to
grow and deepen the capability of
our people. New roles are primarily
focused on supporting strategic
initiatives and our category growth,
and we’re pleased that we continue
to attract high calibre talent to our
organisation.
In the first six months of this financial year we have created
70 new roles. We are a significant regional employer in New
Zealand and take this responsibility very seriously. The best
evidence of this is an effective induction programme for all
new starters, a genuine focus on increasing staff engagement
and a number of initiatives to develop and grow our people in
their roles.
In November John Penno signalled his decision to step down
from his CEO role in 2018. As a co-founder and long-time
executive of the organisation, John recognises Synlait is the
strongest it has ever been and believes it is the best time to
transition to a new CEO with the skills and experience Synlait
needs to succeed in the future.
The Board of Directors has embarked on an international
search for the right person to take on the CEO role and
while this is progressing well, the Board remains committed
alongside John to make the transition as orderly as possible
when the time comes.
John will continue as a Director for the company after the
transition, and an update around progress will be shared as it
is known. We can assure our shareholders that they continue
to be well served by our people at all levels of the business.
It is a great team to work with and they are delivering an
exciting future.
WHAT TO EXPECT FROM THE REST
OF THIS YEAR.
Synlait is an increasingly robust business moving forward
at pace.
The material increases in first half earnings has been achieved
from both large increases in manufacture and sales of our
highest margin products, as well as improved margins and
earlier sales of our ingredients products.
This earlier phasing of ingredients sales, combined with
increasing commitments to R+D and business development,
means earnings in the second half are expected to be lower
than the first half.
Although the second half of FY18 is not expected to be as
strong as the first half, we continue to forecast strong overall
earnings growth for the full year. Looking forward into FY19,
ongoing growth in infant formula volumes are expected to
continue to grow earnings.
Kind regards,
LEADERSHIP UPDATE
John Penno
MANAGING DIRECTOR
2
0 March 2018
Graeme Milne
CHAIRMAN
20 March 2018
Synlait Milk Limited Interim Report 2018
PG 12
I

PG 13
Synlait Milk Limited Interim Report 2018
I

Nigel Greenwood
CHIEF FINANCIAL OFFICER
FINANCIAL UPDATE
Synlait Milk Limited Interim Report 2018
PG 14
I

OVERVIEW
Reported after tax earnings for the
first half of FY18 (H1 FY18) were a
profit of $40.7 million compared to
$10.6 million for the same period
last year (H1 FY17).
Strong margin growth of $41.5 million before tax has been
primarily driven by increased canned infant formula sales
volumes.
FINANCIAL PERFORMANCE
SALES
For the period ended 31 January 2018 our revenue at
$439.3 million is up 52.2% on last year’s $288.7 million.
Increased canned infant formula sales volumes and higher
dairy commodity prices have both driven increased revenue
compared to the same period last year.
Total volume sold for H1 FY18 at 61,303 metric tonnes (MT)
was 0.4% above 61,062 MT in H1 FY17.
H1 FY17H1 FY18Growth %
Sales MT
Powders and cream
54,693
44,435
-18.8%
Consumer Packaged
6,349
16,839
165.2%
Specialty Ingredients
19
28
48.6%
Total
61,06261,3030.4%
Powders and cream sales volumes have decreased compared
to the first half of last year, predominantly as a consequence
of a sell down of aged inventory in the first half of last year.
However it is anticipated that powders and cream sales
volumes in the first half will represent approximately 50% of
our total annual sales volumes (H1 FY17 – 45%)
Consumer packaged sales increased 165.2% over the same
period last year and are 36% up on the second half of FY17
where the sales volume was 12,427 MT. H1 FY18 sales
volumes are expected to represent approximately 48% of
our total sales volumes compared to only 34% in H1 FY17.
PRODUCTION
Total milk solids processed have reduced by 8.7% over H1
FY17, despite a consistent contracted milk supply (41.4 million
kgMS). The increase in infant formula production has limited
the volume of milk that we have been able to process through
the peak on-farm milk production months and so we have sold
3.3 million kgMS to other milk processers during this period.
H1 FY17
H1 FY18
Growth %
Net Production MT
Powders and Cream75,886
64,001
-15.7%
Consumer Packaged7,088
17,821
151.4%
Specialty Ingredients6
6
0%
Total82,98081,815-1.4%
In addition it should be noted that by the end of H1 FY17
we had processed approximately 64% of our estimated total
annual milk production. This will result in a second half drag
associated with under-recovered manufacturing overheads.
There has been an increased focus on sales deliveries,
particularly of ingredient products, which has enabled Synlait
to reduce our half year finished goods inventory from 42,962
MT to 35,040 MT, an 18.4% decrease year over year.
GROSS MARGIN
Synlait generated a gross profit in H1 FY18 of $85.2 million, a $41.5
million improvement on the $43.7 million generated H1 FY17.
Margin growth has been driven by increased infant volumes
with canned infant formula volumes increasing by 10,490 MT
to 16,839 MT.
Gross margins per MT has increased from $716 per MT to
$1,390 per MT. The largest driver of this improvement has
been improved product mix with canned infant formula
representing 27% of total sales volume, up from 10% in H1
FY17. We have also achieved and estimated sales phasing
margin gain of approximately $4.7 million as a result of
contracting higher than anticipated sales in the early part
of the season when prices were high.
The improved gross profit per MT has also been supported
by the dilutive impacts of ingredient volume sell downs and
onerous contract provisions experienced in H1 FY17 not
reoccurring in H1 FY18.
FINANCIAL UPDATE
PG 15
Synlait Milk Limited Interim Report 2018
I

FINANCIAL UPDATE
OVERHEAD EXPENDITURE
In total our overhead expense for H1 FY18 at $24.5 million
is $2.8 million (or 13.1%) up over H1 FY17’s $21.7 million.
The key driver is increased employee costs, predominantly in
the areas of research and development, business development
and the leadership team as Synlait reinvests for future growth.
EARNINGS BEFORE INTEREST, TAX,
DEPRECIATION AND AMORTISATION (EBITDA)
EBITDA at $74.1 million increased 122.7% on H1 FY17’s
$33.3 million, with the $41.5 million improvement in gross
margin being the major driver.
NET FINANCING COSTS
Net financing costs at $4.6 million were $2.4 million lower
than H1 FY17’s $6.9 million. Gross term debt interest costs
have decreased by $2.0 million following the capital raise in
October 2016 and strong cash flow enabling debt repayments
in the second half of FY17.
H1 FY17
H1 FY18
Variance
Net Finance Costs ($ millions)
Gross term debt interest(5.2)
(3.3)
2.0
less Capitalised interest–
0.2
0.2
Net term debt interest(5.2)(3.0)2.2
Working capital funding interest(1.5)
(1.5)
0.1
Interest received0.1
0.5
0.4
Loss on derecognition of
financial instruments
(0.3)
(0.6)
(0.3)
Net financing costs(6.9)(4.6)2.4
EARNINGS PER SHARE
Our reported basic and diluted Earnings Per Share (EPS) for
H1 FY18 was 22.69 cents against H1 FY17’s earnings of 6.34
cents.
The accelerated rights entitlement offer completed in October
2016, and ordinary shares issued to members of senior
management who participated in the IPO incentive scheme,
increased the number of shares on issue from 146,341,197 to
179,223,028. The weighted average number of shares on issue
during the period was 179,223,028 (FY16: 167,309,098).
FINANCIAL POSITION
OVERVIEW
Operating cash flow for the 12 months ended 31 January
2018 of $204.3 million has fully funded capital expenditure
for growth and enabled a reduction of net debt from $146.6
million to $49.7 million. This has resulted in Synlait’s leverage
ratio reducing from 1.8 times EBITDA to 0.4 times EBITDA,
leaving Synlait well positioned to invest for future growth.
TRADE AND OTHER RECEIVABLES
At $47.1 million, trade and other receivables are down on
H1 FY17’s $62.0 million. This decrease is predominantly driven
by improving product mixes, enabling increased assignments
of receivables.
INVENTORIES
Total inventory at $170.1 million is 13.9% lower than the
$197.5 million held at the same time last year.
The major driver of the reduction is 18.4% lower finished
goods inventory (35,040 MT compared to 42,962 MT H1 FY17)
which has been partially offset by a higher inventory cost per
metric tonne due to higher forecast farm gate milk price.
Synlait Milk Limited Interim Report 2018
PG 16
I

