Wednesday, 04 March 2020 12:37

Synlait downgrades earnings

Written by  Nigel Malthus
Leon Clement. Leon Clement.

Canterbury-based milk processor Synlait has downgraded its earnings expectation for the 2020 financial year.

The company now expects net profit after tax (NPAT) of between $70 million and $85 million, compared with $82.2 million for 2019.

A statement released to the New Zealand Stock Exchange in mid-February said the previously announced earnings guidance was for profits to continue to grow in FY20, with the rate of profitability increasing at least at a similar rate to FY19 over FY18. 

“Current information now indicates this rate of growth will not be achieved.”

Synlait’s ordinary shares, which stood at $8.29 on February 12, dropped sharply on the announcement and have traded since then in the mid-$6 range.

They had been trending downwards over the past year, from a high of $11.29 in March.

Synlait said the downward revision was a result of:

• significantly lower than anticipated infant base powder sales due to China infant nutrition market consolidation causing a reduction in demand from brand owners who are yet to receive brand registration;

• lactoferrin prices being more volatile than previously anticipated; 

• while Synlait still anticipates growth in consumer-packaged infant formula sales volumes over the full year, this growth is not as strong as initially envisaged. The a2 Milk Company’s contribution to this growth has not changed.

Synlait chairman Graeme Milne says naturally, the Synlait team expected a stronger FY20 financial performance. 

“We remain confident that the decision to focus on our medium to long-term strategic opportunities will over time improve shareholder value and the sustainability of our business.”

Synlait chief executive Leon Clement said new investments had resulted in a higher cost profile, which has not yet been absorbed by an offsetting increase in revenue.

“The pace and quality at which our teams have delivered on recent growth projects has been impressive, and now we are focused on ensuring we optimise these new facilities. In the meantime, we are moderating our costs while we bring our new investments to life in terms of capacity and capability. We remain confident, and on-track, to deliver on our medium to long term objectives.”

More like this

Brighter future

OPINION: The abrupt departure of Synlait chief executive Grant Watson could be a sign that Chinese company Bright Dairy, the new majority owner of the listed company, is taking charge.

'Quite a journey'

Former Synlait chief executive Grant Watson says the past two years have been quite the journey.

Synlait CEO departs

The first change in Synlait’s management team, since China’s Bright Dairy securing 65% ownership, has been announced.

'Mood change' among Synlait farmers

Canterbury milk processor Synlait says some farmer suppliers have been inquiring about the process to remove their cessation notices, handed in earlier this year.

Featured

New ag degrees at Massey

Changing skill demands and new job opportunities in the primary sector have prompted Massey University to create a new degree course and add a significant major into another in 2025.

The show is on!

It was bringing in a new Canterbury A&P Association (CAPA) show board, more in tune with the CAPA general committee, that has ensured that Christchurch will have a show this year, says CAPA general committee president Bryce Murray.

National

'Quite a journey'

Former Synlait chief executive Grant Watson says the past two years have been quite the journey.

DairyNZ levy to increase?

Retiring chair Jim van der Poel has used his final AGM to announce the intention to increase the DairyNZ farmer…

Former Fonterra CEO dies

Former Fonterra chief executive Theo Spierings passed away in the Netherlands over the weekend.

Machinery & Products

Milk Sustainability Centre launched

The recently announced Milk Sustainability Centre – a collaboration between global giant John Deere and milking and feed specialists De…

Data connection made easier

New Holland and Case IH are introducing new advancements in their precision technology stack to make farming easier and more…

» Latest Print Issues Online

Milking It

Feed from farmers

OPINION: The country's dairy farmers will now also have a hand in providing free lunch for schools.

Brighter future

OPINION: The abrupt departure of Synlait chief executive Grant Watson could be a sign that Chinese company Bright Dairy, the…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter