Lending Association

Synlait Milk’s profit projections plummet

The froth continues to vanish for former boom stock, NZ-based Synlait Milk (ASX:SM1), judging by a surprise slashing of guidance issued Monday morning. In doing so, it confirmed why its shares are down 75% in the past year, with the news that it now expects a loss instead of a small profit for the six months to January 31.

The shares closed in New Zealand on Friday at 80 A cents – that’s a drop of 10% so far in 2024 alone.

The company added to its woes by warning that its full-year result for 2023-24 will be flat to lower instead of being up on the performance in 2022-23.

The big downgrade emerged in the update, which said the company now expects to report a net loss in the range of ($NZ17) million to ($NZ21) million.

“The previously announced guidance stated that Synlait expected its HY24 NPAT to be down on HY23, mainly due to increased financing costs and changes in margin. For reference, Synlait’s HY23 NPAT was $4.8 million.

But the company warned it could be worse: “The range is based on Synlait’s initial consolidated result, which is subject to further review and may be subject to further adjustments as the company prepares its HY24 financial statements for release on Monday, March 25, 2024.”

“The HY24 result remains subject to review procedures by Synlait’s auditor, and the range excludes any additional adjustments, including accruals, provisions, and impairments, which are still being assessed.

The company said the result had been mainly impacted by higher financing and operational costs, ingredient margin reductions, and lower advanced nutrition margins.

“In September 2023, Synlait stated its earnings before interest, taxes, depreciation, and amortization (EBITDA) performance was expected to improve in FY24, compared to FY23. Synlait’s expectation is now that the FY24 EBITDA result is expected to be broadly flat or down on FY23.

Synlait said it was “actively working on the need to deleverage Synlait’s balance sheet as a priority. Synlait will provide an update when it releases its HY24 result in March.”