Profits at newly listed Synlait Milk are expected to be $7.5m lower than prospectus forecast.
Synlait Milk, which twice cut its earnings forecast, posted earnings growth that met revised guidance and said it plans to take a 25 per cent stake Sichuan New Hope Nutritional Foods Co to gain a direct interest in a Chinese infant formula brand.
Profit rose 70 per cent to $19.6
million in the 12 months ended July 31, from $11.5 million a year earlier, the Rakaia-based company said in a statement. Sales rose 43 per cent to $600 million.
Profit was within the guidance of between $17.5 million and $22.5 million Synlait gave in May, when it said earnings growth would be less than previously forecast because of a strong currency and an unfavourable product mix. Profit still met its prospective financial information (PFI) target. Its shares have fallen 16 per cent this year as the NZX 50 Index gained 9 per cent and last traded at $3.30, up from its $2.20 listing price last year.
"Achieving targeted premiums and gross margin for specialised ingredients when world market prices were high proved challenging," said chairman Graeme Milne. "Along with the development of our nutritionals business being set back by regulatory change in the important Chinese market, it meant the profitability advantages over and above PFI we experienced in the first half of the year were largely eliminated."
The company is still awaiting registration under China's new food safety regulations, which require manufacturers to take responsibility for branded product sold to consumers. To build its relationship with a Chinese brand, it plans to acquire 25 per cent of New Hope Nutritional, which sells the akara branded infant formula range in China and is in turn owned by New Hope Dairy, a shareholder in New Zealand's PGG Wrightson.
