Synlait says it now expects $20-30m annual loss

Synlait has downgraded its earnings again. Photo / NZ Herald

Synlait Milk has adjusted its earnings outlook for the June year to a $20-30 million loss after having previously advised that it expected to break even, but said its bankers continued to be supportive.

The company said it does not intend to undertake a capital raising.

Synlait said its board and management had undertaken a review of the impact of previously disclosed risks affecting Synlait's performance.

As a result, the company has altered its full-year forecast based on:

• an expectation of ongoing shipping delays, which will result in the sale of some ingredient products occurring post the June 30 balance date;

• achieving lower prices for ingredient products than Synlait would normally expect to achieve relative to prevailing market prices through a combination of sales phasing and volume pressure; and

• the adoption of a more conservative approach to year-end inventory volumes and valuation.

"Synlait's banking syndicate continues to be supportive and has granted a waiver of relevant covenants in 2021," it said.

The company is working constructively with the syndicate to ensure it has the appropriate funding for 2022.

"I am disappointed to share this news with our investor base," chief executive John Penno said in a statement.

"As a team, we are focused on closing out this year as well as we can, then resetting, and delivering a much-improved financial performance in 2022," he said.

In March Synlait reported a first-half profit drop of 76 per cent after Covid-19 weakened demand for the high-margin infant formula it makes for a2 Milk.

At the time Synlait said it expected to be "broadly break even" in the full year.

Its guidance prior to that was for its 2021 profit to be half that of the previous year's $75.2m.

Shares in Synlait Milk and a2Milk have taken a battering on the back of their numerous earnings downgrades.

Synlait closed at $3.05, down 5c, having dropped by 56 per cent over the last 12 months.

A2 Milk last traded at $5.86 - down 17c - having peaked at $21.51 last July.

The dual listed A2 Milk is now targeting revenue for 2021 of $1.20 billion to $1.25b, down from an earlier forecast of $1.4b.

Under the revised guidance, a2 Milk's ebitda would come in at between $132 and $150m, down from $549.7m in the 2020 year, which was based on a margin of 31.7 per cent.

Today's downgrade comes after big changes at the top for Synlait.

In April, the company announced that chief executive Leon Clement would leave after just two and a half years in the job.

Former CEO Penno has been filling in until a replacement is found.

A month later, Synlait Milk's chief financial officer Angela Dixon announced her resignation.