SML - Synlait Milk Ltd

[silverblizzard888]

I think Abbott is also in the picture now that SML is compliant with the FDA and can supply the US. Potentially another shortage looming there and SML could play an important part for Abbott and even A2 in supplying the US market.

"U.S. Food and Drug Administration recently sent warning letters to ByHeart Inc., Reckitt/Mead Johnson Nutrition, and Perrigo Wisconsin that outline shortfalls in how all three handle potential contamination and gave the formula makers a short timeline to respond. Additionally, one of Reckitt’s plants also didn’t make sure that the equipment and utensils used are of “appropriate design and were installed to facilitate their intended function and their cleaning and maintenance.” "

"warning letters from the FDA to the formula manufacturers “indicate that another formula crisis should soon be underway. Just four companies — including Mead Johnson and Perrigo — comprise 90% of the U.S. baby formula market, meaning that if just one factory is forced to stop production due to safety concerns, it could send a massive shock to the U.S. formula supply, creating a repeat of last year’s baby formula shortage"
"
https://www.deseret.com/2023/9/28/23893790/baby-formula-shortage-coming-congress-legislation-fail-act-fda

[Lego_Man]

One of the best risk-adjusted fixed interest investments in the market has to be the SML 2024 bonds imo.

I have quietly picked up a parcel in recent times and believe that those who bought the bonds at 3.83% pa yield and sold out at up to 18% pa have not thought through the strategic nature of SML to Bright Foods and ATM.

Both would be very happy to take out the company completely at around current valuations (sp $1.43 vs NTA of $3.21) which could yet happen if SML makes a heavily discounted rights issue, underwritten by the principal shareholders.

Do the bondholders have any idea how long (& geopolitically difficult) it takes for a China company to build up a primary sector player like SML? Have a look at how long it took Singapore's Olam International to build up its multi-billion food empire?

There will be a time to play SML shares - the major risk now being the NZX re-indexing in December.

It's a rare opportunity where the bonds offer you equity like payoff on your thesis.

[Balance]

And dairy prices continue their recovery - augurs well for SML’s inventory/stock.

https://www.stuff.co.nz/business/farming/agribusiness/133055361/farmers-will-be-happy-with-the-latest-gain-in-global-dairy-prices

The price of whole milk powder, which has the most impact on farmgate milk prices, gained for a third straight global auction, welcome news for dairy farmers as the industry heads into peak milk season.

The average price for whole milk powder rose 4.8% to US$2931 (NZ$4870) a tonne at the Global Dairy Trade auction overnight. The overall index gained 4.4% with five of the seven products increasing in price.

[silverblizzard888]

Milk price is up on Fonterra's side, thats a good sign of recovering demand and SML should likely be seeing a similar situation.

"Fonterra Co-operative Group Ltd today raised the 2023/24 season forecast Farmgate Milk Price range to $6.50 - $8.00 per kgMS, with a new midpoint of $7.25 per kgMS, up 50 cents."

https://www.nzx.com/announcements/419593

[Sideshow Bob]

Synlait's take on it.....

https://www.nzx.com/announcements/420061

Synlait Milk Limited (Synlait) will enter into a confidential binding arbitration process with The a2 Milk Company to determine the validity of the notice of cancellation of the exclusivity arrangements under the Nutritional Powders Manufacturing and Supply Agreement (NPMSA) for the a2 Platinum® and other nutritional products.

Synlait disputes that The a2 Milk Company has the right to cancel the exclusivity arrangements. Representatives of the companies engaged in a period of good faith negotiations; however, the dispute remains unresolved.

Synlait reminds the market that:

• Any cancellation relates only to the exclusivity arrangements. The NPMSA remains in place but may be terminated by either party on three years’ notice.

• Synlait continues to hold the Chinese regulatory State Administration for Market Regulation (SAMR) licence which is attached to Synlait’s Dunsandel manufacturing facilities. The licence is for The a2 Milk Company’s Chinese labelled 至初® Infant Formula (stages one, two and three), the company expects to manufacture those products for The a2 Milk Company for products destined for the China market for the period of that licence (currently expiring September 2027).

[Balance]

The arbitration is binding - that's good.

Provides certainty one way or the other rather than a long dragged out lawyers' bonanza.

[billkiapi]

Abitration is long and expensive, make no mistake that it is aa bonanza for lawyers. ATM's position is entrenched here which would suggest they think they have enough to win an arbitration hearing. What will be interesting is if there is also any other court proceedings that orbit this issue.

[billkiapi]

Frankly, I'd be sweating if I was a director of Synlait

[winner69]

Frankly, I'd be sweating if I was a director of Synlait

Esp if Synlait stock/sales/delivery data is a bit wonky because of that new ERP system they been trying to grapple with for last couple of years

[percy]

23 October 2023
Resignation of Synlait Chair
The Synlait Milk Limited (Synlait) Board advises that Simon Robertson has resigned as Chair and
Independent Director of the company.
Synlait’s Nominations Sub-Committee will immediately commence a search for an Independent Director to
fill the vacancy. The Board expects the new Independent Director will be suitable to be appointed as
Chair.
Independent Director Paul McGilvary has been elected Acting Chair until the position is permanently filled.
Paul was elected with the full support of the Board.

[BlackPeter]

Public announcements on Labour Day and NZX does not seem to know about this ... where is this coming from?

[Baa_Baa]

Public announcements on Labour Day and NZX does not seem to know about this ... where is this coming from?

On the ASX

[Newman]

Is capital raising becoming the only option?

[billkiapi]

No surprises- with director liability I’m surprised more haven’t jumped off that ship yet. Something going on inside the company, and too many mates on the board if you ask me

[silverblizzard888]

Is capital raising becoming the only option?

They have till March to get Dairyworks sold or else capital raise is very much on the table.

[whatsup]

Water up hill with a rake, springs to mind !!

[percy]

Water up hill with a rake, springs to mind !!

What a wonderful quote.

[blackcap]

I'm surprised the share price, (and the bond yield) have held up so well on the open.

[silverblizzard888]

I'm surprised the share price, (and the bond yield) have held up so well on the open.

It just shows the stocks well and truly at rock bottom. Even the A2 situation only managed to bring it down temporarily before recovering to the current levels, so will take a bit more to bring it down than losing the Chair.

[aperitif]

Is a2 leveraging the exclusivity clause to purchase Dunsandel or an asset swap for MVM. Quite plausible given the majority of English label will be transferred over time. An open board seat now opens up a few doors.

Chopin would be a good candidate

https://thea2milkcompany.com/leadership-member/chopin-zhang

https://mataura.com/people/

[winner69]

Suppose Grant Watson will be ‘departing’ shortly

Shame that John Penno hangs in there …..his glory days are being quickly forgotten and he’s being tarnished with the same brush as others …..could be remembered as ‘the founder of that I’ll fated company that went broke’

[whatsup]

GEE not looking good after todays headsup, $1-20 watch out below !

[winner69]

GEE not looking good after todays headsup, $1-20 watch out below !

Site visit ..did analysts see some not so good stuff left on the white board ……or maybe just that factory looked a mess and not impressive

[billkiapi]

I read the presentation, it' seems to be saying that they're moving to adult nutrition (wahoo) with lots of pretty icons and story telling about how good they are. Nothing about the ATM dispute, nothing about the court case reported in the NBR, nothing about how they plan to pay the cliff of debt they have to pay soonish.

[Balance]

I read the presentation, it' seems to be saying that they're moving to adult nutrition (wahoo) with lots of pretty icons and story telling about how good they are. Nothing about the ATM dispute, nothing about the court case reported in the NBR, nothing about how they plan to pay the cliff of debt they have to pay soonish.

This is about a plant visit, not a trading or business update.

Wait for 1 December.

[billkiapi]

The presentation is all about strategy- may have been attached to a plant visit, but it's all about strategy and an update on Dunsandel shifts

[Balance]

The presentation is all about strategy- may have been attached to a plant visit, but it's all about strategy and an update on Dunsandel shifts

Agreed - how the plant fits with the strategy.

I am liking the way the sp is dropping however.

$1.00 soon?

[Leemsip]

There is an elephant in the room. Didnt mention it.
What did they expect with this preso?

[aperitif]

Hearing some positive news out of the Synlait camp this morning.

[Sideshow Bob]

Hearing some positive news out of the Synlait camp this morning.

No announcements??

Or have they found another bucket of pink paint out back??

[billkiapi]

Hearing some positive news out of the Synlait camp this morning.

One chair down, how many independents to go.... the presentation was just fluff, nothing of substance while they face legal action on a few fronts from what I hear- not in the least of which is A2

[Balance]

Hearing some positive news out of the Synlait camp this morning.

Due diligence by foreign sounding individuals of the two assets for sale?

One of my banking contacts asked me and I said I have heard nothing.

Times like this it would be nice (like when Fletcher Paper was sold to the Norwegian crowd) to hear from staff in the businesses for sale that they are talking to foreign sounding due diligence teams!

Gotto be mindful not to fall foul of insider trading rules these days though!

[Bikeguy]

Synlait have gone to fairly decent efforts to keep the Abbott contract under wraps but the production and product outflow for this customer has increased dramatically, the numbers are going surprise.

