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Synlait shares slump on record milk price

New Zealand's headline share index dipped after Fonterra announced it would likely pay the highest farmgate milk price in the history of the cooperative, pushing up production costs for dairy processors.

Tuesday, October 26th 2021, 7:09PM

by BusinessDesk

The S&P/NZX 50 Index fell 17.82 points, or 0.1%, to 13,075.4. Turnover was $135 million – still quiet after the long weekend. 

Sky Network Television led the market lower, falling 4.2% to $1.84, followed by Synlait Milk which will have to match Fonterra’s high price to buy milk from farmers. 

The dairy processing firm fell 2.6% to $3.70 as investors factored in its increased cost of doing business. 

Its lead customer A2 Milk – which is also under pressure from class-action lawsuits – declined 0.6% to $7.14, while Fonterra Shareholders’ Fund units declined 0.3% to $3.96. 

Fonterra chief executive Miles Hurrell said the forecast lift to $8.40 was a result of continued demand for milk products relative to below-average supply. “While the increase in milk price can put pressure on our input costs, we remain comfortable with our current 2021/22 earnings guidance range of 25-40 cents per share,” he said.

Shares in Tourism Holdings jumped 3.5% to $2.69 after it announced it had sold two non-core businesses to ASX-listed Camplify Holdings for $7.7m. 

The transaction will be paid entirely in newly issued Camplify shares and represents an on-paper profit of approximately $6m.

Chief executive Grant Webster said the transaction allows the company to keep profiting from peer-to-peer campervan rental while also offloading some of the risk.  “We will be able to continue to leverage the benefits of the RV owner network for the THL RVSC sales, service and retail businesses, while minimising the financial risks to THL,” he said. 

Grant Davies, an investment advisor at Hamilton Hindin Greene, said investors were cautious about tourism stocks during the pandemic and were pleased to see less risk in the business. 

SkyCity Entertainment climbed 2.2% to $3.21 after S&P Global Ratings said it was confident the casino operator’s earnings would recover once Auckland level 3 restrictions ease.

“SkyCity's solid operating performance in fiscal 2021 reinforces our view of the quality of the company's long-term monopoly positions in New Zealand and in Adelaide,” the ratings analyst said. 

Seeka shares rose 0.6% to $5.16 after it forecast a full-year net profit before tax between $15m and $17m – an increase on its August guidance. 

Steel & Tube Holdings was up 3.5% at $1.18 after telling shareholders revenue was recovering now Auckland and other regions had returned to alert level 3 and below.

Milford Asset Management told the NZX it has recently bought 7 million Arvida Group shares – for approximately $12m – making it a significant shareholder.

Shares in the retirement group operator were down 0.5% at $2.02, today.  The NZ dollar was trading at 71.68 US cents today, up from 71.63 cents yesterday and 69.27 cents ten days ago.

Tags: Market Close

« NZX50 limps into Labour weekendNZX falls on A2's weak margins »

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