Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


UPDATE: Synlait shares drop 5.9% after second profit warning

UPDATE: Synlait shares drop 5.9% after second profit warning

(Adds share movement, analyst & company comment)

By Suze Metherell

May 30 (BusinessDesk) - Shares in Synlait Milk fell 5.9 percent after the dairy processor, which counts China’s Bright Dairy as a cornerstone shareholder, cut its full-year earning forecast for the second time this year as a strong currency and an unfavourable product mix weighs on the exporter.

The Rakaia-based company cut its forecast profit range to between $17.5 million and $22.5 million in the year ending July 31, from a March estimate of $25 million and $30 million. In January it forecast annual profit of between $30 million to $35 million. Its prospectus forecast profit of $19.8 million.

The shares dropped to an eight-month low $3.15, and recently traded at $3.20 on the NZX, still 45 percent above its $2.20 listing price last July. The shares climbed as high as $4.11 in mid-January.

"Investors are getting a little bit nervous because of the volatility of their guidance and their share price," Grant Williamson, director at Hamilton Hindin Greene told BusinessDesk. "This is not the first time they have had to adjust their guidance and it reflects the fact forecasting in that industry with accuracy is difficult.

"It's been a bit of a rollercoaster ride for investors," said Williamson.

The company said the high kiwi dollar and volatility in global dairy prices, as well as a reduced advantage from its product mix, had weighed on revenue and forecast earnings. Synlait lowered the bottom end of its forecast milk payment to suppliers for the full-year to $8.20 to $8.40 per kilogram of milk solids from a previous forecast of $8.30 to $8.40/kgMS and said it expects to pay a lower price for the upcoming 2015 season of $7.00/kgMS, matching the forecast made earlier this week by its the nation's dominant dairy company Fonterra Cooperative Group.

"We had been expecting to maintain the benefits of a very favourable product mix for the remainder of this financial year, however the exceptional market conditions experienced in the first half of the year have moderated,” Synlait chairman Graeme Milne said.

In January, Synlait said it expected sales of baby formula to fall below its 10,000 metric tonne target this year because stricter Chinese regulations had caused “considerable disruption” in that market. Earlier this month, the dairy exporter missed out in the first round of approvals under new Chinese regulations, preventing it from exporting infant formula to that market.

"It would be a boost for the company if that license was to come through for them," Hamilton Hindin Greene's Williamson said. The company is expected to gain approval from Chinese authorities once its new packaging and processing plant is completed. The dairy processor is spending $21 million expanding its laboratory and administrative facilities, in part to increase its testing capabilities.

"The infant formula and nutritional market continues to prove challenging due to regulatory changes in China and it is clear that we will not meet our volumes targets for this year," said Synlait managing director John Penno. "The development of this business in key markets outside of China with our tier on multi-national companies continues to be strong and we remain confident of meeting our long term objectives."

The company expects to publish its full-year earnings on Sept. 24.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

What Winter? Temperature Records Set For June 20-22

The days around the winter soltice produced a number of notably warm tempertaures. More>>

Conservation Deal: New Kākāpō Recovery Partnership Welcomed

Conservation Minister Maggie Barry says the new kakapo recovery partnership between DOC and Meridian Energy is great news for efforts to save one of New Zealand’s most beloved birds. More>>

ALSO:

Tech Sector Report: Joyce Warns Asian Tech Investors View NZ As Hobbits And Food

Speaking in Wellington at the launch of a report showcasing the value of the technology sector to the New Zealand economy, Joyce said more had to be done to tell the country's technology stories overseas. More>>

ALSO:

Mediaglommeration: APN Gets OIO Approval For Demerger Plan

APN News & Media has received Overseas Investment Office approval for its plan to split out its NZME unit ahead of a potential merger with rival Fairfax Media's New Zealand operations. More>>

New Paper: Ninety-Day Trial Period Has No Impact On Firms' Hiring

The introduction of a 90-day trial period has had no impact on hiring by New Zealand companies although they are now in widespread use, according to researchers at Motu Economic and Public Policy Research. More>>

ALSO:

Corrections: Serco Exits Equity Stake, Remains As Operator

Serco has sold its equity stake in the company that holds the contract to design, build and run Wiri Prison in South Auckland but continues as sub-contractor to operate the facility. More>>

GDP: NZ Economy Grows Faster-Than-Forecast 0.7%

New Zealand's economy grew at a faster pace than expected in the first quarter of 2016 as construction expanded at the quickest rate in two years. The kiwi dollar jumped after the data was released. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news