Synlait Milk shares hit record low

Profit impacted by weak demand, high costs
calendar icon 26 April 2023
clock icon 2 minute read

Shares in New Zealand's Synlait Milk hit a record low on Wednesday, after the dairy producer slashed its 2023 profit outlook for a second straight time, hit by constrained demand, higher financing and increased supply chain expenses, reported Reuters.

The company now expects a range between net loss after tax of NZ$5 million ($3.07 million) and a net profit after tax (NPAT) of NZ$5 million for fiscal 2023.

This is below Synlait's earlier forecast in March, when it had flagged lower net profit after tax in the range of NZ$15 million to NZ$25 million for the year due to cooling demand and higher costs.

The company said in a statement that lower demand from one of its customers affected consumer-packaged infant formula volumes and base powder production, leading to an NPAT impact of NZ$16.5 million in 2023.

a2 Milk Company, which owns nearly a fifth of the shares of Synlait and is a major customer, said it was "surprised" at the extent of Synlait's guidance cut and left its earnings forecast largely unchanged.

Synlait, which exports most of its milk products, largely relies on international milk prices, which have been steadily increasing since the start of this year, according to the latest Global Dairy Trade auction.

The dairy milk producer reduced its forecast base milk price to NZ$8.30 per kilogram of milk solids (kgMS) from the earlier forecast of NZ$8.50 per kgMS, accounting for weak dairy prices.

Shares dived as much as 22.9% by 0115 GMT, posting their biggest-ever drop. The broader benchmark S&P/ASX 200 index retreated by 0.3%.

($1 = 1.6295 New Zealand dollars)

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