Synlait says significantly lower-than-expected infant powder sales caused by Chinese market consolidation will sap its first-half net profit, while the coronavirus outbreak also presents a risk for the company going forward.
The milk processing company, part owned by a2 Milk Co, told the ASX on Thursday that its FY20 earnings would be between $NZ70 million and $NZ85 million net profit after tax ($A67.15 million to $A81.54 million), down from $NZ82.2 a year earlier.
This would follow an expected first-half profit of between $NZ26.5 million to $NZ28.5 million, down from $NZ37.3 million at HY19.
Synlait’s ASX-listed shares slumped by 17.76 per cent to $6.62 by 1030 AEDT – a near-two-year low.
Synlait said its first-half net profit would be affected by lower-than-expected sales of ingredient products due to sales phasing and product mix impacts, as well as lower sales of infant base powders due to China infant nutrition market consolidation.
The New Zealand company added that sales of consumer-packaged infant formula volumes have increased against the prior corresponding half-year period, and that it expects continuing volume growth over the full-year.
However, increased incremental interest, higher manufacturing costs associated with the Pokeno factory and advanced liquid dairy packaging facilities will weigh on its balance sheet.
Chief executive Leon Clement said although the coronavirus outbreak had caused no short-term impact on the company’s performance, it represented some downside risk going forward.
He said this was considered as part of the broader outlook update and contributed to Synlait’s decision to issue a wider guidance range at this stage.
AAP
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