Synlait Milk has revised its FY23 guidance and said its two year recovery plan would now take three. The FY23 guidance came early because it was outside market consensus to ($5)-$5 million. Its stock dropped more than five per cent to $2.52.
Synlait is a New Zealand dairy company, The a2 Milk Company owns a 19.8 per cent share in the company and is Synlait’s exclusive manufacturer for its infant formula business.
CEO Grant Watson said it was becoming “increasingly clear” the two-year recovery plan would take three years
“While underlying momentum is lifting, our full financial recovery will take longer than planned.
“Key drivers of the guidance range include a reduction or delay in advanced nutrition demand, operational and SAP stability challenges, and an increasing cost base. This is on top of inflationary and interest rate pressures,” Watson said.
The drop/delay in forecast and demand comes from forecast changes by its largest customer. A reduction in the amount of milk processed, the supply of raw milk, CO2 shortages, an “extremely” tight labour market, extreme weather events and high inflationary cost pressure have also compounded its forecast figures.
A2 Milk is Synlait’s largest customer, and while its 1H FY23 results showed sales increased in China by 18 per cent despite the market down 12.5 per cent, revenue for its ANZ segment was down 24.6 per cent and EBITDA down 35.6 per cent to NZ$62 million.
Synlait said implementing and stabilising SAP significantly impacted the company’s ability to release and ship products in Q1 FY23.
Watson said the leadership team was focused on stabilising the company to ensure it can deliver sustainable and diversified growth.
Its Ingredients and Consumer business remain strong, commercial UHT cream sales have commenced as planned for the Foodservice business.
Its complete guidance will be on Monday, 27 March.