FINANCIAL UPDATE
TRADE AND OTHER PAYABLES
Trade and other payables at
$204.0 million is up $46.1 million
(29.2%) on last year’s $157.9 million.
Approximately half of the increase is due to an increase in the
value of deposits received from customers as canned infant
formula volumes increase. An increased amount remaining
payable to milk suppliers due to a higher milk price relative to
last season is the other major driver of the increase.
TOTAL NET DEBT
Total Net Debt for H1 FY18, including both current and term
debt facilities less cash on hand, was $49.7 million. This is a
reduction of $96.8 million from January 2017 as a consequence
of strong operating cash flow in the second half of FY17 and
H1 FY18.
$ millions
H1 FY17
H1 FY18
Current Debt66.4
54.9
Term Debt83.5
83.7
Cash on Hand(3.3)
(88.9)
Net debt146.649.7
OPERATING CASH FLOWS
Operating cash flow at $75.0 million were $89.2 million up
on H1 FY17’s negative $14.2 million. The improved operating
cash flow has been predominantly driven by increased
EBITDA ($40.8 million increase) and increased customers
deposits, both a consequence of higher canned infant formula
sales volumes.
BANK FACILITIES AND COVENANTS
We have two syndicated bank facilities in place with ANZ and
BNZ after refinancing in August 2016, refinancing the Mitsui
trade finance facility and completing the capital raise.
1. Working capital facility (multi-currency) – reviewed
annually and facility limit of $120.0 million
2. Revolver facility – matures 1 August 2020 and facility
limit of $145.0 million
We have four key bank covenants in place within our
syndicated bank facility agreement. These are:
1. Interest cover ratio – EBITDA to interest expense of no
less than 3.00× based on full year forecast result
2. Minimum shareholders funds – no less than
$296.0 million
3. Working capital ratio – inventory and debtors to working
capital facility outstanding of no less than 1.5:1
4. Leverage ratio – Total debt to EBITDA is no greater
than 3.75×
We were compliant with our bank covenants at all times
during H1 FY18.
It should also be noted that all unrealised gains or losses
associated with both our foreign exchange and interest
rate swap derivatives within equity are excluded when
determining our compliance with our minimum shareholder’s
funds bank covenant calculation.
Nigel Greenwood, Chief Financial Officer
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at $501.5 million increased $72.7 million over the same time last year ($428.8 million). Major
investments of note were the Wetmix kitchen and the Auckland consumer packaging facility.
$ millions
Location
H1 FY18
TotalCommissioned
Wetmix kitchenDunsandel
18.4
34.5Nov 17
Consumer Packaging FacilityAuckland
11.2
32.9Nov 17
Other capital Expenditure
4.9
Total Capital Expenditure34.5
PG 17
Synlait Milk Limited Interim Report 2018
I

PG 18
I
Synlait Milk Limited Interim Report 2018

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 19
I
FINANCIAL STATEMENTS
HY18

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 20
I
SYNLAIT MILK LIMITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
CONTENTS PAGE
Directors’ responsibility statement 21
Half-year financial statements
Income statement 22
Statement of comprehensive income 23
Statement of changes in equity 24
Statement of financial position 25
Statement of cash flows 26
Notes to the condensed interim financial statements 27
1 Reporting entity 27
2 Basis of preparation of six monthly financial report 27
3 Segment information 28
4 Expenses 29
5 Reconciliation of profit after income tax to net cash outflow from operating activities 30
6 Trade and other receivables 31
7 Inventories 31
8 Property, Plant and Equipment 31
9 Loans and borrowings 32
10 Share capital 32
11 Financial instruments 32
12 Related party transactions 33
13 Contingencies 34
14 Commitments 34
15 Events occurring after the reporting period 34
Independent review report 35
Directory 36

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 21
I
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors are pleased to present the condensed interim financial statements for Synlait Milk Limited and its subsidiaries,
Synlait Milk Finance Limited, The New Zealand Dairy Company Limited, and Eighty Nine Richard Pearse Drive Limited (together
“the Group”) as set out on pages 22 to 34 for the six months ended 31 January 2018.
The Directors are responsible for ensuring that the condensed interim financial statements present fairly the financial position of
the Group as at 31 January 2018 and the financial performance and cash flows for the six months ended on that date.
The Directors consider that the condensed interim financial statements of the Group have been prepared using appropriate
accounting policies, consistently applied and supported by reasonable judgements and estimates and that all relevant financial
reporting and accounting standards have been followed.
The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination
of the financial position of the Group and facilitate compliance of the financial statements with the Financial Markets Conduct
Act 2013.
For and on behalf of the Board.
DIRECTORS’ DECLARATION
31 JANUARY 2018
John Penno
MANAGING DIRECTOR
20 March 2018
Graeme Milne
CHAIRMAN
20 March 2018

