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Why did Bell Potter just lower its outlook for this consumer staples stock?

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A woman sits with a glass of milk in front of her as she puts a finger to the side of her face as though in thought while her eyes look to the side as though she is contemplating something.

ASX consumer staples stock Synlait Milk Ltd (ASX: SM1) is in focus today after the company released half-year results.

Following the announcement, the team at Bell Potter lowered their outlook on the company. 

What did Synlait Milk Report?

Synlait Milk is a dairy processing company that benefits from a differentiated milk supply and operating environment in New Zealand.

Its share price is down over 26% year to date and almost 50% over the last 12 months.

Yesterday, the company released half-year results for the six months ended 31 January 2026.

Key results included: 

  • A reported EBITDA loss of ($34.7 million), with underlying EBITDA of $4.1 million.
  • A reported net loss after tax of ($80.6 million), with an underlying net loss after tax of ($27.3 million).
  • Net debt of $472.1 million – an increase of 88%.
  • Revenue of $949 million – an increase of $32.3 million.
  • Gross profit of $3.1 million – a decrease of $83.9 million.

CEO Richard Wyeth said: 

The numbers we are presenting today are frustratingly disappointing. They are the result of a period where Synlait faced multiple headwinds and had little choice as to how to deal with them. They reflect a severe lack of optionality, not effort, and they do not define the company’s future – although recovery will take time.

What did Bell Potter have to say?

Following these results, the team at Bell Potter released updated guidance on this ASX consumer staples stock. 

Bell Potter said an unfavourable product mix in ingredients, operational plant issues, and lower IMF margins (on production catch-up plan) were drivers of the weaker result.

The broker said FY26e appears a write-off for the consumer staples stock as it bears the impact of material disruptions in its nutrition operations and unfavourable product mix in its ingredients business.

FY27e is likely to also be a year of transition as SM1 looks to fill the void created by loss of A2M EL volumes, with progress being made on based powder (i.e. Abbott contract) and packaged products (white label offerings and new customer acquisition).

Price target decrease

Included in the report was a retained hold recommendation. 

However, the broker lowered its price target to $0.42. 

This was a significant decline from its previous target of $0.72. 

The consumer staples stock closed trading yesterday at $0.41, indicating it is close to fair value. 

To a degree a material bounce back in performance is somewhat assumed, with SM1 trading at 10.5x FY27e EBITDA.

The post Why did Bell Potter just lower its outlook for this consumer staples stock? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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