Site menu

Search by ticker code:
Generic filters


Search by ticker code:
Generic filters

Search by ticker code:
Generic filters

What can A2 Milk (ASX:A2M) investors learn from the latest Synlait (ASX:SM1) guidance?

What can A2 Milk Company Ltd (ASX: A2M) investors learn from the latest FY21 guidance given by Synlait Milk Ltd (ASX: SM1)?

The Synlait guidance

Synlait’s board and management have gone through a review of the impact of previously disclosed risks affecting Synlait’s performance. As a result of that review, it has altered its full year forecast for a few different reasons.

One reason is the expectation of ongoing shipping delays, which will result in the sale of same ingredient products occurring after the FY21 balance date.

Another reason is that Synlait is seeing lower prices for ingredient products than it would normally expect to achieve relative to prevailing market prices through a combination of sales phasing and volume pressure.

The third reason that Synlait referred to was the adoption of a more conservative approach to year-end inventory volume and valuation.

As a result of the above issues and ongoing difficult trading, it’s expecting to make a net loss after tax of between $20 million to $30 million in FY21.

Is Synlait in trouble with lenders?

Synlait said that its banking syndicate continues to be supportive and has granted a waiver of relevant covenants in FY21. The company is working constructively with the syndicate to ensure it has the appropriate funding for FY22.

The dairy business says that it does not intend to undertake a capital raising.

Management comments

Synlait CEO John Penno said: “I am disappointed to share this news with our investor base. As a team we are focused on closing out this year as well as we can, then resettling, and delivering a much-improved financial performance in FY22.”

What can A2 Milk shareholders take from this?

The situation continues to worsen for the two businesses. A2 Milk recently gave an update to shareholders about what it plans to do with its inventory situation. I don’t see things getting better during FY21. Hopefully this doesn’t continue into FY22 or else that will be another financial year with lower earnings.

It’s difficult to know whether this is just a temporary problem. Or whether Chinese demand is permanently lower, despite all of the strong demand over the previous decade.

The A2 Milk share price and Synlait share price may be longer-term opportunities, but it’s a bit of a flip of a coin. That’s not the type of investment I like to make.

There are other ASX growth shares which may have the potential to deliver earnings growth over the next couple of years.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
Skip to content