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 22
I
Period ended
Year ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
Notes
$’000$’000$’000
Revenue
439,316
288,696758,994
Cost of sales
4
(354,128)
(244,959)(648,585)
Gross profit
85,188
43,737110,409
Other income
326
367680
Share of profit/(loss) from associates
189
(481)(560)
Sales and distribution expenses
4
(8,661)
(8,235)(16,731)
Administrative and operating expenses
4
(15,873)
(13,464)(28,021)
Earnings before net finance costs and income tax
61,169
21,92465,777
Finance expenses
(4,497)
(6,746)(11,429)
Finance income
536
9518
Loss on derecognition of financial assets
(591)
(278)(802)
Net finance costs
(4,552)
(6,929)(12,213)
Profit before income tax
56,617
14,99553,564
Income tax expense
(15,954)
(4,384)(15,341)
Net profit after tax for the period
40,663
10,61138,223
Earnings per share
Basic and diluted earnings per share (cents)
22.69
6.3422.07
INCOME STATEMENT
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
The accompanying notes form part of and are to be read in conjunction with these financial statements.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 23
I
Period ended
Year ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
Notes$’000$’000$’000
Profit for the period
40,663
10,61138,223
Items that may be reclassified subsequently to profit and loss
Effective portion of changes in fair value of cash flow hedges
1,043
3,9113,597
Income tax on other comprehensive income
(292)
(1,095)(1,007)
Total items that may be reclassified subsequently to profit and loss
751
2,8162,590
Other comprehensive income for the period, net of tax
751
2,8162,590
Total comprehensive income for the year
41,414
13,42740,813
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
The accompanying notes form part of and are to be read in conjunction with these financial statements.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 24
I
Share
capital
Employee
benefits
reserve
Cash flow
hedge
reserve
Revaluation
reserve
Retained
earnings
Total
equity
UnauditedUnauditedUnauditedUnauditedUnauditedUnaudited
Notes$’000$’000$’000$’000$’000$’000
Equity as at 1 August 2016
172,24743514,03220,27649,853256,843
Profit or loss for the period
––––10,61110,611
Other comprehensive income
Effective portion of changes in
fair value of cash flow hedges
––4,792––4,792
Movement in time value hedge
reserve
––(881)––(881)
Income tax on other
comprehensive income
––(1,095)––(1,095)
Total other comprehensive
income
––2,816––2,816
Issue of new shares
95,412––––95,412
Employee benefits reserve
–(17)–––(17)
Capitalisation of employee
benefits reserve
418(418)––––
Total contributions by and
distributions to owners
95,830(435)–––95,395
Equity as at 31 January 2017
268,077–16,84820,27660,464365,665
Equity as at 1 August 2017
268,0743616,62220,27688,076393,084
Profit or loss for the period
––––40,66340,663
Other comprehensive income
Effective portion of changes in
fair value of cash flow hedges
––668––668
Movement in time value hedge
reserve
––375––375
Income tax on other
comprehensive income
––(292)––(292)
Total other comprehensive
income
––751––751
Total comprehensive income
––751–40,66341,414
Issue of new shares
––––––
Employee benefits reserve
–238–––238
Capitalisation of employee
benefits reserve
––––––
Total contributions by and
distributions to owners
–238–––238
Equity as at 31 January 2018
268,07427417,37320,276128,739434,736
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
The accompanying notes form part of and are to be read in conjunction with these financial statements.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 25
I
Period endedYear ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
Notes$’000$’000$’000
Current assets
Cash and cash equivalents
88,878
3,30773,827
Trade and other receivables
6
47,055
61,95379,028
Goods and services tax refundable
4,599
5,1175,080
Income accruals and prepayments
2,081
1,5062,862
Inventories
7
170,071
197,45582,695
Derivative financial instruments
11
19,279
27,08214,995
Total current assets
331,963
296,420258,487
Non-current assets
Property, plant and equipment
8
501,538
428,795470,554
Intangible assets
5,674
3,8103,246
Goodwill
3,643
–3,643
Other investments
453
343264
Derivative financial instruments
11
11,329
8,02217,431
Total non-current assets
522,637
440,970495,138
Total assets
854,600
737,390753,625
Current liabilities
Loans and borrowings
9
54,944
66,35072,448
Trade and other payables
204,011
157,886142,084
Current tax liabilities
29,774
14,52213,894
Derivative financial instruments
11
3,609
5,2283,904
Total current liabilities
292,338
243,986232,330
Non-current liabilities
Loans and borrowings
9
83,667
83,52883,637
Deferred tax liabilities
39,923
38,22839,557
Derivative financial instruments
11
3,937
5,9835,017
Total non-current liabilities
127,527
127,739128,211
Total liabilities
419,865
371,725360,541
Equity
Share capital
10
268,075
268,077268,074
Reserves
37,923
37,12436,934
Retained earnings
128,737
60,46488,076
Total equity attributable to equity holders of the Group
434,735
365,665393,084
Total equity and liabilities
854,600
737,390753,625
STATEMENT OF FINANCIAL POSITION
AS AT 31 JANUARY 2018
The accompanying notes form part of and are to be read in conjunction with these financial statements.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 26
I
Period ended
Year ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
Notes$’000$’000$’000
Cash flows from operating activities
Cash receipts from customers
470,931
267,931738,042
Cash paid for milk purchased
(268,216)
(201,489)(401,065)
Cash paid to other creditors and employees
(128,215)
(76,152)(207,578)
Net movement in goods and services tax
481
(4,460)(4,055)
Income tax refunds
–
–(10,169)
Net cash inflow / (outflow) from operating activities
5
74,981(14,170)115,175
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
–
–(26,906)
Interest received
536
9518
Acquisition of property, plant and equipment
(34,492)
(7,454)(33,057)
Proceeds from sale of property, plant and equipment
–
1619
Acquisition of intangible assets
(3,175)
(314)(226)
Net cash outflow from investing activities
(37,131)(7,657)(60,152)
Cash flows from financing activities
Receipt of cash from issue of shares (net)
–
95,41295,409
Repayments of borrowings
–
(85,405)(92,405)
Net movement in working capital and trade finance facilities
(17,504)
19,80325,902
Interest paid
(5,295)
(6,721)(12,147)
Net cash (outflow) / inflow from financing activities
(22,799)23,08916,759
Net increase / (decrease) in cash and cash equivalents
15,051
1,26271,782
Cash and cash equivalents at the beginning of the period
73,827
2,0452,045
Cash and cash equivalents at end of the period
88,8783,30773,827
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
The accompanying notes form part of and are to be read in conjunction with these financial statements.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 27
I
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
1 REPORTING ENTITY
The consolidated condensed interim financial statements
presented are those of the Group, including Synlait Milk
Limited and its subsidiaries Synlait Milk Finance Limited,
The New Zealand Dairy Company Limited, and Eighty Nine
Richard Pearse Drive Limited.
Synlait Milk Limited is primarily involved in the manufacture
and sale of dairy products.
The parent company, Synlait Milk Limited, is a profit-oriented
entity, domiciled in New Zealand, registered under the
Companies Act 1993 and listed on the New Zealand Stock
Exchange and the Australian Securities Exchange. Synlait
Milk Limited is a FMC reporting entity under the Financial
Market Conducts Act 2013 and its financial statements
comply with that Act.
2 BASIS OF PREPARATION OF SIX MONTHLY
FINANCIAL REPORT
The unaudited consolidated condensed interim financial
statements have been prepared in accordance with Generally
Accepted Accounting Practice in New Zealand (NZ GAAP)
as appropriate for interim financial statements. They
comply with International Accounting Standard 34 (IAS 34)
and New Zealand equivalent to International Accounting
Standard 34 (NZ IAS 34) Interim Financial Reporting and other
applicable financial reporting standards appropriate for profit
oriented entities.
Synlait Milk Limited is subject to seasonal fluctuations
which have an impact on both revenue and production levels
due to northern hemisphere dairy market demand and the
dairy milking season. Synlait Milk Limited recognises this
is the nature of the industry and plans and manages the
business accordingly. Certain comparative figures have been
changed to reflect current expense allocations between
cost of sales, sales and distribution and administative and
operating expenses.
Items included in the condensed interim financial
statements of the Group are measured using the currency
of the primary economic environment in which the entity
operates (‘the functional currency’). The financial statements
are presented in New Zealand Dollars ($), which is the
Group’s functional currency and are rounded to the nearest
thousand ($000).
There have been no significant changes in accounting policies
during the current period. The same accounting policies
and methods of computation are followed in these financial
statements as the most recent annual financial statements for
the year ended 31 July 2017.
Milk accrual
At interim reporting date, the milk accrual is a key
management estimate. The milk accrual represents the
amount the Group is forecasting to pay its suppliers for
the current year less advance payments made during the
period. The Group’s policy is to value its inventory using the
weighted average monthly milk price necessary to achieve
the Group’s forecast annual milk price for the season.
Managements’ forecast of the milk price for the season is
the basis of the calculation of the milk accrual and at interim
reporting date requires judgement from management.
Key assumptions in the calculation of the forecast annual milk
price for the season include dairy commodity prices, on-farm
milk composition, sales and production curve, annual foreign
exchange conversion rate and other conversion costs.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 28
I
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
3 SEGMENT INFORMATION
The Group operates in one industry, being the manufacture and sale of milk powder and milk powder related products. The Board
makes resource allocation decisions based on expected cash flows and results of the Group’s operations as a whole and the Group
therefore has one segment.
Although the Group sells to many different countries, the Group operates in one principal geographical area being New Zealand.
Revenues of approximately 68% are derived from the top three external customers (31 January 2017: 50%, 31 July 2017 48%).
The proportion of sales revenue by geographical area is summarised below:
Period ended
Year ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
$’000$’000$’000
China
11%
9%8%
Rest of Asia
21%
39%37%
Middle East and Africa
11%
20%19%
New Zealand
32%
12%15%
Australia
22%
15%18%
Rest of World
4%
5%3%
Total
100%
100%100%

