Sounds remarkably like the "bigger fool principle".
Printable View
Attachment 4658..........
What is the NZX code?
Synlait Farms benefits from every rising auction no doubt , higher payout = higher profit = higher shareprice.
Synlait Milk will benefit as it encourages more milk to be produced , higher throughput with the plant , bigger profits. It obviously increases the input costs, but with infant formula alot of what is "in the can" is not actually milk ...
On the commodity WMP,SMP,AMF then as long as they track the revenues/tonne of powder that Fonterra is achieving then they will be fine , higher milk prices hurt Fonterra's consumer business margins too , which is good for Synlait.
It just boosts sentiment as well around the whole of NZ, so that's got to be good for both companies share price.
Agreed
I would be interested to know what proportion of input costs of infant formula are not actually milk.Quote:
Synlait Milk will benefit as it encourages more milk to be produced , higher throughput with the plant , bigger profits. It obviously increases the input costs, but with infant formula alot of what is "in the can" is not actually milk ...
I haven't read the Synlait prospectus FH, so no doubt you can correct me if I am speaking pout of turn. But common sense tells me that if I was building a milk processing plant, I wouldn't build it without knowing that I had a secure supply of milk signed up to keep it running. Why would Synlait suddenly decide they need more milk than was in their business plan?
I would have thought the driving force behind Synlait profitability is the price points that are able to be achieved in their largest export market China. I would imagine that Bright Dairy has already stitched up this side of the business plan. So that means any milk price rise will be negative for profits over the duration of the current marketing agreements.
Don't get me wrong, I think the future for Synlait processing is Bright (pun intended). But I can't see that increasing input costs is good for business in any way.
The last big spike in dairy prices was I understand bad for business, as other products got substituted that did not contain milk!Quote:
It just boosts sentiment as well around the whole of NZ, so that's got to be good for both companies share price.
SNOOPY
Should we run a "book" on what the opening price will be.
Whatsup = $2.55.