Synlait shares tumble after a2 Milk halt

Synlait Milk’s stock price plunged after its close ally, a2 Milk, paused while it reviewed its earnings guidance for the market.

The NZX exchange said the halt to operations would remain in effect until the company’s first announcement or the market opening on Monday.

Synlait, just under 20 percent owned by a2 Milk, and the sole provider of infant formula to a2 Milk, saw its share price drop by 26 cents or 4.8 percent to $ 5.14 on the back of the a2 Milk ad. .

In a separate statement, Synlait said: “Once The a2 Milk Company publishes an announcement, Synlait will assess this information and the impact on its own company, and provide an additional update to the market if necessary.”

In its statement, a2 Milk said it had learned of information that could require the company to review its previously issued earnings guidance for the market.

“We are requesting a halt to operations to give us additional time to properly consider current information and consider new information as it becomes available, and inform the market,” a2 Milk said.

At the November annual meeting, the company said it still expects group revenue for the first half of $ 725 million to $ 775 million, down from $ 805.3 million in the corresponding previous half.

Group revenue for 2021 was expected to reach $ 1.8 billion to $ 1.90 billion, up from $ 1.73 billion in financial year 2020.

The Ebitda margin for 2021 was forecast to be in the order of 31 percent.

“However, due to the volatility arising from Covid-19 and the difficulties this presents with the forecast, naturally there is uncertainty in this forecast,” the company said at the time.

At the annual meeting, the company said it remained committed to the daigou infant formula trade in China, despite being responsible for clouding its short-term earnings outlook.

Daigou, “buy on behalf of,” encompasses the unofficial group of people who buy and ship products to China for profit.

Over the past three years, the trade in daigou in a2 Milk infant formula has developed along corporate lines, with the majority of operators based in Victoria having been the hardest hit of all Australian states by the Covid-19 closures.

Shares of A2 Milk last traded at $ 14.12, having fallen 7.11 percent in the past 12 months.