The previous guidance was for a 10% increase on last year’s $82m, chief executive Leon Clement said.
He blamed reduced sales expectations in the key China infant base powder market, much more volatile lactoferrin prices, and slower growth in consumer-packaged infant formula sales.
Net profit after tax for the first half-year was now expected to lie between $26.5m and $28.5m, compared with $37.5m in the previous corresponding period.
The full first-half results would be announced on March 19 and the revised earnings guidance was being released ahead of time, Clement said.
Immediately after the announcement Synlait’s share price dropped more than $1.50 or nearly 20%.
The reduced earnings and profits would not impact Synlait’s current farm gate milk price forecast of $7.25/kg milksolids, increased by 25c in late January.
Clement said the new investments in the liquid milk plant at Dunsandel and the new site at Pokeno, in northern Waikato, had contributed costs which were not yet matched by increasing revenue.
“In the meantime, we are moderating our costs while we bring our new investments to life in terms of capacity and capability.
“We remain confident and on-track to deliver on our medium to long term objectives.”
The volume growth in the company’s supply contract with infant formula A2 Milk Company was not included in the slowdown picture.
But Synlait does not disclose how much of the annual milk supply, which has been 63m kg milksolids for the past three financial years, is certified A2 or the rate at which more converted herds are supplying the company.
Production of lactoferrin was divided between forward contracts and spot market sales and the spot market prices had halved recently, chief financial officer Nigel Greenwood said.
Coronavirus was also mentioned as a market risk, leading to the lower earnings range number of $70m, perhaps $3-$4m lower than it otherwise would have been.
But Clement said the virus in China had not had any material short-term financial impact.