[ralph]

Synlait have gone to fairly decent efforts to keep the Abbott contract under wraps but the production and product outflow for this customer has increased dramatically, the numbers are going surprise.
Absolutely it's going to be a big contract ,& they did well attempting to keep it secret for so long

[billkiapi]

Reality Abbott won't replace A2 for a long time yet, if ever. Even at 5M units a year that is miles away from the A2 volumes

[Bikeguy]

It’s only my opinion however I don’t think Synlait need to replace A2, I feel that while A2 are going to do as they are told and provide MVM some volume ( and create production space so Synlait can utilise and service other customers like Abbott) they are going are nowhere, A2 are going to continue to play their part in this symbiotic relationship that the Chinese for all intents and purposes own. A2 provide a very palatable solution to a very uncomfortable reality, that the Chinese Government owns and controls substantial offshore foreign food production assets.

[billkiapi]

It's a long stretch imo- A2 clearly dropped SML in it twice this year- once over the 2nd or was it 3rd SML profit downgrade, and then again with withdrawing exclusivity. Plenty of blending and canning capacity in NZ, and I think A2 will end up leaving over some serious issue between them and SML- so serious that they are willing to tank the SML share price and the A2 investment with it. Time will tell I guess.

[aperitif]

https://www.nbr.co.nz/investment/penno-actions-regrettable-and-unacceptable-says-a2-letter/

[blackcap]

I took a nibble and purchased some SML010's at 17.3% the other day. What am I missing? Balance sheet looks sound enough. Surely a bad year will not eat away all the equity?

[aperitif]

Interesting to see CEO Watson at the a2 launch at the 2023 China International Import Expo this week. Hmmm

http://t.m.china.com.cn/convert/c_k3xW5AGv.html

[Leemsip]

Hey Black Cap. I’m not quite clever enough to calc the balance sheet, with potential sales of assets vs debt repayments etc. care to share any workings?

[BlackPeter]

I took a nibble and purchased some SML010's at 17.3% the other day. What am I missing? Balance sheet looks sound enough. Surely a bad year will not eat away all the equity?

Just one bad year? I am not even sure they could call themselves currently an ongoing concern ...

I guess their problem is that they have a lot of terribly performing equity (which makes you wonder, whether they can realize the value they put against it in the balance sheet). Market seems to wonder.

Anyway - banks want their money back - you might want to check, how long they recently extended their credit line, and so far it doesn't looks like it is easy to find a buyer for Talbot cheese and Dairyworks - both already for ages on the market. If they don't sell, things might get interesting soon (not just) for bond holders.

Big issue for Synlait is that they had only one pony earning them the keeps (A2 Platinum), and that one is now laming on two of its feet: Chinese market caving in and on top of that A2 Milk gave them notice on their exclusive production rights. Currently in mediation and could go any way.

Synlait made as well a lot of expensive investments during their high growth years which are now underutilised given thatq the growth is gone - and not returning their capital. Whether they can sell their two additional fabs in the North Island and, if yes, for the amount they paid for when they had been keen to expand - is anybodys best guess ... they clearly need to find a buyer happy to pay big dollars in a fire sell.

Obviously - they may or may not be lucky, but I can see why the market prices the bonds that low ...

Good luck.

[Rawz]

i buy the dairyworks orange cheese for our homemade beef burgers. Rawz family doing their bit to help this struggling company :cool:

[BlackPeter]

i buy the dairyworks orange cheese for our homemade beef burgers. Rawz family doing their bit to help this struggling company :cool:

Good on you. Would you consider to buy the company (dairyworks) itself? This certainly would help Synlait and you could always eat your own cheese :);

[blackcap]

i buy the dairyworks orange cheese for our homemade beef burgers. Rawz family doing their bit to help this struggling company :cool:

Thanks Rawz, I appreciate that.

BP, I understand what you are saying. The SP does seem to suggest they are a going concern. The auditors have not seen fit to challenge the asset side of the business.

If they go under, the plant and machinery should still be worth 40% of book value?

Not sure but I do understand the uncertainty.

Last 4 years:

NPAT $74m, -$29m, $38.5m, -$14.1m
Op cF $103m, $15m, $233m, $39m
Revenue: Steady
Current ratio: Above or near 1
Debt Equity: 1.46, 1.11, 1.11, 1.13

Does not look like a company about to go under.

[BlackPeter]

Thanks Rawz, I appreciate that.

BP, I understand what you are saying. The SP does seem to suggest they are a going concern. The auditors have not seen fit to challenge the asset side of the business.

If they go under, the plant and machinery should still be worth 40% of book value?

Not sure but I do understand the uncertainty.

Last 4 years:

NPAT $74m, -$29m, $38.5m, -$14.1m
Op cF $103m, $15m, $233m, $39m
Revenue: Steady
Current ratio: Above or near 1
Debt Equity: 1.46, 1.11, 1.11, 1.13

Does not look like a company about to go under.

Look - as I said, I wish you the best of luck, and I don't know either.

One of the things which would make me nervous with this company is that the (near) majority shareholders (Bright Dairy) might have quite different interests to retail shareholders. While I am pretty sure that they are interested in the facilities as part of the feed China strategy, nobody knows whether it is in their best interest to maintain the current company structure. It might be much cheaper for them to allow them to go bankrupt and buy the assets on the cheap from the liquidator.

Doubt they would have lots of competition - A2M has already their own factories (and as well Chinese shareholders) - and who else would want to buy a not particularly profitable milk production plant during an economic crisis?

So - I guess, while I am sure that the facilities will somehow survive, I am not quite sure whether the beneficiaries will be the current bond and shareholders.

Anyway - I might be just too neurotic ... but I suppose that's what impacts both bond and shareprices. If you just look at NTA (and beleive in it), than the SML share (not just the bonds) is currently a steal.

So - I guess this is exactly what it looks - high risk, high gain (if it works out) ... and I don't like these games if other players have more information that I do. Both Bright Dairy as well as A2M do - and I would not eat my hat that they are going to play fair.

[aperitif]

https://www.nbr.co.nz/investment/penno-actions-regrettable-and-unacceptable-says-a2-letter/

[Muse]

Summarised from the AFR.

Bids for Dairyworks due last week. Several AU private equity groups put in bids, however failed to meet the Company's expectations (advised by Jarden, same as Sky....). Sources say still likely to be acquired by a smaller trade player like Bega who "swerved" the auction. Then a bunch of stuff about balance sheet being a concern, and if sale delayed could a capital raise cant be ruled out.

* someone probably needs to remind Synlait they are the ultimate price taker, not price maker.

[Bikeguy]

Look - as I said, I wish you the best of luck, and I don't know either.

One of the things which would make me nervous with this company is that the (near) majority shareholders (Bright Dairy) might have quite different interests to retail shareholders. While I am pretty sure that they are interested in the facilities as part of the feed China strategy, nobody knows whether it is in their best interest to maintain the current company structure. It might be much cheaper for them to allow them to go bankrupt and buy the assets on the cheap from the liquidator.

Doubt they would have lots of competition - A2M has already their own factories (and as well Chinese shareholders) - and who else would want to buy a not particularly profitable milk production plant during an economic crisis?

So - I guess, while I am sure that the facilities will somehow survive, I am not quite sure whether the beneficiaries will be the current bond and shareholders.

Anyway - I might be just too neurotic ... but I suppose that's what impacts both bond and shareprices. If you just look at NTA (and beleive in it), than the SML share (not just the bonds) is currently a steal.

So - I guess this is exactly what it looks - high risk, high gain (if it works out) ... and I don't like these games if other players have more information that I do. Both Bright Dairy as well as A2M do - and I would not eat my hat that they are going to play fair.

I think you are accurate to be nervous regarding the strategic plans of Bright, and the fact it may not benefit all shareholders, I personally have taken the risk however share your sentiment.

[Marilyn Munroe]

There is an article on businessdesk.co.nz https://businessdesk.co.nz/article/primary-sector/is-a2-milk-eyeing-up-synlaits-dunsandel?utm_source=nzh&utm_medium=referral&utm_campaign=nzh-home (paywalled) commenting on a Forsyth Barr report speculating whether a2 Milk will make a bid for Synlait's Dunsandel plant.

The reports conclusion; if a2 wants to bring more infant formula in-house buying Dunsandel makes better sense than ramping up Mataura.

It tries to guess the value of Dunsandels China licenses. In my opinion this is a problematic exercise given the uncertain macro economic situation in China and the wobbly twiddling with economic levers such as licenses typical of command economies.

Forsyth Barr wonders if Bright Dairy will become a white night to protect its stake in Synlait. My take is this is unlikely as the ultimate owner of Bright, the Shanghai Municipality will be feeling the pinch.

It is Synlait's AGM today so more information may become available latter.

Boop boop de do
Marilyn

[Balance]

There is an article on businessdesk.co.nz https://businessdesk.co.nz/article/primary-sector/is-a2-milk-eyeing-up-synlaits-dunsandel?utm_source=nzh&utm_medium=referral&utm_campaign=nzh-home (paywalled) commenting on a Forsyth Barr report speculating whether a2 Milk will make a bid for Synlait's Dunsandel plant.

The reports conclusion; if a2 wants to bring more infant formula in-house buying Dunsandel makes better sense than ramping up Mataura.

It tries to guess the value of Dunsandels China licenses. In my opinion this is a problematic exercise given the uncertain macro economic situation in China and the wobbly twiddling with economic levers such as licenses typical of command economies.

Forsyth Barr wonders if Bright Dairy will become a white night to protect its stake in Synlait. My take is this is unlikely as the ultimate owner of Bright, the Shanghai Municipality will be feeling the pinch.

