Synlait posts six-month $6.4m loss in ‘year of two halves’

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In spite of recording a $6.4 million net loss after tax for the first six months to January 31, Synlait Milk [NZX: SML] says it is expecting a much stronger second half performance this financial year.

The results announced this morning includes after-tax unrealised foreign exchange losses of $6.8 million. It says delays in the shipment of infant formula and nutraceutical products impacted upon its underlying after-tax financial performance.

According to a statement, “A one-off, after-tax product mix benefit of $7.5 million in the first half of the 2014 financial year, combined with increased depreciation and interest costs from the commissioning of three growth initiatives projects in the second half of the 2014 financial year, are the primary reasons for a $11.7 million variation between the underlying 2015 financial year interim result of $0.4m and the 2014 financial year interim result of $12.1m net profit after tax.”

Despite expecting that current market volatility will continue, Synlait is confident there are  sufficient committed contracts to achieve a forecast net profit after tax result of $10-15 million for this financial year.

“We are expecting a much stronger performance in the second half of the 2015 financial year, associated with increased sales of our higher margin infant and nutraceutical products,” chairman Graeme Milne said.

“This is very much a year of two halves. The timing of when we can recognise our forecast results for 2015 financial year has shifted more than we were expecting from the first half to the second half of the year.”

Managing director John Penno said that, although the previous 18 months have been challenging for the dairy industry, investing in nutritional capacity and capability is what will create value for the business in the long term.

“We are acutely aware of the decline in commodity prices and the impact this is having on our suppliers. We have an increased ability to respond well to these pressures, which means in some situations we can offer financial incentives to help ease these impacts on our suppliers,” Mr Penno said in a statement.