The Synlait Milk Ltd (ASX:SM1) share price could be hammered on Monday after halving its FY 2021 guidance due to weak demand from A2 Milk Company Ltd (ASX:A2M)…
The post Synlait Milk (ASX:SM1) share price on watch after halving guidance due to a2 Milk (ASX:A2M) update appeared first on The Motley Fool Australia. –
The Synlait Milk Ltd (ASX: SM1) share price will be on watch today after it released an update on its guidance.
That update revealed that A2 Milk Company has experienced a more significant and protracted disruption in the daigou channel than expected. As a result, it downgraded its sales and earnings guidance materially for FY 2021.
What did Synlait announce?
This morning the dairy processor updated its FY 2021 guidance to reflect a revised demand forecast received from the infant formula company following its guidance update.
According to the release, the updated forecast from a2 Milk Company has resulted in Synlait forecasting total consumer-packaged infant formula volumes to be approximately 35% lower than FY 2020.
As a result of this change, based on initial estimates and currently available information, management expects its FY 2021 net profit after tax to be approximately half that of its FY 2020 profit result.
The company intends to provide investors with a further update on its FY 2021 profit expectations with its half year results in March.
The dairy processor’s board and management team revealed that they are continuing to actively pursue opportunities to mitigate the impact of this development. This includes focusing on the execution of its diversification strategy, asset optimisation, and prudently managing costs.
It also advised that there has been no disruption to manufacturing or demand for Synlait’s ingredient, lactoferrin, or consumer-goods businesses, and remains confident that it can deliver on its medium to long term objectives.
However, the company warned that its guidance remains subject to the ongoing effects of COVID-19, with consumer behaviour, channel dynamics, and supply chain disruptions all subject to change.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
- These are the 10 most shorted shares on the ASX
- ASX 200 Weekly Wrap: ASX hits new post-March high
- These were the worst performing ASX 200 shares last week
- Why did the Synlait (ASX:SM1) share price drop 2% then enter a trading halt today?
- ASX 200 falls 1.2% on Friday
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.