It is Synlait's AGM today so more information may become available latter.

Boop boop de do
Marilyn

SML's AGM is on Friday 1 Dec.

2 more days.

[JimmyTrade]

Grant Watson appeared extremely nervous addressing some of the investor questions.

Was expecting much more invasive questions…

Seems the synlait exclusivity agreement to a2m isn’t going to have an outcome for 12-18 months.

[silverblizzard888]

Share price dropping quick in the last few days to $1.12

Instos exiting before the end of the year or nervous investors selling out on worried thoughts?

[Balance]

Share price dropping quick in the last few days to $1.12

Instos exiting before the end of the year or nervous investors selling out on worried thoughts?

Getting kicked out of NZX50.

So will drop below $1.00 imo in current settings.

[Muse]

Share price dropping quick in the last few days to $1.12

Instos exiting before the end of the year or nervous investors selling out on worried thoughts?

Being booted out of the NZX50

[Marilyn Munroe]

A recent report(1) by the chardonnay quaffers and canape nibblers at MFAT predicts diary exports to China will increase by 25 percent over the next decade.

In my opinion the report does not give enough weight to the demographic and macro economic trends starting to emerge in China.

Predictions, especially about the future, are difficult. We will know in ten years who is right.

Boop boop de do
Marilyn

(1) https://www.mfat.govt.nz/assets/Trade-General/Trade-Market-reports/China-Agricultural-outlook-2023-2032-December-2023.pdf

[silverblizzard888]

Makes sense with the index rebalancing then. Lots of shares for sale from instos and not a lot of buyers. Also not a lot of certainty around the company's future.

[Rawz]

another company with close to 40% leverage (sitting at 38% by my calc) and SP is under huge pressure. If only they didnt have so much debt..

this is why i prefer companies with strong balance sheets. Every business goes through tough times.. you dont see such massive drawdowns when the balance sheet has strength to it.

However saying all that if they sell Dairyworks they should be okay. SP will rocket if they sell it for $170m-$200m

[silverblizzard888]

another company with close to 40% leverage (sitting at 38% by my calc) and SP is under huge pressure. If only they didnt have so much debt..

this is why i prefer companies with strong balance sheets. Every business goes through tough times.. you dont see such massive drawdowns when the balance sheet has strength to it.

However saying all that if they sell Dairyworks they should be okay. SP will rocket if they sell it for $170m-$200m


Pretty much, if they could pay down debt and pay less interest as a result, which amounts to over $29m last financial year they would produce a decent profit from that itself. Selling Dairyworks was meant to be the solution, but everyone interested in buy it is basically low balling them. Their aim was net proceeds of $130m from the sale, but even that looks like a tough ask given how long discussions are going for. The sale would very much see the company get back on stable ground and see the share price recover very quickly.

They have been aiming to capitalize on their inventory and hold more cash now, so far we don't know how well thats gone, but if they manage to put together enough cash from coverting excess inventory to cash and doing a small capital raise that would get them through. Easiest and preferred solution from the markets view point is selling dairyworks.

[Rawz]

Pretty much, if they could pay down debt and pay less interest as a result, which amounts to over $29m last financial year they would produce a decent profit from that itself. Selling Dairyworks was meant to be the solution, but everyone interested in buy it is basically low balling them. Their aim was net proceeds of $130m from the sale, but even that looks like a tough ask given how long discussions are going for. The sale would very much see the company get back on stable ground and see the share price recover very quickly.

They have been aiming to capitalize on their inventory and hold more cash now, so far we don't know how well thats gone, but if they manage to put together enough cash from coverting excess inventory to cash and doing a small capital raise that would get them through. Easiest and preferred solution from the markets view point is selling dairyworks.

Wow i see inventories are $250m wtf... revenue $1.32b. so they turn it over 5.2x?? less even since inventories is held at cost.
Isnt milk like a FMCG and thus inventory turnover should be much higher?

If they can carry much lower inventory that would definitely help.

If they can convert $30m inventory to cash and then sell Dairyworks for say worst case $150 (its on the balance sheet at $177m). the total debt would be about $300m or a much more reasonable 24% leverage

[silverblizzard888]

Wow i see inventories are $250m wtf... revenue $1.32b. so they turn it over 5.2x?? less even since inventories is held at cost.
Isnt milk like a FMCG and thus inventory turnover should be much higher?

If they can carry much lower inventory that would definitely help.

If they can convert $30m inventory to cash and then sell Dairyworks for say worst case $150 (its on the balance sheet at $177m). the total debt would be about $300m or a much more reasonable 24% leverage


They held extra inventory incase there was any delay in the SAMR and didn't want to affect A2's orders. Now that SAMR has been renewed they are all clear to hold minimal inventory.

If they can get top dollar for Dairkworks that would be great, but the value of $177m is made of $58m goodwill, $52m inventory, PPE $25m, $13.9m right of use of assets and some small items. All fragile items values in a firesale.

[Rawz]

When ERD was kicked out of the NZX50 we saw the SP go from $1+ to the 40cent range.

If no positive news coming out of SML, I.e. asset sale or new customer or inventory sell down etc then yes the SP could face constant pressure and go below $1 or even well below..?

[Baa_Baa]

When ERD was kicked out of the NZX50 we saw the SP go from $1+ to the 40cent range.

If no positive news coming out of SML, I.e. asset sale or new customer or inventory sell down etc then yes the SP could face constant pressure and go below $1 or even well below..?

I think you'll see the instos/fundies rebalancing well before the exclusion date, no point in holding out when they can salvage something before the SP bottoms. Relentless SP down pressure should be evident leading into the removal from NZX50. Good news won't make much difference to these big money who have to re-balance.

[Rawz]

Can’t get over the inventory level… no wonder the business is stuck on struggle street. I don’t know much about the inner workings of this company but you can tell something is terribly wrong. Big old dog stock unless someone can shed some light here for me.

look at 2CC, they hold about $10m in cars and sell about $80m a year….

SML need to shrink their inventory by $100m

[ratkin]

When ERD was kicked out of the NZX50 we saw the SP go from $1+ to the 40cent range.

If no positive news coming out of SML, I.e. asset sale or new customer or inventory sell down etc then yes the SP could face constant pressure and go below $1 or even well below..?

who is first on the list to replace them in the top 50?

[Rawz]

who is first on the list to replace them in the top 50?

Dream stock TRA of course <3

[xafalcon]

Can’t get over the inventory level… no wonder the business is stuck on struggle street. I don’t know much about the inner workings of this company but you can tell something is terribly wrong. Big old dog stock unless someone can shed some light here for me.

look at 2CC, they hold about $10m in cars and sell about $80m a year….

SML need to shrink their inventory by $100m

The NZ dairy industry is highly seasonal due to our farming methods. But customer offtake is generally flat across the year. So this leads to variable inventory levels for every dairy company in NZ

Peak production is Sep-Jan. There is virtually zero production May-Jul. The key inventory level metric in NZ dairy industry is inventory in August = seasonal minimum

Comparing to a used car import company inventory vs turnover is rediculous in the extreme

I have worked in NZ dairy industry management for 30 years. I have even contracted SML to produce IF base powder until ongoing quality issues made it untenable to continue

[Rawz]

The NZ dairy industry is highly seasonal due to our farming methods. But customer offtake is generally flat across the year. So this leads to variable inventory levels for every dairy company in NZ

Peak production is Sep-Jan. There is virtually zero production May-Jul. The key inventory level metric in NZ dairy industry is inventory in August = seasonal minimum

Comparing to a used car import company inventory vs turnover is rediculous in the extreme

I have worked in NZ dairy industry management for 30 years. I have even contracted SML to produce IF base powder until ongoing quality issues made it untenable to continue

Yes so the cows are dried off may-july. SML financials are to 31 July. I.e. they held $250m worth of inventory right at the bottom of the season. Shouldnt they be holding minimum levels? As the milk avalanche is about to hit them through to Nov before it starts tampering off again?

[Rawz]

haha okay just looked at last years half year accounts to 31 Jan, i.e. basically near the peak of milk collection and inventories are sitting at $467m wow

sorry to be posting as im learning.

It still feels like the inventories are way out of whack. Like at FY they should be holding $100m and at HY they should be holding $250m. Imagine freeing up all that into cash.
I dont get why they have to hold so much inventory

[Paint it Black]

A recent report(1) by the chardonnay quaffers and canape nibblers at MFAT predicts diary exports to China will increase by 25 percent over the next decade.

In my opinion the report does not give enough weight to the demographic and macro economic trends starting to emerge in China.

Predictions, especially about the future, are difficult. We will know in ten years who is right.

Boop boop de do
Marilyn

(1) https://www.mfat.govt.nz/assets/Trade-General/Trade-Market-reports/China-Agricultural-outlook-2023-2032-December-2023.pdf

Thanks for the link - accepting your skepticism it gives NZ pretty good exporting confidence into the future especially mutton and fruit.

[Rawz]

my last comment on this inventory issue/thing.

the last 10 years the avg revenue/inventory ratio has been 5.5x.
So last years revenue of $1,203k/5.5= $219m.

Last years inventory was $250m. So yes there is about $30m of inventory that can be converted to cash to help pay down the debt. Sell Dairyworks for $150m and then debt is down around $300m or 24% leverage.

Could be worth a punt under $1 per share

[silverblizzard888]

Based off Fonterra's report today its quite a good sign for SML.

