Synlait Milk Forecasts H1 Loss on High Costs & Plant Woes

Key Financial Projections Unveiled

New Zealand dairy producer Synlait Milk has announced it expects a significant net loss after tax for the first half of its fiscal year. The company forecasts the loss to be between NZ$77 million and NZ$82 million for the six months ending January 31, a stark contrast to the NZ$4.8 million profit reported in the corresponding period a year earlier.

Operational Challenges Drive Losses

The projected loss is attributed to a combination of higher operational costs and the lingering effects of production issues at its Dunsandel facility. Although most production problems have been resolved, the company stated that the fallout continues to negatively impact the business.

These earlier delays depleted inventory levels, forcing the company to focus the current season on rebuilding stock. Consequently, Synlait had to sell a larger volume of low-margin raw milk instead of converting it into higher-value processed products, leading to reduced plant efficiency and increased operating costs.

Economic and Market Impact

The financial downturn reflects the operational pressures facing the company. CEO Richard Wyeth expressed significant disappointment with the half-year result, acknowledging its impact on the pace of the company's financial turnaround strategy.

This forecast is likely to influence investor sentiment and place pressure on Synlait's stock performance, highlighting the company's vulnerability to production disruptions and commodity price dynamics.

Forward Outlook

Synlait's immediate focus remains on completing its inventory rebuild and improving plant efficiency to return to profitability. Investors and market analysts will be closely watching for signs of a successful operational recovery and improved margins in the upcoming reporting periods.

FAQ

Q: Why is Synlait Milk forecasting a loss?
A: The loss is primarily due to high operating costs, the after-effects of plant production issues, and the need to sell lower-margin products while rebuilding inventory.

Q: What is the expected loss amount?
A: The company forecasts a net loss after tax between NZ$77 million and NZ$82 million for the first half-year.

Q: How does this compare to the previous year?
A: It marks a significant downturn from a NZ$4.8 million profit reported for the same period last year.

Source: Investing.com