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 29
I
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
4 EXPENSES
Period ended
Year ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
Notes
$’000$’000$’000
The following items of expenditure are included in
cost of sales
Depreciation and amortisation
11,340
9,92920,059
Employee benefit expense
20,067
13,96229,674
(Decrease) / increase in inventory provision7
2,717
(1,926)(1,441)
Increase / (decrease) in onerous contracts provision7
1,116
5,277376
The following items of expenditure are included in
sales and distribution
Depreciation and amortisation
862
8121,610
Employee benefit expense
3,913
3,3746,582
The following items of expenditure are included in
administrative and operating
Depreciation and amortisation
749
6171,344
Employee benefit expense
8,067
5,35212,974
Directors fees
288
240498
Share based payments expense
238
(16)21
ASX listing fees
–
402–
For cost of sales and sales and distribution, employee numbers have increased following the commissioning of both the Auckland
blending and consumer packaging facility and the new Wetmix kitchen in November 2017, as welll as the new Research and
Development Centre which opened in March 2018. Administrative and operating employee benefit expenses has increased to
support the business’ growth.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 30
I
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
5 RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH OUTFLOW FROM
OPERATING ACTIVITIES
Period ended
Year ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
$’000$’000$’000
Profit for the period
40,663
10,61138,223
Non-cash and non-operating items:
–
Depreciation and amortisation of non-current assets
12,951
11,35823,013
Gain on sale of fixed assets
3
–(19)
Write off intangible assets
–
–64
Share of (profit)/loss from associate
(189)
481560
Non-cash share based payments expense
238
(17)19
Interest costs classified as financing cash flow
4,497
6,74611,429
Interest received classified as investing cash flow
(536)
(95)(18)
Loss on derecognition of financial assets
591
278802
Deferred tax
74
1,5642,981
(Loss) / gain on derivative financial instruments
1,487
(494)(420)
Movements in working capital:
(Increase) / decrease in trade and other receivables
31,974
(24,439)(41,236)
(Increase) / decrease in income accruals and prepayments
781
941(416)
(Increase) / decrease in inventories
(87,375)
(123,570)(8,810)
(Increase) / decrease in other current assets
481
(4,460)(4,424)
(Decrease) / increase in trade and other payables
53,461
104,10692,432
(Decrease) / increase in current tax liabilities
15,880
2,8202,192
Working capital items acquired
–
–(1,197)
Net cash inflow from operating activities
74,981
(14,170)115,175

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 31
I
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
6 TRADE AND OTHER RECEIVABLES
The Group has derecognised trade receivables that have been sold pursuant to the terms of receivables purchase agreements
that the Group has entered into with its bankers. The Group has assessed the terms of the agreements and has determined that
substantially all the risks and rewards have been transferred to the respective banks. During the six months ended 31 January 2018,
the Group has not entered into any new receivable assignment agreements with any new customers however some amendments to
the terms of two existing agreements have been made.
7 INVENTORIES
Period ended
Year ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
$’000$’000$’000
Raw materials at cost
27,337
15,18415,249
Finished goods at cost
137,041
160,05554,930
Finished goods at net realisable value
5,693
22,21612,516
Total inventories
170,071
197,45582,695
The valuation of inventory as at 31 January 2018 is lower than the valuation as at 31 January 2017 due to the product mix of
inventory held. Total quantity of finished goods held at 31 January 2018 is lower than 31 January 2017.
The total inventory provision as at 31 January 2018 was $4.5m (31 January 2017: $1.3m, 31 July 2017: $1.8m) all of which related to
finished goods, a $3.2m increase from prior year. The increase is primarily due to an increase in volume of product not expected to
be sold at cost.
The total onerous contracts provision as at 31 January 2018 was $0.2m (31 January 2017: $6.2m, 31 July 2017: $1.3m). Onerous
contracts typically occur in a rising commodity market when there is a material time delay between pricing and manufacturing
an order, and delivery. Due to the steep rise in commodity prices at the end of 2016, standard cost of manufacture and therefore
weighted average cost of inventory increased, resulting in a $6.2m onerous contract provision as at 31 January 2017. The onerous
contract provision reduced to $0.2m as at 31 January 2018 due to a stable commodity market.
8 PROPERTY, PLANT AND EQUIPMENT
During the six months ending 31 January 2018, capital work in progress has increased by $45.6m with the majority relating to two
major capital projects ($13.5m Auckland blending and consumer packaging facility and $25.2m for the new Wetmix kitchen). In
November 2017, historical capital work in progress as well as additions during the six months ended 31 January 2018 relating to
these two projects have been transferred to fixed assets ($34.3m Auckland blending and consumer packaging facility and $35.8m for
the new Wetmix kitchen).

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 32
I
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
9 LOANS AND BORROWINGS
Interest bearing liabilities are recognised initially at fair value, net of transaction costs incurred. Interest bearing liabilities are
subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value
is recognised in the profit and loss component of the consolidated statement of comprehensive income over the period of the
borrowings using the effective interest method.
Period ended
Year ended
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
$’000$’000$’000
Current liabilities
Working capital facility (syndicated) NZD
–
14,100–
Working capital facility (syndicated) USD
54,944
52,25072,448
54,94466,35072,448
Non-current liabilities
Bank loans
84,000
84,00084,000
Loan facility fees
(333)
(472)(363)
83,66783,52883,637
The bank loans and working capital facility within Synlait Milk Limited are secured under the terms of the General Security Deed
dated 26 June 2013, by which all present and future property is secured to the ANZ Bank and Bank of New Zealand. The Group
facilities include:
–A secured revolving credit facility of $145m that matures on 1 August 2020, with an amortisation of $30m on 1 August 2018 and
–A secured working capital facility of NZD $120m with a USD $80m sublimit that matures on 21 August 2018.’
The Group is subject to capital requirements imposed by its bank through covenants agreed as part of the lending facility
arrangements. The Group has met all externally imposed capital requirements for the six months ended 31 January 2018, 31 January
2017 and the year ended 31 July 2017.
10 SHARE CAPITAL
The Group had 179,223,028 ordinary shares on issue as at 31 January 2018 (31 January 2017: 179,149,619, 31 July 2017: 179,223,028).
11 FINANCIAL INSTRUMENTS
Commodity derivatives
During the period the Group entered into a small number of commodity derivative contracts to further support the Group’s existing
financial risk management strategy. The movement in the fair value of the commodity derivatives is included within the cash flow
hedge reserve.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 33
I
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
12 RELATED PARTY TRANSACTIONS
Parent entity
Bright Dairy Holding Limited hold 39.04% of the shares issued by the Synlait Milk Limited (31 January 2017: 39.06%, 31 July 2017:
39.04%). Bright Dairy Holding Limited is a subsidiary of Bright Food (Group) Co. Limited, a State Owned Enterprise domiciled in the
People’s Republic of China.
Other related entities
In June 2013 a subsidiary of Synlait Milk Limited, Synlait Milk Finance Limited, was set up primarily for holding all banking facilities
for the Group and related interest rate swaps. Funds are loaned to Synlait Milk Limited and interest is charged at market rates.
In January 2015, the Group acquired 25% of the shares of Sichuan New Hope Nutritionals, an infant formula company registered
in China. This company owns and markets the “Akara” and “E-Akara” infant formula brands in the Chinese market, which are
exclusively manufactured by Synlait Milk Limited.
In May 2017 Synlait Milk Limited acquired 100% of the share capital of The New Zealand Dairy Company Limited and Eighty
Nine Richard Pearse Drive Limited. Following the acquisition, Synlait Milk Limited completed the construction of a blending and
consumer packaging facility in Auckland. Eighty Nine Richard Pearse Drive Limited owns the land and buildings at which the
Auckland blending and consumer packaging facility is constructed. Eighty Nine Richard Pearse Drive Limited leased its land and
buildings to The New Zealand Dairy Company Limited, and now leases them to Synlait Milk Limited following the acquisition.
(a)Transactions with other related parties
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
$’000$’000$’000
Purchase of goods and services
Bright Dairy and Food Co Ltd – Directors fees
74
72141
Sale of goods and services
Bright Dairy and Food Co Ltd – Sale of milk powder products
1,610
7192,698
Bright Dairy and Food Co Ltd – Reimbursement of costs
(42)
(27)(157)
Sichuan New Hope Nutritional Foods Co. Ltd – Sale of milk powder products
7,177
4,87616,371
All transactions with related parties are at arm’s length on normal trading terms.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 34
I
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31 JANUARY 2018
(b)Outstanding balances
The following balances are outstanding at the reporting date in relation to transactions with related parties:
31 January31 January31 July
201820172017
UnauditedUnauditedAudited
$’000$’000$’000
Current receivables and payables (sales of goods and services)
Bright Dairy and Food Co Ltd – Sale of milk powder products
1
2501,364
Bright Dairy and Food Co Ltd – Reimbursement of costs
(125)
(162)(102)
Sichuan New Hope Nutritionals Ltd – Sale of milk powder products
236
1,7831,039
13 CONTINGENCIES
As at 31 January 2018 the Group had no contingent liabilities or assets (31 January 2017: $nil, 31 July 2017: $nil).
14 COMMITMENTS
The Group has awarded the contract for the construction of a new wet milk processing plant. The total value of the construction
contract is $125m (31 January 2017: $nil, 31 July 2017: $nil). As at 31 January 2018, there is no further capital commitment
(31 January 2017: $29.2m, 31 July 2017: $34.6m).
15 EVENTS OCCURRING AFTER THE REPORTING PERIOD
During February 2018 Synlait Milk Limited and Bright Dairy Holding Limited entered into a new five year supply agreement for
packaged infant formula. Overall, the agreement targets a fourfold increase from current volumes over the five-year term.
In addition, on 27 February 2018 Synlait Milk Limited announced the conditional purchase of 28 hectares of land in Pokeno, North
Waikato, to establish a second nutritional powder manufacturing site. Synalit expects to invest around $260m on the undeveloped
site over the coming years. The conditional purchase of land is subject to Overseas Investment Office (OIO) approval.

Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2018
PG 35
I
INDEPENDENT REVIEW REPORT
31 JANUARY 2018
TO
THE SHAREHOLDERS OF SYNLAIT MILK LIMITED
We have reviewed the condensed consolidated interim financial statements of Synlait Milk Limited and its subsidiaries (‘the
Group’) which comprise the consolidated statement of financial position as at 31 January 2018, and the consolidated income
statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the period ended on that date, and a summary of significant accounting policies and other explanatory
information on pages 22 to 34.
This report is made solely to the Group’s shareholders, as a body. Our review has been undertaken so that we might state to the
company’s shareholders those matters we are required to state to them in a review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company’s shareholders as a body,
for our engagement, for this report, or for the opinions we have formed.
BOARD OF DIRECTORS’ RESPONSIBILITIES
The Board of Directors are responsible for the preparation and fair presentation of the condensed consolidated interim financial
statements, in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial Reporting and for such
internal control as the Board of Directors determine is necessary to enable the preparation and fair presentation of the condensed
consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.
OUR RESPONSIBILITIES
Our responsibility is to express a conclusion on the condensed consolidated interim financial statements based on our review. We
conducted our review in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor
of the Entity (‘NZ SRE 2410’). NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to
believe that the condensed consolidated interim financial statements, taken as a whole, are not prepared, in all material respects,
in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial Reporting. As the auditor of Synlait
Milk Limited, NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial
statements.
A
review of the condensed consolidated interim financial statements in accordance with NZ SRE 2410 is a limited assurance
engagement. The auditor performs procedures, primarily consisting of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance
with International Standards on Auditing (New Zealand). Accordingly we do not express an audit opinion on those financial
statements.
Our firm carries out other assignments for Synlait Milk Limited in areas of taxation advice. These services have not impaired our
independence as auditor of the Company. The firm has no other relationship with, or interest in the Group.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim
financial statements of the Group do not present fairly, in all material respects, the financial position of the Group as at 31 January
2018 and its financial performance and cash flows for the period ended on that date in accordance with NZ IAS 34 Interim
Financial Reporting and IAS 34 Interim Financial Reporting.
2
0 March 2018
Charte
red Accountants
AUCKLAND, NEW ZEALAND

DIRECTORY
1 REGISTERED OFFICE
1028 Heslerton Road
RD13, Rakaia 7783
New Zealand
Telephone: +64 3 373 3000
Email: info@synlait.com
2 BOARD OF DIRECTORS
Graeme Roderick Milne (Chair of the Board)
– Independent Director
Willem (Bill) Jan Roest (Chair of the Audit and Risk
Committee) – Independent Director
Ian Samuel (Sam) Knowles – Independent Director
John William Penno (Managing Director)
– Board Appointed Director
Min Ben – Bright Dairy Director
Qikai (Albert) Lu – Bright Dairy Director
Sihang (Edward) Yang – Bright Dairy Director
Hon. Ruth Margaret Richardson (Chair of the Remuneration
and Governance Committee) – Bright Dairy Director
3 SENIOR LEADERSHIP TEAM
Dr. John Penno – Chief Executive Officer and
Managing Director
Nigel Greenwood – Chief Financial Officer
Dr. Suzan Horst – Director, Quality, Regulatory and
Laboratory Services
Boyd Williams – Director, People, Culture and Performance
Martijn Jager – Director, Sales and Business Development
Neil Betteridge – Director, Operations
Chris France – Director, Strategy and Business Transformation
Deborah Marris – General Counsel and Commercial Manager
Matthew Foster – General Manager, Strategic Projects
Roger Schwarzenbach – General Manager, Innovation
and Technical Services
Rob Stowell – General Manager, Supply Chain
Antony Moess – General Manager, Manufacturing
Callam Weetman – General Manager, Sales
Hamish Reid - Chief Sustainability Officer and General
Manager, Brands
4 AUDITOR
Deloitte
151 Cambridge Terrace
Christchurch 8013
New Zealand
5 LAWYERS
MinterEllisonRuddWatts
Lumley Centre
88 Shortland St
Auckland 1010
6 BANKERS
ANZ Bank New Zealand Limited
The Bank of New Zealand
7 INVESTMENT BANKERS
First NZ Capital Securities Limited
8 SHARE REGISTRAR
Computershare Investor Services Limited
Private Bag 92119
Auckland 1142
Level 2
159 Hurstmere Rd
Takapuna
Auckland 06022
Freephone (within NZ): 0800 467 335
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
9 MANAGING YOUR SHAREHOLDING ONLINE
To change your address, update your payment instructions
and to view your registered details including transactions,
please visit www.investorcentre.com/nz
General enquiries can be directed to
enquiry@computershare.co.nz
Please assist our registry by quoting your CSN or shareholder
number when making enquiries.
10 OTHER INFORMATION
Please visit us at our website www.synlait.com
Synlait Milk Limited Interim Report 2018
PG 36
I

Synlait Milk Limited
1028 Heslerton Road
RD13, Rakaia 7783
Private Bag 806
Ashburton 7740
P + 64 3 373 3000
www.synlait.com
TO BE CONTINUED

---

Synlait Milk Limited Interim Results FY18
NEXT GENERATION

- This presentation is intended to constitute a summary of certain
information about Synlait Milk Limited (“Synlait”). It should be read
in conjunction with, and subject to, the explanations and views in the
documents previously released to the market by Synlait, including
Synlait’s Interim Report for the period ended 31 January 2018.
- This presentation is provided for information purposes only. The
information contained in this presentation is not intended to be
relied upon as advice to investors and does not take into account
the investment objectives, financial situation or needs of any
particular investor. Investors should assess their own individual
financial circumstances and should consult with their own legal,
tax, business and/or financial advisers or consultants before making
any investment decision.
- Certain statements in this presentation constitute forward looking
statements and projections as they relate to matters other than
statements of historical fact. Such forward looking statements
and projections are provided as a general guide only based
on management’s current expectations and assumptions and
should not be relied upon as an indication or guarantee of future
performance. Forward looking statements and projections involve
known and unknown risks, uncertainties, assumptions and other
important factors, many of which are beyond the control of Synlait
and which are subject to change without notice. Actual results,
performance or achievements may differ materially from those
expressed or implied in this presentation. No person is under any
obligation to update this presentation at any time after its release
except as required by law and the NZX Main Board Listing Rules.
- Past performance information is given for illustration purposes only
and is not indicative of future performance and no guarantee of
future returns is implied or given.
- While all reasonable care has been taken in relation to the
preparation of this presentation, to the maximum extent permitted
by law, no representation or warranty, expressed or implied, is
made as to the accuracy, adequacy, reliability, completeness or
reasonableness of any statements, estimates or opinions or other
information contained in this presentation, any of which may
change without notice. To the maximum extent permitted by law,
Synlait, its subsidiaries, and their respective directors, officers,
employees, contractors, agents, advisors and affiliates disclaim
and will have no liability and responsibility (including, without
limitation, liability for negligence) for any direct or indirect loss
or damage which may be suffered by any person through use
of or reliance on anything contained in, or omitted from, this
presentation.
- Forward looking statements in this presentation are unaudited and
may include non-GAAP financial measures and information. Not all
of the financial information (including any non-GAAP information)
will have been prepared in accordance with, nor is it intended to
comply with: (i) the financial or other reporting requirements of any
regulatory body; or (ii) the accounting principles generally accepted
in New Zealand or any other jurisdiction with IFRS. Some figures
may be rounded and so actual calculation of the figures may differ
from the figures in this presentation. Some of the information in this
presentation is based on non-GAAP financial information, which
does not have a standardised meaning prescribed by GAAP and
therefore may not be comparable to similar financial information
presented by other entities. Non-GAAP financial information in this
presentation has not been audited or reviewed.
- All values are expressed in New Zealand currency unless otherwise
stated.
- All intellectual property, proprietary and other rights and interests in
this presentation are owned by Synlait.
- This presentation is not an offer or an invitation to acquire Synlait’s
shares or any other financial products and is not a product
disclosure statement, prospectus or other offering document, under
New Zealand law or any other law.
DISCLAIMER
PG 2
Synlait Milk Limited Interim Results 2018