1. Dairy demand is slowly recovering with milk price being raised to $7.50

2. Low milk price is contributing to stronger ingredient, food service and consumer margins with gross margin up from 15.5% to 21.4%. Fonterra's profit after tax for Q1 is up 85% from this time last year.

https://www.nzx.com/announcements/423064

[Rawz]

About to go under a $1...?

How low can she goooooo

[Balance]

Getting kicked out of NZX50.

So will drop below $1.00 imo in current settings.

Any day now - I will hear you call, below $1.00?

[Rawz]

Good call Balance. SP $0.99 incredible how far its fallen.

[Sideshow Bob]

Any day now - I will hear you call, below $1.00?

Trading at $0.99 now....... :sleep:

[Balance]

Getting kicked out of the index, no prospects of dividends PLUS potential capital raising with each passing day of no asset sale success.

Almost impossible to buy the stock until all the above are resolved.

[RTM]

Trading at $0.99 now....... :sleep:

Jeeze that's awful.
Tripled my money on these around 2019, pleased I sold them.
All that stainless must be worth more than a $1 ?
Not following now.

[Rawz]

When do the nzx50 funds have to be fully sold by?

[silverblizzard888]

When do the nzx50 funds have to be fully sold by?

"the S&P/NZX New Zealand Indices rebalance quarterly in March, June, September, and December, effective after market close of the third Friday of the rebalancing month."

Last day would be 15th December this week hence why the heavy selling to below $1. Current price 95 cents.

[Leemsip]

Wen deep value?

[Rawz]

Wen deep value?

If SML announce a sale of dairy works and reduction of inventory then we are deeeeeep value now

[Sideshow Bob]

Synlait are paying $1.20 at NZX TAB for the "Synlait Bond Cup", on the 17th of December 2024.....;)

[Toddy]

Synlait are paying $1.20 at NZX TAB for the "Synlait Bond Cup", on the 17th of December 2024.....;)

Do they offer the 'cash out' option if you change your mind.

[silverblizzard888]

Do they offer the 'cash out' option if you change your mind.

If you change your mind thats where you sell it back to the market and hope someone who wants it will buy it.

[Leemsip]

Must be a fair bit of turbulence inside the board room. Share price smashed to lows never dreamed of, real questions on solvency.

They should speak out and directly address these elephants in the room asap. What’s the plan you highly paid titans of industry?

[billkiapi]

This all appears to be self inflicted- they bought an argument with their biggest customer they cannot win and judging by NBR they tried to get a leg over A2 as well - wash the board out and they might have a chance.

[silverblizzard888]

Must be a fair bit of turbulence inside the board room. Share price smashed to lows never dreamed of, real questions on solvency.

They should speak out and directly address these elephants in the room asap. What’s the plan you highly paid titans of industry?

One thing I got from the AGM was Bright was in full support of them, so I don't think insolvency will come into question, but with the share price dropping so much any capital raise will be like giving the company away.

[Baa_Baa]

This all appears to be self inflicted- they bought an argument with their biggest customer they cannot win and judging by NBR they tried to get a leg over A2 as well - wash the board out and they might have a chance.

Well good luck with that, the board is stacked with the majority owners advocates. Personally, I don't think Bright Diary (39% ownership) gives a sh*t what the share price is, except whether they can make a move themselves for majority ownership at the lowest purchase price. Or maybe in cahoots with A2M, take over the company, as Commerce Commission might favour a NZ owner with Bright partnership, more than Bright owning outright. It makes sense given A2M's chairs' recent comments about owning the supply chain. If that's what Bright, and/or A2M want, then they're doing the best job of it by destroying the market cap. Think about it, it is a listed company, surely you'd want as low as possible market cap before moving to take it all over? It is in their vested interest to utterly destroy the market cap, if the ambition is to fully acquire it, or acquire in partnership. And they're in the best position to 'direct' how and when that market cap is destroyed, essentially removing any resistance. And, don't underestimate their patience, this could go a lot lower imo, as the dispute(s) will take at least a year or more to resolve.

[billkiapi]

Hundred percent right

[silverblizzard888]

Last rebalancing day tomorrow, will be interesting to see if share price bounces back over $1.20 or if this is the new price range.

[Rawz]

Last rebalancing day tomorrow, will be interesting to see if share price bounces back over $1.20 or if this is the new price range.

Why would it bounce when they are dropping out of the 50 index? Would have thought the opposite. Drop to below 90cent range

[silverblizzard888]

Why would it bounce when they are dropping out of the 50 index? Would have thought the opposite. Drop to below 90cent range

Buying strength has actually been decent except for the 'index rebalancing wave' that comes and washes it down a few cent throughout the day. If not for the instos theres decent buying going around. It could head below 90 cents if they get desperate to sell down the rest of their stock.

Dropping out of the index is usually a short term impact and we have seen the share price drop from over $1.20 to 95 cents so it has caused quite an impact in this timeframe. Long term is still about fundamentals.

[silverblizzard888]

Massive amount of buying and selling today with 6,439,704 shares changing hands. That must be the end of index rebalancing I suppose.

[Filthy]

https://www.nzx.com/announcements/423663

“Our B Corp™ recertification proves that Synlait meets the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”

Pretty good news! Easy to balance profit and purpose when your not making much of a profit though eh... /sigh

[Sideshow Bob]

https://www.nzx.com/announcements/423663

“Our B Corp™ recertification proves that Synlait meets the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.”

Pretty good news! Easy to balance profit and purpose when your not making much of a profit though eh... /sigh



Man, sure all shareholders are relieved about that.......phew!! :sleep:

[blackcap]

Man, sure all shareholders are relieved about that.......phew!! :sleep:

Yeah, I see that announcement as mildly negative. Not the right focus.

[Filthy]

Man, sure all shareholders are relieved about that.......phew!! :sleep:

& I finally beat you to posting an announcement sidebob!

[silverblizzard888]

No wonder Synlait is performing average lately they are only getting B's in their class.

[Filthy]

https://www.nzx.com/announcements/423987 - A2 really looking to screw them aren't they

[Filthy]

Language around asset sale has softened and starting to warm us up for a cap-raise that sounds like it will be supported by Bright

[winner69]

They conclude H124 profit to be down on last year

Jeez, last year Net NPAT was a miserly $4.8 million.

So essentially breakeven in first half …that’s not good

[sb9]

Looks like ATM are have put boot into their margins and screwed them hard on pricing.

[Rawz]

Language around asset sale has softened and starting to warm us up for a cap-raise that sounds like it will be supported by Bright

Agree.

Shesh this is completely un-investable lol
I mean why bother with the risk

[Leemsip]

Guess a cap raise means the bonds are safe? Currently paying 21% pa

Also not worth the risk I think

[Bikeguy]

Language around asset sale has softened and starting to warm us up for a cap-raise that sounds like it will be supported by Bright

Bright are so in control of this outcome, A2 are doing exactly what they are told and the end result is China are going to take full control of this company at the price they want

[william67]

They are on the same boat, Synlait could increase the price of products manufactured for the a2 Milk Company.

[Balance]

Bright are so in control of this outcome, A2 are doing exactly what they are told and the end result is China are going to take full control of this company at the price they want

Scene is set indeed.

[billkiapi]

I think A2M buys the debt actually- looks like those court cases were a look inside the fractious relationship between A2M and Synlait and that’s now showing in SP. When egos collide eh?

[Meh]

As time passes I am expecting a capital raise more and more. What are people’s thoughts as to whether the ATM will spit out cash to partake in the capital raise, or will they let their share holding absolutely be obliterated? May play very well for bright dairy if they partake and buy extra at bargain prices. If bright don’t partake I feel any capital raise will be a disaster. last capital raise in 2020 both bright and A2 pre committed. I wonder when in a dispute how nice of a response synlait will get to the capital raising question from a2.

[silverblizzard888]

They better decide early on if they want a capital raise or not because the share price keeps going lower. Their inability to make decisive action and get things done is making it worse on themselves. Depending on the size of the capital raise, but I think A2 would take part just to keep their golden goose laying the golden eggs they need to sell to China.

[carrom74]

They better decide early on if they want a capital raise or not because the share price keeps going lower. Their inability to make decisive action and get things done is making it worse on themselves. Depending on the size of the capital raise, but I think A2 would take part just to keep their golden goose laying the golden eggs they need to sell to China.

ATM under the previous CEO bought a 19-20% stake from Mitsubishi holdings at about $10 a share … at this current sp they are averaging them down by almost half. Golden goose apart- they have to get in just to average their investment cost down.

[silverblizzard888]

ATM under the previous CEO bought a 19-20% stake from Mitsubishi holdings at about $10 a share … at this current sp they are averaging them down by almost half. Golden goose apart- they have to get in just to average their investment cost down.

Yes it would be a good chance to average down. If SML raise $100m then they would be on the hook for about $20m, which isn't too much to them in the scheme of things and keeps their position strong in case they want to do a merger or takeover.

[carrom74]

Yes it would be a good chance to average down. If SML raise $100m then they would be on the hook for about $20m, which isn't too much to them in the scheme of things and keeps their position strong in case they want to do a merger or takeover.

I guess $20M is just the interest drawdown from the 900M stockpile of cash😝

[billkiapi]

It’d be much smarter for A2M to buy the debt and call it. Something is very wrong between Synlait and A2M and A2M CEO seems to be resolutely calling Synlait’s conduct into question. My picks that A2M buys the debt and calls it and bond holders can sue the directors if they want to because there’ll be nothing left by that stage

[whatsup]

if so what % interest rate is all of the debt paying ?

