Shares of Synlait Milk, the dairy company which has taken a cornerstone stake in Sichuan New Hope Nutritional Foods Co to gain direct interest in a Chinese infant formula brand, fell 12 percent after it turned to a loss in the first half due to delays in infant formula shipments, a decline in dairy prices and challenges in its value-added production line.

The Rakaia-based company posted a loss of $6.4 million in the six months ended Jan. 31, from a profit of $12.1 million a year earlier, it said in a statement. Sales sank 31 percent to $197.5 million. The company had a one-time product mix benefit of $7.5 million in the first half of last year.

The shares fell 36 cents to $2.65, the lowest level since August 2013.

Last year, the dairy company saw its exports to China delayed as it waited for a license under a new Chinese regulatory system, which makes dairy manufacturers take responsibility for branded products sold to consumers, meaning only a quarter of forecast sales volume for bulk infant formula and retail-ready infant formula had been delivered to date, Synlait said.

Meanwhile, globally the price of dairy products more than halved last year, as an oversupply in the market weighed on demand and pushed down prices. Synlait is looking to insulate itself against volatility in the commodity market by producing value-added products, but said it had challenges in the production of its new lactoferrin protein which may see the forecast 15 metric tonnes not produced in the full year.

"The past 18 months have been challenging for everyone in the dairy industry," chairman Graeme Milne and chief executive John Penno said in Synlait's interim report. "While we are expecting a much stronger performance in the second half of the 2015 financial year, associated with increased sales of our higher margin infant formula and nutraceutical products, we expect the current market volatility to continue and have therefore revised our forecast to a range of $10.0 million to $15.0 million for the full year to 31 July 2015."

That forecast is below last year's $19.6 million annual net profit.

The company won't pay a first-half dividend.

Synlait had cash outflows from operating activities at $62.6 million in the first half, up from last year's $8.0 million, which it attributed to falling milk prices and payouts to dairy farmers.

The stock is rated an average of 'hold' based on the opinion of two analysts surveyed by Reuters, with a price target of $3.80.