Lower infant formula sales tank Synlait Milk profits

Synlait Milk says it will miss profit forecasts with sales growth of its speciality milk products lagging behind expectations.

The dairy producer expected first half net profit to be in a range of $26.5 million to $28.5m for the six months ended 31 January, compared with last year's $37.3m.

Full year net profit was expected to be in a range of $70m and $85m, dashing hopes it would beat last year's $82.2m.

"Naturally, the Synlait team expected a stronger FY20 financial performance," chair Graeme Milne said.

"We remain confident that the decision to focus on our medium to long-term strategic opportunities will over time improve shareholder value and the sustainability of our business."

In a market update, the company said anticipated infant base powder sales were significantly lower than expectations as a result of consolidation in the China infant nutrition market, which caused a reduction in demand from brand owners who were yet to receive brand registration there.

It said lactoferrin prices were also more volatile than previously anticipated.

In addition, Synlait said growth in consumer-packaged infant formula sales volumes were not as strong as initially envisaged, however it noted A2 Milk Company's contribution to the growth had not changed.

It said the past six months had been challenging despite an increase in consumer-packaged infant formula sales volumes over the year earlier.

The company said it had higher costs associated with the Pokeno and advanced liquid dairy packaging facilities, with significant capacity available.

This article was originally published on RNZ and re-published with permission.

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