[Gerald]

if so what % interest rate is all of the debt paying ?

3.83% on the $180m of bonds maturing end of this year and for the $240m of bank debt doesn't seem to be disclosed because the refi was prior to the year end, but was at 7% prior, probably over 10 now. Someone can correct me if wrong.

[Balance]

It’d be much smarter for A2M to buy the debt and call it. Something is very wrong between Synlait and A2M and A2M CEO seems to be resolutely calling Synlait’s conduct into question. My picks that A2M buys the debt and calls it and bond holders can sue the directors if they want to because there’ll be nothing left by that stage

ATM pursuing the strategy of a cancer cell?

You are assuming that Bright Dairy (market cap $2.7 billion with minimum debt) is going to stand idly by - bearing in mind that the Chinese invest with a 100 year time horizon vs the quarter by quarter mindset of Western companies?

Having written that, the market has certainly delivered a golden opportunity for ATM & Bright Food to takeover SML at a knockdown price imo.

They just have to act judiciously within NZ's regulatory framework to achieve their aim.

In their shoes, I would allow market sentiment (from delays to asset sale & CR) to crunch the sp down to 60c before taking out SML at say, $1.00. Minorities will be only too pleased to be relieved of their shares by then.

Anyone said "Mooooo?"

[Marilyn Munroe]

You are assuming that Bright Dairy (market cap $2.7 billion with minimum debt) is going to stand idly by - bearing in mind that the Chinese invest with a 100 year time horizon vs the quarter by quarter mindset of Western companies?



You are assuming the Commissar of the Bean Counter Directorate of the Shanghai Municipality is going to pony up the foreign currency to a fighting fund rescuing some factory in the Antipodes which produces product that can be resourced from anywhere in the world if he has a chat with the milk powder licensing Commissar whose office is just down the corridor.

Boop boop de do
Marilyn

[Balance]

You are assuming the Commissar of the Bean Counter Directorate of the Shanghai Municipality is going to pony up the foreign currency to a fighting fund rescuing some factory in the Antipodes which produces product that can be resourced from anywhere in the world if he has a chat with the milk powder licensing Commissar whose office is just down the corridor.

Boop boop de do
Marilyn

I am indeed making that assumption but unlike you, I do not subscribe to your description of SML as 'some factory' etc.

Next you will be assuming that Bright Food US$2.5 billion acquisition of the 56% stake in the Israeli Dairy producer Tnuva was for a few factories and a few brand names!

Have you ever exported to China or dealt with a Chinese SOE?

[billkiapi]

According to the last reported balance sheet, Bright Dairy & FoodLtd had liabilities of CN¥9.98b due within 12 months, and liabilities of CN¥3.12b due beyond 12 months. Offsetting these obligations, it had cash of CN¥2.27b as well as receivables valued at CN¥2.07b due within 12 months. So its liabilities total CN¥8.75b more than the combination of its cash and short-term receivables. They have a strong market cap, and could raise cash- but why would they with Synlait buying an argument with its 50% of revenue customer and number 2 shareholder?

[Balance]

According to the last reported balance sheet, Bright Dairy & FoodLtd had liabilities of CN¥9.98b due within 12 months, and liabilities of CN¥3.12b due beyond 12 months. Offsetting these obligations, it had cash of CN¥2.27b as well as receivables valued at CN¥2.07b due within 12 months. So its liabilities total CN¥8.75b more than the combination of its cash and short-term receivables. They have a strong market cap, and could raise cash- but why would they with Synlait buying an argument with its 50% of revenue customer and number 2 shareholder?

Seriously, is that the level of your financial and operational analysis of a company?

You list all current liabilities but not all current assets as a measure of a company's liquidity?

Suggest you try harder!

https://www.investing.com/equities/bright-dairy-balance-sheet

As I have written, in Bright Foods' shoes, I would crunch SML's sp down to 60c (lower is better of course) before taking advantage of the negative sentiment out there against the company.

[billkiapi]

I guess we will see what will happen- A2M doubling down on their issues with Synlait and they don't appear to be cowed by Bright. It could be that A2M and Bright align to take control, but it'd be easier to buy the debt from the banks and call it. Bright could do that too if they wanted to. Reality is that shareholders are the victims here. No need to critique my financial analysis- I was not being exhaustive, just noting that I can't see why Bright would go to extra lengths to double down on Synlait

[Bikeguy]

As I have written, in Bright Foods' shoes, I would crunch SML's sp down to 60c (lower is better of course) before taking advantage of the negative sentiment out there against the company.[/QUOTE]

I feel you are right on the money with what Bright are in the process of doing…

People seem to be assuming that A2 has the upper hand in all this, and that they are going to teach Synlait a lesson…when the simple reality is is it just a business strategy being executed by the controlling player, Bright aka China.

They own the market the product is being sold into, they decide who has the ticket of entry through the license process and soon they will own other asset being some foreign stainless and raw product that feeds it,
A2 are not fools, why do you think their only other manufacturing facility also has Chinese involvement? Why do people think Nestle have come onboard with Synlait? They are asking for access.
No disrespect to A2 but their business would be decimated if they truly went to war with Bright, their license would not be renewed and some other lucky “customer” would be the new winner of the Willy wonker golden ticket,
A2 are not in some battle, they are doing exactly what is being asked of them and will prosper for it.

[Sideshow Bob]

Here the the one you've all been waiting for. Really!!

Synlait's Sustainability Report.

https://www.nzx.com/announcements/424497

It even has some pink!!

Nothing about financial sustainability but.........

[billkiapi]

ForBarr's assessment isn't encouraging.... and why would a deeply discounted rights issue create excitement when it just pays debt and not growth when A2M is arguing with Synlait

[Sideshow Bob]

ForBarr's assessment isn't encouraging.... and why would a deeply discounted rights issue create excitement when it just pays debt and not growth when A2M is arguing with Synlait

You'd also have to wonder what the tactics of the two shareholders will be.......with 57.8% between them, that would be the key. Maybe because their intentions or lack of, that's why nothing has happened yet?

Badly need to flog off some silverware. That Talbot Forest Cheese was a real winner!! (Sorry W69)

[billkiapi]

@Bikeguy and @Balance might be right - Bright and A2M might just buy the whole lot and shareholders be damned, and bondholders forever be damned. Why John Penno would buy that argument with A2M I just don't know.

[Bikeguy]

You'd also have to wonder what the tactics of the two shareholders will be.......with 57.8% between them, that would be the key. Maybe because their intentions or lack of, that's why nothing has happened yet?

Badly need to flog off some silverware. That Talbot Forest Cheese was a real winner!! (Sorry W69)

The strategy Bright and A2 are in the process of completing is going to be very profitable for them both.
Once the credit raise has been completed and they have both gained even greater % control of this company at a massive discount Bright and A2 will right the ship ( the “disputes” and uncertainty will magically stop, A2 will have substantially “invested” in its supply chain etc etc) and both will absolutely clean up as the share price “recovers “

[billkiapi]

I can't figure out how they clean up the bonds though, unless after a cap raise to pay down debt they have enough free cashflow to pay the bonds? Otherwise 150M as suggested by ForBarr seems to be light? I think you're right though, BD and A2M have a plan....

[Bikeguy]

I can't figure out how they clean up the bonds though, unless after a cap raise to pay down debt they have enough free cashflow to pay the bonds? Otherwise 150M as suggested by ForBarr seems to be light? I think you're right though, BD and A2M have a plan....

I agree with you, 150m is very light and with the job that’s been done scaring the bejesus out of the market to date I can’t see any reason why they would not continue with that approach…they will go hard with a large number of shares at a large discount, because quite simply they do not want us to participate…

[billkiapi]

While A2M streaks ahead on good data, Synlait flails around below 90c having bought an argument with A2M that it just can't win. The NBR infers that it is because oil some tech deal Penno was involved in which seemed to be intended to strong-arm A2M. If that is true, then A2M will not forgive him, or forget it and it would be the reason we have all been killed on sp.

[Sideshow Bob]

While A2M streaks ahead on good data, Synlait flails around below 90c having bought an argument with A2M that it just can't win. The NBR infers that it is because oil some tech deal Penno was involved in which seemed to be intended to strong-arm A2M. If that is true, then A2M will not forgive him, or forget it and it would be the reason we have all been killed on sp.

Just had a search for the article, and came across this!!

Synlait's John Penno explains the company's success
https://www.nbr.co.nz/synlaits-john-penno-explains-the-companys-success/

Oh whoops, its from 2014........;)

[Balance]

While A2M streaks ahead on good data, Synlait flails around below 90c having bought an argument with A2M that it just can't win. The NBR infers that it is because oil some tech deal Penno was involved in which seemed to be intended to strong-arm A2M. If that is true, then A2M will not forgive him, or forget it and it would be the reason we have all been killed on sp.

Highly dilutive equity raise on the way according to Craigs.

So :

Current market cap of $196m with sp at 90c (218.6m shares on issue).

Say $200m to be raised so it will have to be a 3 for 1 rights issue at 30c?

Bright Foods & ATM to jointly underwrite the CR?


https://businessdesk.co.nz/article/primary-sector/synlait-faces-the-choice-of-the-lesser-evil-in-dealing-with-debt-issues
paywalled

[billkiapi]

agree- hugely discounted rights issue only real way out- surely shareholders will go for a class action against directors asleep while the relationship with A2M was destroyed. I would take apart in that, no reason not to really? What kind of fool threatens biggest customer and second biggest shareholder.

