Synlait Milk Share Price Plunges by 11%

The stock value of Synlait Milk Ltd [NZX:SML] fell by 10.72% today.

Synlait Milk holds the exclusive rights as the manufacturer of the popular dairy product for The a2 Milk Company [NZX:ATM]. Both companies cooperate heavily on exports to China.

At the time of writing, Synlait has a market capitalisation of $1.8 billion. and the share price is at $9.70.

 

Why has the [NZX:SML] share price decreased today?

Synlait Milk has just announced a disappointing decline in first-half net profits — a 9.7% dip in performance compared to 2019. This comes on the back of lower-than-expected margins for export sales to China.

This is a direct result of new food safety regulations that are currently coming into force. Synlait will have to jump through more bureaucratic hoops in order to register its brand with the China Food and Drug Administration.

 

So where could the Synlait Milk share price go from here?

Despite investor jitters, Synlait’s projected outlook for the future remains strong.

A new manufacturing plant in Pokeno will be commissioned in time for the 2019-2020 milk season. Another packaging facility in Dunsandel is also on schedule for unveiling soon.

In addition, Synlait’s diversification into the cheese industry with Talbot Forest Cheese also bodes well for future growth.

Finally, once the mood normalises and Kiwi exporters come to grips with the new Chinese regulatory environment, the share price for Synlait could recover and maintain its upward trajectory.

For more information, please read our recent issues regarding a2 Milk and Synlait:

Regards,

Taylor Kee,
Editor, Money Morning New Zealand

PS: New Zealand has already benefited as China lifted nearly a billion people out of extreme poverty. Now it’s set to boom again as middle-class incomes continue to rise. In our latest FREE research report, we identify three investments ready to soar on the back of China’s rise. Download your free report here with all the details.


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


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