I

John Penno
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
STRATEGIC UPDATE

- RECORD HALF YEAR NET PROFIT OF $40.7 MILLION COMPARED TO $10.6 MILLION FOR THE SAME PERIOD LAST YEAR
(H1 FY17) GENERATED FROM INCREASING CANNED INFANT FORMULA VOLUMES, AND IMPROVED INGREDIENTS MARGINS
- STRENGTHENED BALANCE SHEET WITH REDUCTION OF NET DEBT TO $50 MILLION FROM $147 MILLION
- ACHIEVED ORGANIC GROWTH IN INFANT FORMULA CAPACITY, WITH VOLUMES UP 36% OVER H2 FY17
- GEOGRAPHIC GROWTH INITIATED WITH COMMISSIONING OF SYNLAIT AUCKLAND AND PURCHASE OF SYNLAIT POKENO
- ANNOUNCED FOODSTUFFS SOUTH ISLAND CONTRACT TO MANUFACTURE FRESH MILK AND CREAM WITH A $125 MILLION
INVESTMENT IN ADVANCED LIQUID DAIRY PACKAGING FACILITY TO EXPAND INTO NEW CATEGORIES
- ENHANCED CAPABILITY WITHIN SENIOR LEADERSHIP TEAM WITH THREE NEW APPOINTMENTS
- INVESTMENT IN RESEARCH AND DEVELOPMENT WITH THE OPENING OF SYNLAIT PALMERSTON NORTH
- UNLOCKING CAPACITY WITH THE COMMISSIONING OF THE NEW WETMIX KITCHEN AT SYNLAIT DUNSANDEL
- ACHIEVED CFDA REGISTRATION FOR THE a2 MILK COMPANY’S
TM
INFANT FORMULA IN CHINA
OPENING REMARKS
PG 4
Synlait Milk Limited Interim Results 2018

I

GROWTH COMPANY
WE ARE A
Synlait Milk Limited Interim Results 2018

I
PG

5

REGULATORY
CAPABILITY
QUALITY TESTING
LABORATORY
CONSUMER
PACKAGING
MANUFACTURING
EXCELLENCE
DIFFERENTIATED
MILK SUPPLY
RESEARCH + CATEGORY
DEVELOPMENT
INGREDIENTS
INFANT NUTRITIONEVERYDAY DAIRY
ADULT NUTRITION
WE WILL LEVERAGE OUR UNIQUE VALUE CHAIN IN
EACH CATEGORY TO BUILD SUCCESSFUL BUSINESSES
THAT CONTRIBUTE TO OUR LONG-TERM SUCCESS
TO SUCCEED
OUR CATEGORIES
OUR VALUE CHAIN
PG 6
Synlait Milk Limited Interim Results 2018

I

OUR CATEGORIES
STRONG CONTRIBUTOR TO STRATEGIC GOALWEAK CONTRIBUTOR TO STRATEGIC GOAL
BLENDING + CONSUMER
PACKAGING II
PRODUCT DEVELOPMENT
WETMIX IIMARKET RESEARCH
RTD INFANT FORMULA
RTD BLENDED
DAIRY BEVERAGE
DIVERSIFY MARKETS - CATEGORIES, CUSTOMERS, GEOGRAPHY
DELIVER HIGHER VALUE PRODUCTS
ADAPT TO A CHANGING WORLD DEMOGRAPHIC
FOCUS ON B2B, BUT MOVE CLOSER TO CUSTOMERS AND CONSUMERS
BUILD SUPPLY CHAIN INTEGRITY
DELIVERED IN CONSUMER,
FOODSERVICE AND
INGREDIENTS PACKAGING
BUILD SALES -
PEOPLE, TECHNICAL
TAILOR PRODUCT TO
CUSTOMER NEED
FRESH MILK
EXPORT CREAM
OPPORTUNITIES
INGREDIENTSINFANT NUTRITIONEVERYDAY DAIRY
ADULT NUTRITION
PG 7
Synlait Milk Limited Interim Results 2018

I

A PORTFOLIO OF INFANT FORMULA CUSTOMER PARTNERSHIPS
- STAGE 4 INFANT FORMULA MANUFACTURED SINCE JUNE 2017
- CHINESE FOOD AND DRUG ADMINISTRATION (CFDA) REGISTRATION RECEIVED IN FY17
- EXCLUSIVE SUPPLIER OF THE a2 MILK COMPANY’S
TM
INFANT FORMULA TO CHINA AND
AUSTRALASIA MARKETS
- NEW SUPPLY AGREEMENT SIGNED IN FEBRUARY 2018
- CFDA APPLICATION TO BE SUBMITTED APRIL 2018
- NEW FIVE-YEAR SUPPLY AGREEMENT SIGNED IN AUGUST 2017
- CFDA REGISTRATION APPLICATION SUBMITTED
- CURRENTLY AVAILABLE IN AUSTRALIA AND NEW ZEALAND
- DISTRIBUTING NATIONWIDE IN AUSTRALIA THROUGH COLES SUPERMARKETS
- PENDING U.S. FOOD AND DRUG ADMINISTRATION (FDA) REVIEW
PG 8
Synlait Milk Limited Interim Results 2018

I

WE HAVE UNLOCKED INFANT FORMULA CAPABILITY
Note:
(1)
AMF = Anhydrous Milk Fat*Some Lead With Pride
TM
farms also supply a2 Milk
TM
and Grass Fed
TM
, total Lead With Pride
TM
farms is 53.
MILK SOLIDS
65.0m kgMS (FY17)
19.8m
6.9m
1.7m Other Suppliers
20 GRASS FED™
FARMS
8.8m
25 LEAD WITH
PRIDE
TM
FARMS*
THREE HIGH SPECIFICATION
SPRAY DRYERS
120,000 MT
MAX. CAPACITY
D3 (INFANT
FORMULA CAPABLE)
40,000 MT
D2 (INFANT
FORMULA CAPABLE)
40,000 MT
D1 (INFANT-GRADE
WMP + SMP)
40,000 MT
20,000 MT
AMF
(1)
PLANT
2 7. 6m
91 REGULAR
FARMS
WETMIX
KITCHENS
80,000 MT
MAX. CAPACITY
40,000MT - November 2017
WETMIX ONE
40,000 MT
WETMIX TWO
40,000 MT
(Commissioned Nov 17)
Wetmix Two enables both of our
large-scale infant formula spray dryers
to simultaneously manufacture
infant formula base powder.
CONSUMER PACKAGING
93,000 MT TOTAL CAPACITY
35,000 MT
(CANNING)
DUNSANDEL
23,000 MT
SACHET LINES
PLANNED
Synlait Auckland’s new blending and
canning line doubles our canned
infant formula capacity.
35,000 MT
(CANNING)
AUCKLAND
(Commissioned Nov 17)
BASE POWDER
CUSTOMERS
CONTRACTED FARMS
APPROX 200
62 a2 MILK
TM