[Filthy]

Highly dilutive equity raise on the way according to Craigs

real shame that they didn't raise some extra cash when the SP was $10 bucks eh. imagine the poor punters who got in then.

but don't worry, they've got fancy pink reports & B corp sustainability; just no focus on being financially sustainable.

440 staff getting paid over $100K.... forget tech, go work for these guys.

all those highly paid people and they still manage to fall out with their No1 customer.

so frustrating. & agree Balance, going to have raise low with most being forced to participate or diluted into oblivion.

better get a wriggle on, SP dropping like a brick now word is out.

[Bikeguy]

Highly dilutive equity raise on the way according to Craigs.

So :

Current market cap of $196m with sp at 90c (218.6m shares on issue).

Say $200m to be raised so it will have to be a 3 for 1 rights issue at 30c?

Bright Foods & ATM to jointly underwrite the CR?


https://businessdesk.co.nz/article/primary-sector/synlait-faces-the-choice-of-the-lesser-evil-in-dealing-with-debt-issues
paywalled


I feel you are very correct, and neither Synlait or A2M want us to participate in this CR.

[JimmyTrade]

Invested in this company back in 2018 when outlook was nothing but white gold, its been a significant loss and lesson learnt. Not wanting to cash bad monies with good but at the same time knowing the infrastructure Synlait has and its functionality its challenging not to be tempted...

[Rawz]

Invested in this company back in 2018 when outlook was nothing but white gold, its been a significant loss and lesson learnt. Not wanting to cash bad monies with good but at the same time knowing the infrastructure Synlait has and its functionality its challenging not to be tempted...

My theory in these situations is better to what until the downside risk is gone (i.e. cap raise is done and dusted and balance sheet fixed). Sure you may miss out on say 20% or 30% gain from the bottom of hell that the SP will likely drop down too but at least it will all be smooth sailing from your new entry. easy to sleep at night at that point

[winner69]

Best SELL signal ever for Synlait was back in 2018 when Directors and Management got a standing ovation at the ASM ….applauding the wonderful result and high share price

Times sure have changed

[Filthy]

should've actually done their CR in June just after the SAMR re-reg at ~$1.80 - would've given holders a much better deal than the ~$0.80 by the time they get the info out. could be due a speeding ticket soon as well. will be down ~8% today on "no news"; should really inform the market eh?

[xafalcon]

It is sad to watch a train wreck in action, but Synlait management have done it to themselves

I did IF business with synlait acting as a TPM. I attended every production run, and every time there was some new quality problem uncovered. At the time I had 25 years experience in IF manufacture, and offered unlimited free technical help to fix their plant and process

They refused help, the quality dropped below acceptable standard, and I took my $3.5M business elsewhere. That "we know best" attitude just doesn't cut it in the highly regulated iF business - if it doesn't meet specifications, it can't be sold, end of story

If they treated ATM as poorly, and I suspect they did (but ATM has no manufacturing experience so didn't realise the full extent), it is little wonder they are looking to shake things up

What I don't understand, is why the directors allowed this to happen. Were they fed misinformation, or are they just incompetent (or worse)

[billkiapi]

Always wondered what happened to the US brand- Munchkin? Was that you?

[whatsup]

It is sad to watch a train wreck in action, but Synlait management have done it to themselves

I did IF business with synlait acting as a TPM. I attended every production run, and every time there was some new quality problem uncovered. At the time I had 25 years experience in IF manufacture, and offered unlimited free technical help to fix their plant and process

They refused help, the quality dropped below acceptable standard, and I took my $3.5M business elsewhere. That "we know best" attitude just doesn't cut it in the highly regulated iF business - if it doesn't meet specifications, it can't be sold, end of story

If they treated ATM as poorly, and I suspect they did (but ATM has no manufacturing experience so didn't realise the full extent), it is little wonder they are looking to shake things up

What I don't understand, is why the directors allowed this to happen. Were they fed misinformation, or are they just incompetent (or worse)

WOW, That a pretty sad story ,,,, if true !!

[Goob]

I brought a bunch of the bonds late last week at a ~22% YTM. Thinking is pretty simple & reckon the chance of getting par on the bonds is high bc of Bright/A2.

In one way or another I think Bright may come to the rescue. They have owned Synlait for 14 years now; have 3/7 board seats; is said to be a 'strategic' owner, sharing supply chain and distribution expertise, and have five year supply agreements (with prescribed annual production volumes) for Bright's 'Pure Canterbury' infant formula product. I expect a China state-owned player would be far less likely to watch its first international investment go into a liquidation sale, and thought it was noteworthy the September refinance saw BNZ leave the syndicate, replaced by... mainly Chinese banks (Bank of China, China Construction Bank, HSBC, alongside Rabobank). Bright also has the balance sheet to keep Synlait alive if they want to (~0.7x debt/ebitda).


But A2 provides even more downside protection IMO; there's a big risk if A2 take a passive approach to a Synlait fire sale. They should be okay if a financial acquirer comes in (and SAMR registration for A2's China Label is transferred to the new owner). But if another IF company buys Synlait/Dunsandel and takes over the SAMR product slots, A2 won't have any near-term option to get China Label from (which is 35% of sales). That would be a disaster, likely a $150m+ EBIT hit.

Synlait are definitely in a lot of trouble but I just can't see these two players not making a move (plus my math on a liquidation sale suggests bondholders should still get par).

22% return (net of div taxes) feels like a good deal but maybe I'm missing something (or downright stupid)..

[Rawz]

I brought a bunch of the bonds late last week at a ~22% YTM. Thinking is pretty simple & reckon the chance of getting par on the bonds is high bc of Bright/A2.

In one way or another I think Bright may come to the rescue. They have owned Synlait for 14 years now; have 3/7 board seats; is said to be a 'strategic' owner, sharing supply chain and distribution expertise, and have five year supply agreements (with prescribed annual production volumes) for Bright's 'Pure Canterbury' infant formula product. I expect a China state-owned player would be far less likely to watch its first international investment go into a liquidation sale, and thought it was noteworthy the September refinance saw BNZ leave the syndicate, replaced by... mainly Chinese banks (Bank of China, China Construction Bank, HSBC, alongside Rabobank). Bright also has the balance sheet to keep Synlait alive if they want to (~0.7x debt/ebitda).


But A2 provides even more downside protection IMO; there's a big risk if A2 take a passive approach to a Synlait fire sale. They should be okay if a financial acquirer comes in (and SAMR registration for A2's China Label is transferred to the new owner). But if another IF company buys Synlait/Dunsandel and takes over the SAMR product slots, A2 won't have any near-term option to get China Label from (which is 35% of sales). That would be a disaster, likely a $150m+ EBIT hit.

Synlait are definitely in a lot of trouble but I just can't see these two players not making a move (plus my math on a liquidation sale suggests bondholders should still get par).

22% return (net of div taxes) feels like a good deal but maybe I'm missing something (or downright stupid)..

Care to share you math behind a liquidation sale with bond holders getting paid?

[billkiapi]

There are so many scenarios which see bondholders get zero. A2M/Bright buy the debt and call it; that'd be an asset sale with liquidation to follow. Bondholders get nothing; shareholders get to sue. Bondholders should take heart from the Manziel decision although that means litigation funders take a big chunk. The reason its 22% is risk.... They're priced as junk bonds.

[SailorRob]

Seriously, is that the level of your financial and operational analysis of a company?

You list all current liabilities but not all current assets as a measure of a company's liquidity?

Suggest you try harder!

https://www.investing.com/equities/bright-dairy-balance-sheet

As I have written, in Bright Foods' shoes, I would crunch SML's sp down to 60c (lower is better of course) before taking advantage of the negative sentiment out there against the company.


Should ask Teitei about what analysis he used to get the great prices he got on these bonds.

He's a financial genius.

[Goob]

Assuming a liquidation sale of assets, order of seniority (according to bonds preso) is:
1) Liabilities preferred by law: $56m (I took $14m employee entitlements and $42m tax liability)
2) Bank debt: of $243m (used $110m & $133m drawn on working capital and revolver facilities at FY23 respectively.
3) Other borrowings secured over assets: $27m which I've assumed is just the commodity and foreign exchange/interest rate derivative libs on the BS.
The sub bonds rank equally to other trade liabilities. ~$500m total ($180m bonds, $273m trade payables less employee entitlements and $47m lease liabilities).

All in looking for $826m recovery proceeds to get par on the subs.

Dairyworks is no trophy asset but has ~50% & ~25% of NZ consumer cheese & butter market. Far more stable demand base than Synlait's core and did ~$11m NPAT in FY23 (and management guided to growth in FY24). I think 7x that NPAT would be comfortably cheap enough to get PE funds interested ($77m proceeds).
I've estimated Synlait ex Dairyworks assets can do $74m of unlevered free cash flow looking forward (this is obviously the hard/sensitive bit). They are past a big capex cycle which helps (D&A will be $50m+ but capex guidance is maintenance only and < $30m p.a.). If we assume someone buys them for 6x FCF that's $444m proceeds.

I've then assumed you get ~$309m on recoveries of other assets. Tax assets $3m, derivative assets $26m, $9m cash, 100% of $83m trade receivables (may be too generous) and inventory at 75% recovery $188m.

These are back of the envelope from an inexperienced credit investor so take with a grain of salt (e.g. haven't included any liquidation costs), but this would get you to around break even on the $826m.

