Synlait shares fall 12% after posting a first-half loss
Synlait shares fall 12% after posting a first-half loss; lowers full-year guidance
By Suze Metherell
March 30 (BusinessDesk) - Shares of Synlait
Milk, the dairy company which has taken a cornerstone stake
in Sichuan New Hope Nutritional Foods Co to gain direct
interest in a Chinese infant formula brand, fell 12 percent
after it turned to a loss in the first half due to delays in
infant formula shipments, a decline in dairy prices and
challenges in its value-added production line.
The
Rakaia-based company posted a loss of $6.4 million in the
six months ended Jan. 31, from a profit of $12.1 million a
year earlier, it said in a statement. Sales sank 31 percent
to $197.5 million. The company had a one-time product mix
benefit of $7.5 million in the first half of last year.
The shares fell 36 cents to $2.65, the lowest level
since August 2013.
Last year, the dairy company saw
its exports to China delayed as it waited for a license
under a new Chinese regulatory system, which makes dairy
manufacturers take responsibility for branded products sold
to consumers, meaning only a quarter of forecast sales
volume for bulk infant formula and retail-ready infant
formula had been delivered to date, Synlait
said.
Meanwhile, globally the price of dairy products
more than halved last year, as an oversupply in the market
weighed on demand and pushed down prices. Synlait is looking
to insulate itself against volatility in the commodity
market by producing value-added products, but said it had
challenges in the production of its new lactoferrin protein
which may see the forecast 15 metric tonnes not produced in
the full year.
"The past 18 months have been
challenging for everyone in the dairy industry," chairman
Graeme Milne and chief executive John Penno said in
Synlait's interim report. "While we are expecting a much
stronger performance in the second half of the 2015
financial year, associated with increased sales of our
higher margin infant formula and nutraceutical products, we
expect the current market volatility to continue and have
therefore revised our forecast to a range of $10.0 million
to $15.0 million for the full year to 31 July 2015."
That forecast is below last year's $19.6 million annual net profit.
The company won't pay a first-half
dividend.
Synlait had cash outflows from operating
activities at $62.6 million in the first half, up from last
year’s $8.0 million, which it attributed to falling milk
prices and payouts to dairy farmers.
The stock is
rated an average of 'hold' based on the opinion of two
analysts surveyed by Reuters, with a price target of $3.80.
(BusinessDesk)