The local market was stirred when Synlait Milk announced it was reducing its net profit guidance for the year ending July to a range of $5m loss and $5m gain, from the previous $15m-25m profit.
The $20m downgrade represented the impact of further advanced nutrition demand reductions, higher financing and supply chain costs.
A2 Milk, which has a 20 per cent shareholding in Synlait, followed suit by telling the market it was surprised at the extent of the reduction in Synlait’s guidance range.
A2 Milk said there is no material change to its outlook, and it was expecting full-year revenue growth of about 10 per cent.
Synlait slumped 58c or 27.1 per cent to $1.56 and a2 Milk was down 34c or 5.45 per cent to $5.90.
Greg Smith, head of retail with Devon Funds Management, said the tit-for-tat between Synlait and a2 provided the market with some excitement.
“The companies have a close mutual relationship and they provided quite divergent views. You’d think they would be more aligned than that. They need each other – Synlait holds the registration licence for a2 Milk to sell in China, and a2 has the marketing brand.
“Synlait implied that it was a2′s reduction in demand that largely explained $16.5m of the $20m profit downgrade,” Smith said.
The two companies were discussing the allocation of one-off production, supply chain and other costs.
Synlait told the market that the China re-registration remained on track for production in the fourth quarter, and a new multinational customer will increase advanced nutrition sales at its Pokeno processing plant. There have been no demand changes in the ingredient, foodservice and consumer businesses.
Synlait is currently reviewing its capital strategy, especially its debt level, to ensure it has the appropriate funding for the 2024 financial year and beyond, but it is not considering a capital raise.
Synlait also announced it was reducing its forecast milk price to $8.30 per kgMS, from $8.50, because of lower commodity prices and a slower-than-expected Chinese recovery. Fonterra Shareholders’ Fund was down 8c or 2.32 per cent to $3.37.
The local market was also driven down by Meridian Energy falling 23c or 4.26 per cent to $5.17; Ebos Group decreasing 90c or 1.97 per cent to $44.80; and Mainfreight shedding 99c to $72.
Westpac fell 70c or 2.84 per cent to $23.95; Heartland Group shed 3c or 1.86 per cent to $1.58; Napier Port decreased 5c or 1.93 per cent to $2.554; Marsden Maritime Holdings declined 10c or 1.9 per cent to $5.15; and Precinct Properties was down 5.5c or 4.28 per cent to $1.23.
In the retail sector, Hallenstein Glasson was up 19c or 3.42 per cent to $5.74; and Michael Hill was down 2c or 1.85 per cent to $1.06.
Other decliners were Vulcan Steel falling 32c or 3.56 per cent to $8.68; Bremworth down 2c or 5.56 per cent to 34c; Enprise Group decreasing 4c or 4.76 per cent to 80c; Accordant Group shedding 5c or 2.98 per cent to $1.63; and Task Group giving up 3c or 6.98 per cent to 40c.
Summerset Group, down 5c to $8.17, told shareholders at its annual meeting that it is well prepared to deal with an uncertain economic period this year while continuing to grow. Summerset said it has a prudent capital structure and can flex its build rate as demand dictates.
Other retirement village operators Ryman Healthcare was down 7c to $5.28, and Arvida Group declined 2c or 1.89 per cent to $1.04.
Contact Energy was up 10c to $7.75; Restaurant Brands increased 27c or 3.91 per cent to $7.18; Rakon rose 5c or 5.26 per cent to $1; Move Logistics collected 3c or 3.66 per cent to 85c; and Embark Education improved 2c or 3.64 per cent to 57c.
Smartpay Holdings, up 2.5c or 1.82 per cent to $1.395, reported that Australian transaction revenue rose 76 per cent in March and total value increased 64 per cent for the year. Consolidated revenue for the year was up 54 per cent, and the number of merchandise terminals, now more than 46,000 in Australia and New Zealand, increased 62 per cent.