My proceed numbers equal 47% of Synlait’s $998m PPE and Dairywork’s $177m of assets. Dean's Foods a big dairy processor in the USA had a liquidation sale in 2020 where facilities were sold for 52% of the PPE carrying value (which was $820m USD) so broadly in line with this.

But to reiterate, I don't think it gets to this event anyway

[blackcap]

Assuming a liquidation sale of assets, order of seniority (according to bonds preso) is:
1) Liabilities preferred by law: $56m (I took $14m employee entitlements and $42m tax liability)
2) Bank debt: of $243m (used $110m & $133m drawn on working capital and revolver facilities at FY23 respectively.
3) Other borrowings secured over assets: $27m which I've assumed is just the commodity and foreign exchange/interest rate derivative libs on the BS.
The sub bonds rank equally to other trade liabilities. ~$500m total ($180m bonds, $273m trade payables less employee entitlements and $47m lease liabilities).

All in looking for $826m recovery proceeds to get par on the subs.

Dairyworks is no trophy asset but has ~50% & ~25% of NZ consumer cheese & butter market. Far more stable demand base than Synlait's core and did ~$11m NPAT in FY23 (and management guided to growth in FY24). I think 7x that NPAT would be comfortably cheap enough to get PE funds interested ($77m proceeds).
I've estimated Synlait ex Dairyworks assets can do $74m of unlevered free cash flow looking forward (this is obviously the hard/sensitive bit). They are past a big capex cycle which helps (D&A will be $50m+ but capex guidance is maintenance only and < $30m p.a.). If we assume someone buys them for 6x FCF that's $444m proceeds.

I've then assumed you get ~$309m on recoveries of other assets. Tax assets $3m, derivative assets $26m, $9m cash, 100% of $83m trade receivables (may be too generous) and inventory at 75% recovery $188m.

These are back of the envelope from an inexperienced credit investor so take with a grain of salt (e.g. haven't included any liquidation costs), but this would get you to around break even on the $826m.

My proceed numbers equal 47% of Synlait’s $998m PPE and Dairywork’s $177m of assets. Dean's Foods a big dairy processor in the USA had a liquidation sale in 2020 where facilities were sold for 52% of the PPE carrying value (which was $820m USD) so broadly in line with this.

But to reiterate, I don't think it gets to this event anyway

I think you are pretty close to the mark there. Bond holders will definitely get something if not 100% of face in the worst possible outcome.

A successful rights issue would be great news for debt holders.

[whatsup]

Q, Would bond holders support a C R if asked, we all know that is not the usual but would they support an other wise dying company ?

[Filthy]

ATM up ~15% last week on birth rate & amazon news; finally getting tailwinds back. all of those delayed weddings because of those massive covid lockdowns. lots of babies to come soon. And while the fortunes of both companies & balance sheets are very (very) different, the SP performance over the last 3.5 years has been pretty similar. Assuming 'the positive run' for ATM continues, an optimist might assume it'll drag SML outta the mud with it.... as an aside, this pretty graph also shows a 91% drop in the last 5 years - punters capital now worth one tenth what it used to be. At least there is the pink reports eh.

14917

[Snoopy]

Q
, Would bond holders support a C R if asked, we all know that is not the usual but would they support an other wise dying company ?


Bond holders are loan providers to the company. Their equity ownership of the company is zero. They get no say in the operations of the company at all. Why should they?

But if you are asking if bondholders should be allowed to apply for new capital in the company - should a share issue be forthcoming? I suggest that would be highly irregular. It would suggest that what were bonds would be repurposed as a convertible capital note with equity rights. I don't think that would be allowable, unless it was all in the original prospectus of the bonds.

SNOOPY

[Filthy]

should've actually done their CR in June just after the SAMR re-reg at ~$1.80 - would've given holders a much better deal than the ~$0.80 by the time they get the info out

must be due some news shortly.... or will they wait for the share price to halve again.

[Balance]

must be due some news shortly.... or will they wait for the share price to halve again.

In Bright Foods or ATM shoes, that's what I would do - let the sp halve again.

[Bikeguy]

In Bright Foods or ATM shoes, that's what I would do - let the sp halve again.

Balance is 100% right, this is playing out exactly as they have set it up

[Rawz]

How does the retail investor profit from this?

[Leemsip]

I guess you buy it at the right time and profit from the takeover? Falling knife right now.

[Marilyn Munroe]

How does the retail investor profit from this?

You could purchase their bonds (NZX:SML010) which are currently trading at a substantial discount to their face value in the hope they will be redeemed in full.

This advice is worth what you paid for it, do your own research etc etc.

Boop boop de do
Marilyn

[Rawz]

You could purchase their bonds (NZX:SML010) which are currently trading at a substantial discount to their face value in the hope they will be redeemed in full.

This advice is worth what you paid for it, do your own research etc etc.

Boop boop de do
Marilyn

Basically better to just sit back and watch this slow moving train wreck play out

[Balance]

If you really believe that the company is beyond salvation, short the stock. Problem with this is Bright Food and/or ATM taking advantage of the price and doing a takeover.

Otherwise, wait for a CR like what happened with SKT, AIR & NZK. There was excellent monies made participating in the CR.

[Balance]

If you really believe that the company is beyond salvation, short the stock. Problem with this is Bright Food and/or ATM taking advantage of the price and doing a takeover.

Otherwise, wait for a CR like what happened with SKT, AIR & NZK. There was excellent monies made participating in the CR.

And if you are shorting, you certainly do not want to see a potential headline like this :

"ATM to buy Dunsandel plant for $550m. All disputes between ATM and Synlait discontinued."

[Bikeguy]

Otherwise, wait for a CR like what happened with SKT, AIR & NZK. There was excellent monies made participating in the CR.

This is the approach I will be taking if a credit raise eventuates,

[Newman]

Bright Dairy might be able to arrange new bank loans to replace the ones that would have to be paid back in March.

[Leemsip]

A credit raise would be intriguing. I guess there are more concerns than just the huge pile of debt, but raising $300m @ 70c might get me investing.
Still got a load of good assets.

As you say Balance, this has worked out well for NZX investors before....

Presumably smart people behind the scenes are making this happen..

[xafalcon]

Not all CR have good outcomes. Rakon springs vividly to mind.

[Newman]

Orders at a price of 2% higher or lower than the last trade are not allowed to be placed.

[Sideshow Bob]

https://www.nzx.com/announcements/425914

Liu Ruibing (Ryan) has resigned as CFO of Bright Dairy Holding Limited (Bright Dairy) for personal reasons and he has subsequently stood down as a Bright Dairy appointed Director of Synlait Milk Limited (Synlait) given his employment has ceased with Bright Dairy.
Synlait and Bright Dairy thank Ryan for his contribution to Synlait.

Ryan’s resignation is effective immediately. Bright Dairy will provide an update on Ryan’s replacement in due course. The resignation does not impact Synlait’s daily operations.

Bright Dairy has a 39.0% shareholding in Synlait.

[aperitif]

Good stint - lol

https://www.nzx.com/announcements/413231

[Rawz]

Good stint - lol

https://www.nzx.com/announcements/413231

Bright bringing in some heavier hitters to ensure they take control of this dog after the final collapse?

[Lego_Man]

Another shocking update this morning. They're not even trying to sugar coat it now.

[Rawz]

Another shocking update this morning. They're not even trying to sugar coat it now.

Where’s the link?

[Sideshow Bob]

Where’s the link?

https://www.nzx.com/announcements/425973

Synlait Milk Limited (Synlait) currently expects its total Net Profit After Tax (NPAT) for the six-month period ended 31 January 2024 (HY24) to be a net loss in the range of ($17) million to ($21) million.

The range is based on Synlait’s initial consolidated result, which is subject to further review and may be subject to further adjustments as the company prepares its HY24 financial statements for release on Monday 25 March 2024. The HY24 result remains subject to review procedures by Synlait's auditor, and the range excludes any additional adjustments, including accruals, provisions, and impairments, which are still being assessed.

The previously announced guidance stated that Synlait expected its HY24 NPAT to be down on HY23, mainly due to increased financing costs and changes in margin. For reference, Synlait’s HY23 NPAT was $4.8 million.

The HY24 result has mainly been impacted by:

• Increased financing and operational costs.
• Ingredient margin reductions.
• Advanced Nutrition margin reductions.

In September 2023, Synlait stated its earnings before interest, taxes, depreciation, and amortisation (EBITDA) performance was expected to improve in FY24, compared to FY23. Synlait’s expectation is now that the FY24 EBITDA result is expected to be broadly flat or down on FY23.

The Board and Management are actively working on the need to deleverage Synlait’s balance sheet as a priority. Synlait will provide an update when it releases its HY24 result in March.

[whatsup]

Very sharp falling knife with this one now !

[Newman]

Another shocking update this morning. They're not even trying to sugar coat it now.

Capital raising seems less likely before the due date of Symlait paying banks back $130m. China is in its New Year holidays till the weekend, and I suspect Bright Dairy would appoint a new director quickly to Synlait and agree on the terms of capital raising as small shareholders expected.

What would happen if no capital raising is completed before March 30? Would the share price drop to 20 cents?

[whatsup]

SMLO10's 24% atm !!

[Balance]

SMLO10's 24% atm !!

Been 24% for the last week.

