* Dairy firm sees up to 15% drop in FY profit
* Shares slump nearly 20% to a near 2-yr low
* Structural issues in China hurting Synlait - analyst (Adds details on outlook, CEO comment, analyst comment, shares)
By Niyati Shetty
Feb 13 (Reuters) - New Zealand’s Synlait Milk Ltd said on Thursday its annual profit could fall up to 15% due to a drop in infant formula sales to China and risks from the coronavirus outbreak, sending its shares to a near two-year low.
The milk processor’s share price slumped as much as 19.2%, losing more than NZ$285 million in market value and marking its worst-ever intraday fall. The stock was down 18% in late trade.
Synlait’s warning of a potential hit to earnings from the coronavirus epidemic came after Australian vitamins maker Blackmores Ltd said on Wednesday its profit could more than halve as the virus disrupts supply chains.
“We are not currently experiencing any supply chain disruption; however, we are monitoring the situation very closely and felt it prudent to front foot potential impacts,” Synlait CEO Leon Clement said in a statement.
The company forecast net profit after tax for 2020 in a range of NZ$70 million to NZ$85 million ($45.2 million to $54.9 million). It had previously forecast a rise in profit from last year’s NZ$82.2 million.
Synlait said the possible impact from the coronavirus outbreak was largely responsible for the lower end of its forecast range.
Synlait, a key milk supplier to a2 Milk Co, said sales of infant formula to China would be lower this year as brands there are still awaiting registration after a wave of consolidation.
Synlait faced problems from current events in China, an analyst said.
“They have got a lot of production coming in so I certainly don’t think they are going to have any issues in lifting their profit looking forward, but obviously there are structural issues in China which are hurting them,” said Jeremy Sullivan, an investment advisor at Hamilton Hindin Greene .
A2 Milk, Synlait’s second largest shareholder, said in a statement on Thursday that its performance for the year remained strong despite the warning from its milk supplier.
Shares of a2 Milk fell as much as 3.2% in early trade, but were up slightly by 0350 GMT.
Synlait said it expected a first-half net profit of NZ$26.5 million to NZ$28.5 million, down from NZ$37.3 million a year ago.
$1 = 1.5477 New Zealand dollars Reporting by Niyati Shetty and Nikhil Kurian Nainan in Bengaluru, Additional reporting by Shriya Ramakrishnan; Editing by Anil D'Silva and Richard Pullin