Why the Synlait Milk share price on watch today

The Synlait Milk Ltd (ASX: SM1) share price is one to watch this morning after the Kiwi dairy group increased its forecast milk price.

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The Synlait Milk Ltd (ASX: SM1) share price is one to watch today after a milk price update from the New Zealand dairy group.

What did Synlait Milk report today?

Synlait Milk announced an updated forecast base milk price for the 2019/2020 season. The milk price is up to $7.25 per kilogram of milk solids (kgMS) compared to $7.00 kgMS previously.

The decision to raise its forecasts was driven by a view that global dairy prices will remain relatively constant for the remainder of the milk season.

The Synlait Milk share price will be worth watching today as investors evaluate the impact for the New Zealand dairy group.

Higher than expected commodity prices at the end of 2019 were a major factor, said CEO Leon Clement.

Mr. Clement said the group was “pleased to be able to offer an improved forecast milk price for the current season.”

The next price update is expected in late May 2020.

How has the Synlait Milk share price performed recently?

The Synlait share price had somewhat of a disappointing 2019, with Synlait shares gaining just 0.35% over the course of the 2019 calendar year. That’s despite the shares climbing as high as $11.20 in March 2019.

However, it wasn’t all doom and gloom for the New Zealand dairy group, with solid operational expansion last year.

The group’s revenue surpassed $1 billion in FY19 for the first time and net profit after tax increased by 10% to $82.2 million.

The company also acquired Talbot Forest Cheese in August 2019, so the growth potential is still there.

What about the other ASX dairy companies?

While the Synlait share price has struggled in recent times, some of its listed rivals have soared higher.

Before exiting the ASX, the Bellamy’s Australia share price surged as China Mengniu Dairy Company bought the group for $1.5 billion late last year.

A2 Milk Company Ltd (ASX: A2M) shares have been an ASX growth share for years, while Bubs Australia Ltd (ASX: BUB) shares have doubled in 12 months.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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