Keytone Dairy posts increased sales figures and strong growth for March quarter

Keytone Dairy ASX March quarterly 2019 organic exporter certification
Keytone Dairy’s second manufacturing facility, located in Christchurch, is nearing completion.

New Zealand-based Keytone Dairy Corporation (ASX: KTD) has capped off a positive financial year’s performance with increased sales figures and a number of milestones achieved during the final quarter of 2019.

In its March quarterly released today, the newly-listed company reported an increase in total sales revenues and cash inflows from sales compared with the December quarter, translating into a significant uplift in year-on-year performance.

Total sales revenue was up 31% for the three months to March and cash inflow receipts were up 43% to $819,000.

Net cash outflows from operations were negligible at $63,000, compared to an operating “cash burn” of $537,000 in the December quarter.

Cash outflows for new plant and equipment purchases totalled $528,000, with the items earmarked for a manufacturing facility currently being built in Christchurch.

Sales of Keytone’s proprietary branded powder products (as opposed to products contract-packed for third parties) were also up 25% while sales of private label brands across the entire range increased 31%.

Additional capacity

Keytone’s second factory has been designed to boost the company’s total normal powdered product manufacturing capacity from 1,500 tonnes per annum to approximately 5,000tpa.

The company said the additional capacity will provide an opportunity to further grow sales figures by expanding its range of premium powdered dairy products, increasing the variety of manufacturing runs and offering a broader product range to new and existing private label clients.

The factory contains a state-of-the-art packing room featuring round-the-clock sterilisation technology which is believed to be a first for the New Zealand market.

It also boasts a large-scale, two-tonne blender which underwent final inspections during the quarter and is being prepared for installation.

Canning and sachet lines and ancillary automated manufacturing equipment will also be inspected in the coming weeks and installed ahead of final compliance and licencing assessments.

Further expansion

At the beginning of the quarter, Keytone exercised its option to acquire Lot 5 in Christchurch’s Izone Southern Business Hub, in addition to the previously-purchased Lots 8 and 9.

The adjacent lots will allow for “significant economies of scale” over the medium term as the company’s manufacturing capacity increases in line with its product range.

Keytone said it would consider the future potential of a larger, integrated and purpose-built manufacturing facility across the three lots centred around multiple road access points allowing for seamless drive-through distribution logistics.

Organic certification

Last month, Keytone received organic certification from New Zealand government agency AsureQuality as well as organic exporter certification from the country’s Ministry of Primary Industries for the production of organic instant whole milk powders.

The certifications will enable Keytone to expand its proprietary range to include the premium, high-value products for domestic and international markets.

It will commence the manufacture of organic product runs ahead of securing long-term contracts for its organic proprietary products and third party private labels.

Keytone will also continue to partner with global supermarket chains and distribution channels for the manufacture and supply of private label brands.

Its efforts were boosted recently with the award of AA status and accreditation from the British Retail Consortium for food safety, providing added validation to the market for the quality of its products and manufacturing process.

At mid-morning, shares in Keytone were steady at $0.46.

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