Synlait says 1H profit declines on lower margins
Synlait Milk said net profit was $37.3 million in the six months to Jan 31, versus $41.3 million in the same period a year earlier.
Revenue, however, lifted 7% to $470.9 million on higher sales volumes across its powders and cream and lactoferrin businesses.
It processed 12.4% more milk than it did in the same period last year, producing 90,495 metric tonnes of product.
Synlait said sales volumes of fully-finished infant formula were slightly ahead of the first-half of 2018, but were delivered at lower margins.
“This is a result of the new pricing agreement entered into with The a2 Milk Company last July, as well as not having the benefit of the higher margin sales to our China-based customers that we enjoyed in HY18. These brands are awaiting State Administration for Market Regulation registration,” Synlait said in a statement.
All manufacturers of infant formula are required to register brands and recipes with the China Food and Drug Administration to sell into the Chinese market through traditional channels. The registration is part of broader efforts by China to lift food safety standards after a number of scares, including the death of infants from ingesting infant formula laced with melamine in 2008.
Synlait expects to obtain SAMR registration for New Hope’s Akara and E-Akara brands and Bright Dairy’s Pure Canterbury brand by the end of 2019, but noted it is difficult to be definitive on timelines.
The shares fell by $1.99, or 17.6 percent, to $9.30 after the result. Prior to the announcement, the stock had gained 25 percent year-to-date.
Broking firm FNZC says the result was disappointing: “There was nothing in this result that supported a more positive view” on Synlait’s earnings outlook or its new growth initiatives.
Fonterra reports 1H net profit, signals further asset sales
Fonterra Co-operative Group’s net profit attributable to shareholders for the six months ended Jan. 31 was $76 million versus a $354 million loss in the same six months a year earlier.
Normalised earnings before interest and tax fell 29% to $323 million. While sales volumes rose 2%, revenue fell 1% to $9.7 billion.
The dairy giant says it has begun a process to sell its 50% share of DFE Pharma, and completed the $16 million cash sale of Corporacion Inlaca in Venezuela to Mirona. Write-downs and other non-cash adjustments means Fonterra will book a loss of $126 million on the Inlaca sale overall.
Chief executive Miles Hurrell says Fonterra is well on track to meet its target of reducing year-end debt by $800 million.
Hurrell says the focus for the full year is to meet the earnings guidance – which he confirmed should be 15-25 cents per share – deliver the three-point plan and fundamentally reset the business so it can deliver sustainable earnings. That target excludes the 8 cents per-share impact of the expected loss on the Inlaca sale.
He also confirmed the forecast farmgate milk price at $6.30-6.60 per share.
Original article sourced from NZX.