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

Synlait snag

OPINION: Canterbury milk processor Synlait's recovery seems to have hit another snag.

Synlait's back

OPINION: After years of financial turmoil, Canterbury milk processor Synlait is now back in business.

Wyeth to head Synlait

Former Westland Milk boss Richard Wyeth is taking over as chief executive of Canterbury milk processor Synlait from May 19.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

New McHale terra drive axle option

Well-known for its Fusion baler wrapper combination, Irish manufacturer McHale has launched an interesting option at the recent Irish Ploughing…

Amazone unveils flagship spreader

With the price of fertiliser still significantly higher than 2024, there is an increased onus on ensuring its spread accurately at…

» Latest Print Issues Online

Milking It

Tough times

OPINION: Dairy industry players are also falling by the wayside as the economic downturn bites around the country.

MSA triumph

OPINION: Methane Science Accord, a farmer-led organisation advocating for zero tax on ruminant methane, will be quietly celebrating its first…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter