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Synlait says while it is confident in its strategy 'to right-size its cost base', the uncertainty of 'broader macroeconomic factors' means the company is not providing result guidance for the coming year at this stage

Business / news
Synlait says while it is confident in its strategy 'to right-size its cost base', the uncertainty of 'broader macroeconomic factors' means the company is not providing result guidance for the coming year at this stage

Dairy company Synlait Milk [SML] has made a $4.3 million after-tax loss in the year ended July, which compares with a profit of $38.5 million last year.

The loss was at the bottom end of the company's earlier guidance to the market of a result from -$5 million to +$5 million.

The company is not at this stage offering any guidance as to what its result may be in the current financial year.

"Our financial results are challenging and not where we need them to be," Synlait Chair Simon Robertson said.

"But tactically, we are building the foundations for a stronger Synlait, playing to our strengths while continuing to diversify our products, markets, and customers. Our refreshed strategy leverages Synlait’s strengths in our world-class capabilities and experience in partnering to produce high-value Advanced Nutrition and Foodservice products.

"Over the coming 12 months, we will address our balance sheet (through the intended divestment of Dairyworks and Temuka cheese assets); right size our cost base to current activities and near-term growth opportunities; deliver and build on our current and prospective Advanced Nutrition and Foodservice customer opportunities; and lift our operational performance," he said.

Synlait said its final average base milk price is $8.22 per kgMS for the 2022-2023 season. (That was the same as Fonterra confirmed for its price last week.) In addition, an average of $0.27 per kgMS was paid for incentives, taking the total average milk payment to $8.49 per kgMS.
• The base milk price forecast for the 2023 / 2024 season remains unchanged at $7.00 per kgMS.

In its statement to NZX on Monday, Synlait confirmed that the financial year just gone was "highly challenging for Synlait" and it cited material reductions in customer demand, CO2 shortages, extreme weather events, the Covid-19 pandemic, inflationary impacts, ongoing investments in new product workstreams (i.e., UHT cream and Advanced Nutrition customer growth), and the launch and stabilisation of the company’s new enterprise resource planning (ERP) system.

"Looking ahead to the 2024 financial year, Synlait could still face challenging China market dynamics, softening global conditions more generally, and continued inflationary pressures across its cost base, which could impact future customer demand and the company’s overall profitability. Synlait does, however, expect Advanced Nutrition volumes to continue to grow at the Pokeno site in FY 24, and the company’s overall EBITDA performance [earnings before interest, tax, depreciation and amortisation] is also expected to improve in FY 24, compared to FY 23," the company said.

In the year just finished Synlait reported EBITDA of $90.7 million, down from $131.6 million the year before.

Synlait said the a2 Milk Company’s [ATM] purported cancellation of the exclusivity arrangements under the Nutritional Powders Manufacturing and Supply Agreement (NPMSA) for the a2 Platinum® and other nutritional products is not expected to impact Synlait’s FY 24 results. Synlait reiterated that it disputes that The a2 Milk Company has the right to cancel the exclusivity arrangements.

"While Synlait is confident in its strategy to right-size its cost base to current activities and its near-term Advanced Nutrition and Foodservice growth opportunities, the uncertainty of broader macroeconomic factors means the company will not provide guidance at this time," the company said.

"Synlait is committed to its refreshed strategy to create a more focused company and remains largely on track to meet its five-year (FY 28) strategic ambitions."

See the Synlait Milk profile here.

Synlait Milk

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If they survive their bonds paying about 17% could be a real buy. This not a recommendation just a thought.



I agree, 17% will have been calculated based on the probability of their failure, you can be sure there is an increased risk associated with such an investment, but a business with significant physical assets, unless they are mortgaged to the hilt, will probably survive 


Possibly- but way too reliant on the Chinese market for mine