FARMS
PG 9
Synlait Milk Limited Interim Results 2018

I

- Synlait is investing in nutritional powder manufacturing capacity
to meet customer demand for infant formula products
- Establishing this capacity on a second site allows mitigation of our
current single-site risk
- Also introduces access to a second milk pool which further reduces
our risk profile
- Our site acquired in Pokeno, North Island meets these needs while
also providing a platform for growth in other categories
- Initial investment on site will be one infant formula capable spray
dryer and related infrastructure at a cost of circa $260 million, capable of
manufacturing 40,000 MT of infant base powder per annum
- Investment to be funded through debt facilities
SECOND NUTRITIONAL POWDER MANUFACTURING
SITE: POKENO, WAIKATO
PG 10
Synlait Milk Limited Interim Results 2018

I

TRANSFORMATIONAL IN THE DAIRY INDUSTRY, SYNLAIT’S LEAD WITH PRIDE™
PROGRAMME RECOGNISES AND REWARDS THOSE SUPPLIERS WHO ARE ACHIEVING
DAIRY FARMING EXCELLENCE. LEAD WITH PRIDE™ IS AUSTRALASIA’S ONLY
INTERNATIONALLY ACCREDITED ISO / IEC 17065 DAIRY FARM ASSURANCE SYSTEM
AND MEASURES DAIRY FARMS ON FOUR PILLARS OF DAIRY FARMING; ENVIRONMENT,
ANIMAL HEALTH AND WELFARE, MILK QUALITY, AND SOCIAL RESPONSIBILITY.
ENVIRONMENT
MILK QUALITY
ANIMAL HEALTH AND WELFARE
SOCIAL RESPONSIBILITY
LEAD WITH PRIDE
™
PROGRAMME PILLARS
PG 11
Synlait Milk Limited Interim Results 2018

I

ENTRY INTO EVERYDAY DAIRY WITH LIQUID MILK
- Exclusive supply arrangement with Foodstuffs South Island to supply private label
fresh milk and cream (Value and Pams brands) from early 2019
- Distributed in their network of PAK’n SAVE, New World, Four Square and On The Spot stores
- Ten year agreement with demand to underpin capital investment
- $125 million modern and sophisticated advanced liquid dairy packaging facility
to be constructed at our Dunsandel site
- Investment to be funded through debt facilities
- Annual capacity of 110 million litres of which one third will be initially utilised for
Foodstuffs South Island products
- Synlait’s current milk supply adequate to meet the volumes of the contract
- New facility will be capable of manufacturing a range of traditional and new products
- New product development to be supported from our new R+D centre in Palmerston North
- Long life cream export category also presents attractive opportunities we intend to pursue
PG 12
Synlait Milk Limited Interim Results 2018

I

MASSEY AND FOODPILOT CORE TO
DELIVERING SYNLAIT’S ASPIRATIONS
- Synlait Palmerston North was opened on Friday 2 March by Massey
University’s Vice Chancellor, Professor Jan Thomas, and the mayor of
Palmerston North, Grant Smith
- Our Palmerston North R+D capability consists of a laboratory, office
and access to Massey University’s FoodPilot plant
- FoodPilot is the largest and best equipped publically accessible
pilot plant in the Southern Hemisphere
- Massey University offers access to an extensive network of expertise
- Extensive lab facilities covering multiple disciplines
- Palmerston North is the hub of dairy R+D in New Zealand
(surrounded by Crown Research Institutes like Ag Research, Plant and Food)
- While Palmerston North will initially focus on dairy liquids, we have R+D
teams elsewhere working on nutritional powders, packaging and many
other areas
PG 13
Synlait Milk Limited Interim Results 2018

I

PEOPLE
Deborah Marris - GENERAL COUNSEL AND
HEAD OF COMMERCIAL
Deborah Marris is joining Synlait from her previous role
as Managing Director, Global Compliance with Barclays
Bank, India.
Prior to that she held senior executive roles with other
global organisations, including as General Counsel (Asia
Pacific, Europe and America), Chief of Staff (New Zealand)
and also Head of Tax (New Zealand) for ANZ Bank.
Deborah established her career initially with 15 years
working as a senior lawyer for firms throughout New
Zealand, the United Kingdom and Hong Kong.
Deborah holds a Bachelor of Commerce and
Administration and a Bachelor of Laws (Hons) from
Victoria University of Wellington and is a qualified barrister
and solicitor in New Zealand.
Dr. Suzan Horst - DIRECTOR OF QUALITY, REGULATORY
AND LABORATORY SERVICES
Suzan Horst has most recently been Director Quality
Affairs, Business Group EMEA (Europe, the Middle
East and Africa) for FrieslandCampina. She has held
other senior roles since joining them in 2005, including
Director Corporate QA, crisis and issue management and
Corporate Quality Assurance Manager.
Prior to joining FrieslandCampina, Suzan was Global Food
Safety Competence Manager for Nutreco B V and lectured
agricultural economics and food safety before that.
Suzan holds a Ph.D. in Agricultural Economics and
a Bachelor of Science in Animal Husbandry from the
Wageningen University and Research Centre in the
Netherlands, part of which involved study at Massey
University in New Zealand.
Hamish Reid - GENERAL MANAGER OF BRAND AND
CHIEF SUSTAINABILITY OFFICER
Hamish Reid takes the lead on developing Synlait’s
strategy for sustainability with a particular focus on our
aspiration to further improve our environmental and
social performance from farm to fridge. He will also lead
our thinking as we continue evaluating potential B2C
opportunities.
Hamish has deep experience in food and beverage
marketing, predominantly for Danone in Paris and
Saatchi & Saatchi in London. More recently, Hamish
has established an award-winning not-for-profit in New
Zealand and consulted to businesses around the world
developing environmental and social programmes that
boost economic performance.
PG 14
Synlait Milk Limited Interim Results 2018

I

Nigel Greenwood
CHIEF FINANCIAL OFFICER
OUR FINANCIAL RESULTS

OVERVIEW
- First half profit eclipses all previous results
- Profit growth is product margin led, driven by increasing
canned infant formula volumes, and improved ingredients
margins
- First half performance includes some gains not expected
to be repeated in the second half
- Lower debt levels have continued to improve profit and
loss leverage
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
IFC VOLUME DRIVES NPAT
NET PROFIT AFTER TAX
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0
IFC SALES MT
$ MILLIONS
$ MILLIONS
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
IFC VolumeUnderlying NPAT
$61.2m
NET DEBT DECREASED FROM
TO
$147m
$50m
EBIT INCREASED TO
(H1 FY17: $21.9m)
5,246
10.2
24.2
10.6
2 7. 6
40.7
10,753
6,349
12,427
16,839
PG 16
Synlait Milk Limited Interim Results 2018

I

H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
SALES VOLUME
- H1 FY18 powders and cream volumes down on prior year due to:
- Increase of milk consumed in canned infant formula
- Sell down of distressed inventory in H1 FY17
- Despite lower sales volume, the proportion of powders and
cream sold in the first half relative to full year expectations was
48% (H1 FY17 45%)
- Growth trajectory of canned infant formula has continued, with
total consumer packaged volumes nearly tripling from the same
period last year and up 36% on H2 FY17
- Finished goods inventory of 35,040 MT was 18% lower than
H1 FY17, reflecting improved inventory management and
supporting growth in operating cash flow
Sales volumes for specialty ingredients are not shown on the graph.
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
FINISHED GOODS INVENTORY
SALES VOLUME
100,000
80,000
60,000
40,000
20,000
0
60,000
50,000
40,000
30,000
20,000
10,000
0
MT
MT
Powders and CreamsConsumer Packaged
5,246
41,102
10,753
59,285
6,349
54,693
12,427
67, 8 9 516,839
44,435
45,185
21,042
42,962
14,504
35,040
PG 17
Synlait Milk Limited Interim Results 2018

