How are Synlait’s (ASX:SM1) shares faring post FY23 guidance update?

Highlights

• Synlait Milk announced no change in its FY23 guidance via ASX.
• The company hinted towards loss in HY23 NPAT due to delayed shipments and low supply.
• Shares of Synlait reacted negatively to the news, down 5.294%.

Today morning (22 December), New Zealand-based milk production company Synlait Milk Limited (ASX:SM1) shared its first-half FY23 performance via an ASX filing. The company informed the market that its full-year FY23 guidance remained unchanged, driven by increased demand in advanced nutrition, consumer, and food service volumes. However, Synlait’s net profit after tax (NPAT) for HY23 may get impacted due to a few related factors.

Synlait also hinted towards releasing its full-year FY23 results on 27 March 2023, along with the company’s NPAT guidance for FY23.

Shares of Synlait Milk were trading in the red territory with a loss of 5.294% shortly after the news surfaced. At the time of writing (12:08 PM AEDT), Synlait’s shares were valued at AU$3.220 apiece.

A glance at Synlait’s HY23 performance

According to the ASX release, below are a few factors that may impact Synlait’s HY23 NPAT:

• Synlait stated in the first four months of FY23, lower milk supply, delayed ingredient shipments, and SAP implementation led to lower sales volumes, down about 45%.
• Following significant SAP stabilisation efforts, the monthly ingredient export run rate returned to normal and was anticipated to be fully caught up at the start of Q4 FY23.
• During the first half of FY23, lactoferrin volumes were reduced by about 40% due to sales phasing. For FY23, lactoferrin margins are anticipated to be comparable to or even better.
• For HY23, Synlait witnessed increased expenses, driven by SAP stabilisation activities, supply chain issues, and inflation.

As stated in the ASX filing, the impact of delayed sales on cash flows will cause net debt and associated interest expenses to be greater than anticipated at HY23. Synlait continues to target a debt-to-EBITDA ratio of 2.0x to 2.5x for FY23.

The company mentioned that it plans to complete FY23 and begin FY24 at a level of profitability comparable to FY21. However, Synlait is facing a few challenges, like supply chain challenges, a tight labour market, high inflation, and the SAMR registration deadline. These factors might all significantly affect the company's current FY23 projection.

How have Synlait’s shares performed in a year?

Including today’s decline, the share of Synlait has dropped 2.96% in the last five trading sessions while increasing by 23.31% in a month. Over the previous six months, shares of Synlait have gained 11.19% in value and have plunged 0.61% on year-to-date (YTD) and in a year.