I

69,257
PRODUCTION VOLUME
10,329
12,315
17,821
64,001
39,550
75,886
35,541
PRODUCTION VOLUME
- First half contracted milk supply consistent with prior
years’ collections at 41.4 million kgMS
- Total production volumes slightly down on H1 FY17
(81,815 MT vs 82,980 MT)
- Increased infant base powder production to meet
canned infant formula demand has seen 3.3 million kgMS
sold (0.4 million kgMS H1 FY17)
- Milk production exhibits seasonality that drives overhead
recovery, with 61% of expected FY18 milk processed in H1
100,000
80,000
60,000
40,000
20,000
0
Sales volumes for specialty ingredients are not shown on the graph.
Powders and CreamsConsumer PackagedMilk Processed
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
45.0
40.0
35.0
25.0
20.0
15.0
10.0
5.0
0
5,714
7,088
MT MILLIONS KGMS
PG 18
Synlait Milk Limited Interim Results 2018

I

H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
1,390
830
716
839
900
GROSS PROFIT PER MT
1,600
1,400
1,200
1,000
800
600
400
200
0
GROSS PROFIT PER METRIC TONNE
- Consumer packaged sales volume growth and improved ingredient
margins have driven the increase in gross profit per MT from $830 per MT
to $1,390 per MT
- Margin expansion has been:
- Reduced sales of powders and cream products (18.8%) following
the uncommon sell down in H1 FY17
- High utilisation of all facilities, particularly Wetmix and consumer
packaging
- Intra-seasonal timing differences that are not forecast to repeat in the
second half
- Reduction of onerous contracts provision from $6.2 million in H1 FY17
to $0.2 million in H1 FY18
- All of these have supported a $41.5 million increase in Gross Profit to
$85.2 million
- Management expect some of this margin expansion to retrace in the
second half due to:
- Spare capacity following commissioning of our new Wetmix and
consumer packaging facilities
- Seasonal variation in milk production
- Sales phasing upside not expected to be repeated in H2 FY18
$
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
85.2
43.7
58.7
41.7
66.7
GROSS PROFIT
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0
$ MILLIONS
PG 19
Synlait Milk Limited Interim Results 2018

I

OVERHEADS
- Net overheads have increased by 13.1% over H1 FY17 to $24.5 million,
however only $1.4 million, or 6%, above H2 FY17
- Largest driver of the increase is employee costs, which reflects the
continued investment into capability for research and development,
business development and leadership to support continuing growth
and diversification
OVERHEADS
30.0
25.0
20.0
15.0
10.0
5.0
0
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
24.5
21.7
21.7
1 7.0
23.1
OVERHEADS
30.0
25.0
20.0
15.0
10.0
5.0
0
H1 FY17
Employee costsConsultancyASX ListingOther
H1 FY18
$ MILLIONS
$ MILLIONS
21.7
3.5
0.6
(0.4)
(0.9)
24.5
PG 20
Synlait Milk Limited Interim Results 2018

I

OPERATING CASH FLOW
- Synlait generated strong operating cash flows in H1 FY18 of
$75.0 million. This is an improvement of $89.2 million from the
same period last year and pleasing in the part of the year that
typically experiences weak cash flows
- The improvement in operating cash flow has been driven by:
- Better sales deliveries resulting in lower inventory on hand,
generating $33.6 million
- Increased sales to customers in our receivables
assignment program increasing from $38.5 million
to $70.5 million
- Returning to more traditional advance rate profiles for
contracted milk suppliers from abnormally high rates
in H1 FY17, generating a further $21.9 million of
operating cash flow
- Increased infant formula sales leading to increased
customer deposits of $13.8 million
(14.2)
33.6
13.8
YEAR-ON-YEAR OPERATING CASH FLOW
100.0
80.0
60.0
40.0
20.0
0
(20.0)
H1 FY17
Customer Deposits
Milk payments
Receivables Assigned
Inventory ReductionOther
H1 FY18
$ MILLIONS
75.0
(14.2)
100.4
4.0
129.3
OPERATING CASH FLOW
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0
-20.0
-40.0
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
$ MILLIONS
21.9
(12.1)
75.0
32.0
PG 21
Synlait Milk Limited Interim Results 2018

I

NET DEBT
- Record operating cash flow generation of $204.3 million
for the 12 months ended 31 January 2018 has fully
funded our capital expenditure program and enabled the
reduction of debt to low levels
- In the 12 months to 31 January 2018, Synlait has
invested $89.6 million in capital expenditure. The major
components of this were Synlait Auckland ($49.1 million)
and our new Wetmix kitchen ($29.2 million)
- This leaves the company well placed to fund its expansion
plans in Dunsandel (advanced liquid dairy packaging
facility $125 million) and Pokeno ($260 million infant
formula manufacturing facility)
NET DEBT
300.0
250.0
200.0
150.0
100.0
50.0
0
H1 FY17
CapexOperating Cash FlowInterestOther
H1 FY18
1
Based on a rolling 12 month EBITDA (trailing)
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
NET DEBT
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
DEBT / EBITDA
1
4.6X0.4X
$ MILLIONS
$ MILLIONSNET DEBT / EBITDA
49.7
7.1
10.7
(204.3)
89.6
146.6
292.0
213.4
146.6
82.3
49.7
PG 22
Synlait Milk Limited Interim Results 2018

I

OUTLOOK
John Penno
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

- The material increase in first half earnings has been
achieved from both large increases in manufacture and
sales of our highest margin products, and through improved
margin, and earlier sales of our ingredients products
- This earlier phasing of ingredients, combined with
increasing commitments to R+D and business development,
means earnings in the second half are expected to be lower
than the first half
- Although the second half of FY18 is not expected to be as
strong as the first half, we continue to forecast strong overall
earnings growth for the full year
- Looking forward into FY19, ongoing growth in infant formula
volumes are expected to continue to grow earnings
SECOND HALF RETURNS
ACTUALFORECAST
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18H2 FY18
18,000
12,427
16,839
6,349
10,753
5,246
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
CANNED INFANT FORMULA SALES
MT
PG 24
Synlait Milk Limited Interim Results 2018

I

APPENDIX
PG 25
Synlait Milk Limited Interim Results 2018

I

GROSS PROFIT PER MT (POWDERS AND CREAM)
POWDERS AND CREAM GROSS PROFIT PER MT
1,200
1,000
800
600
400
200
0
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
$
837
726
667
692
1,115
PG 26
Synlait Milk Limited Interim Results 2018

I

GROSS PROFIT PER MT (CONSUMER PACKAGED)
CONSUMER PACKAGED GROSS PROFIT PER MT
900
800
700
600
500
400
300
200
100
0
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
$
463
762
490
842
800
PG 27
Synlait Milk Limited Interim Results 2018

I

LACTOFERRIN UPDATE
- Synlait has a strong and growing customer base for lactoferrin,
spanning from use in health supplements to infant formula
- A demand and supply imbalance is driving a global strengthening
in lactoferrin prices
- Demand for lactoferrin is driven by increasing use in infant
formula, particularly in China
- Synlait is well placed to deliver to global demand, with significant
expertise in lactoferrin production
- In FY17, Synlait also gained FDA approval to export lactoferrin
to the U.S. market for use in infant formula, enabling further
market opportunities
H1 FY16H2 FY16H1 FY17H2 FY17H1 FY18
213,681
40,540
19,203
-37,510
145,030
250,000
200,000
150,000
100,000
50,000
0
-50,000
-100,000
LACTOFERRIN GROSS PROFIT PER MT
$
PG 28
Synlait Milk Limited Interim Results 2018

I

INVESTORS
Casey Blatch, Strategic Finance Manager
+64 3 373 3091
Casey.Blatch@synlait.com
MEDIA
Dan Walraven, Communications Manager
+64 27 836 7532
Daniel.Walraven@synlait.com