[Balance]

Capital raising seems less likely before the due date of Symlait paying banks back $130m. China is in its New Year holidays till the weekend, and I suspect Bright Dairy would appoint a new director quickly to Synlait and agree on the terms of capital raising as small shareholders expected.

What would happen if no capital raising is completed before March 30? Would the share price drop to 20 cents?

Sky TV & NZK show that CR's rights price can get down towards 10c rather than 20c.

That is on the cards if a CR takes place.

[bull....]

I dont see how a capital raising will save them now. they were to slow to do one.
even a 1 billion share issue at 20c would only raise 200 million. :scared:
hopefully an announvcemnt of sale of assets and a cap raise might buy them time for operating conditions to improve but time running out
receivership looking most likely is my guess. hope im wrong

[Rawz]

I listened this podcast yesterday while running errands in Auckland yesterday https://www.theinvestorspodcast.com/episodes/multi-bagger-first-principles-w-ian-cassel/

Ian Cassel is one of my favorite guests to listen to as he only invests in Mircocaps, which I prefer. You can type his name into Spotify and a bunch of interviews will pop up.

Anways, Ian and the host were discussing when to average down. And basically the answer was to never ever ever ever do it when a company reports bad numbers. Im not sure when SML troubles started but over the last 12 months i know its been bad news after bad. And looking at the chart SML is down 80% over the last 12 months (probably 80% for the 12 months before that too). They went on to talk further about when to avg down and the conclusion was basically only if the market is irrational with its pricing vs value but in a good fundamental news period. Summary.. never avg down only avg up.

[Newman]

NZ Herald: Synlait Milk keeps market guessing on Dairyworks after first half update
https://www.nzherald.co.nz/business/financing-costs-driving-synlait-milk-to-17m-21m-first-half-loss/VWHLDCQGLZDLVGDSN4TRQWJMDQ/
“So without any comment, the market will continue to speculate on the next steps and the market will naturally gravitate more towards an equity raising at a likely deep discount to the share price, or an alternative asset sale such as Dunsandel or Pōkeno.”

[billkiapi]

Call the class action lawyers- the board has stood by and allowed the destruction of the A2 relationship - they have let John Penno have some dispute with a tech company he part owned that supplied services to A2 and Synlait which got reported in NBR- they appear asleep at the wheel and couldt see this coming and cost shareholders hundreds of millions of dollars

[Filthy]

So they are required to make a prepayment of at least $130 million by no later than 31 March 2024 (~6 weeks away). However from the latest ann. "The Board and Management are actively working on the need to deleverage Synlait’s balance sheet as a priority. Synlait will provide an update when it releases its HY24 result in March". The result date looks set for 25 Mar. And with no intent on giving out any info before then, if its going to be a CR - this timeline wouldnt work? 5-days for a proper CR seems way to short? Unless its instos & bright only and retail just get diluted. So perhaps the asset sale is actually going to come through?

[Snoopy]

So they are required to make a prepayment of at least $130 million by no later than 31 March 2024 (~6 weeks away). However from the latest ann. "The Board and Management are actively working on the need to deleverage Synlait’s balance sheet as a priority. Synlait will provide an update when it releases its HY24 result in March". The result date looks set for 25 Mar. And with no intent on giving out any info before then, if its going to be a CR - this timeline wouldnt work? 5-days for a proper CR seems way to short? Unless its instos & bright only and retail just get diluted. So perhaps the asset sale is actually going to come through?


I don't think it would be legal to just announce that retail shareholders will be diluted. There is only one class of shares, so all shareholders have to be given equal opportunity to participate in whatever happens. What might happen is that Synlait work assiduously behind the scenes with major shareholders Bright and A2 to get a capital raising done by the March 25th reporting date. Synlait would then announce a further supplementary share issue to minority shareholders, fully underwritten by Bright and A2, on the same terms agreed to by Bright and A2 to be completed in April. That would give the banks certainty of the company's ability to make loan the repayment by 31st March. I am sure the banks would be happy to charge, ahem, 'suitable interest rates' on any short term borrowings that Synlait might make before the public tranche of the capital raising comes through, to allow the debt to be fully repaid by 31st March.

SNOOPY

[whatsup]

I don't think it would be legal to just announce that retail shareholders will be diluted. There is only one class of shares, so all shareholders have to be given equal opportunity to participate in whatever happens. What might happen is that Synlait work assiduously behind the scenes with major shareholders Bright and A2 to get a capital raising done by the March 25th reporting date. Synlait would then announce a further supplementary share issue to minority shareholders, fully underwritten by Bright and A2, on the same terms agreed to by Bright and A2 to be completed in April. That would give the banks certainty of the company's ability to make loan the repayment by 31st March. I am sure the banks would be happy to charge, ahem, 'suitable interest rates' on any short term borrowings that Synlait might make before the public tranche of the capital raising comes through, to allow the debt to be fully repaid by 31st March.

SNOOPY

Snoops, IMO pretty shonky arrangement , Q why would ATM do this, IMO they have written of their " investment "

[Rawz]

Snoops, IMO pretty shonky arrangement , Q why would ATM do this, IMO they have written of their " investment "
SML hold the Chinese Licence to export milk there?

[Bikeguy]

SML hold the Chinese Licence to export milk there?

Yes, I agree…without the licence A2 doesn’t have a business in their biggest market. I don’t like it but that is the reality.
A2 are going to be putting in a fair bit of that cash they have accumulated, ( and Bright have told them this for some time which is why they haven’t used it in dividends etc) because without that stainless and without that license they are out of business.
This has been a very strategic plan executed very well by Bright and the cards will be turned over next month.

[whatsup]

Yes, I agree…without the licence A2 doesn’t have a business in their biggest market. I don’t like it but that is the reality.
A2 are going to be putting in a fair bit of that cash they have accumulated, ( and Bright have told them this for some time which is why they haven’t used it in dividends etc) because without that stainless and without that license they are out of business.
This has been a very strategic plan executed very well by Bright and the cards will be turned over next month.

Olli shi! !!

[winner69]

Snoops, IMO pretty shonky arrangement , Q why would ATM do this, IMO they have written of their " investment "

In their heads probably yes

In the Accounts at June valued at $72m and no $31m so a further writedown to come

Spent $282m in this strategic investment ….now $31m

[Filthy]

Spent $282m in this strategic investment ….now $31m

another $282M and they could probably take the lot!

[Filthy]

I don't think it would be legal to just announce that retail shareholders will be diluted. There is only one class of shares, so all shareholders have to be given equal opportunity to participate in whatever happens. What might happen is that Synlait work assiduously behind the scenes with major shareholders Bright and A2 to get a capital raising done by the March 25th reporting date. Synlait would then announce a further supplementary share issue to minority shareholders, fully underwritten by Bright and A2, on the same terms agreed to by Bright and A2 to be completed in April. That would give the banks certainty of the company's ability to make loan the repayment by 31st March. I am sure the banks would be happy to charge, ahem, 'suitable interest rates' on any short term borrowings that Synlait might make before the public tranche of the capital raising comes through, to allow the debt to be fully repaid by 31st March.

SNOOPY

yes, that seems logical - thanks Snoops!

[Newman]

Sml010 @32.5%

[Lego_Man]

Sml010 @32.5%

Something's afoot. The bank trading desk that was providing price quotes on SML010 is no longer making a market either.

[billkiapi]

I suspect A2 will let them go under and pick what they want from the wreckage

[Balance]

I suspect A2 will let them go under and pick what they want from the wreckage

Really?

And the Chinese are going to allow ATM to do that - pick what they want from the wreckage?

Big call.

[Bikeguy]

I suspect A2 will let them go under and pick what they want from the wreckage

Just a thought, if this scenario where to play out what happens to A2M if SML go under and they don’t secure the assets? The SAMR registration is with SML so effectively A2M are without both production and access to their biggest market if SML go down?

[Marilyn Munroe]

Really?

And the Chinese are going to allow ATM to do that - pick what they want from the wreckage?

Big call.

Not necessarily. Things in China are a bit sticky at the moment. There is rising unemployment and massive destruction of value in the property sector.

The Chinese Communist Party must be worried a disaffected population may challenge their lock on social mobilisation.

Something to placate the proletariat would be a good idea. How about the Party drops all this certification rigmarole and allows infant formula imports go open circuit.

I would not discount Bright Dairy walking away. The recent purge at Bright suggests harsh realities are being acknowledged. To participate in a capital raise Bright would have to come up with a substantial quantity of New Zealand Pesos. It will take real money not just an entry on a spreadsheet like it would in China. Besides the losses from walking away would be a small footnote in the accounts of the Shanghai Municipality compared to their property losses.

Roman Empowers worked out their survival depended on the provision of bread and circuses to the masses. President Xi will be aware tyrants who ignore this lesson can end up Ceaușescued. Propping up a failing dairy company in the Antipodes or keeping the proletariat feed and happy, which will he choose?


Boop boop de do
Marilyn

[Newman]

[QUOTE=Marilyn Munroe;1040674]Not necessarily. Things in China are a bit sticky at the moment. There is rising unemployment and massive destruction of value in the property sector.

I would not discount Bright Dairy walking away. The recent purge at Bright suggests harsh realities are being acknowledged. To participate in a capital raise Bright would have to come up with a substantial quantity of New Zealand Pesos. It will take real money not just an entry on a spreadsheet like it would in China. Besides the losses from walking away would be a small footnote in the accounts of the Shanghai Municipality compared to their property losses.]

Good points.

Bright Dairy has been in poor financial performance for 3 consecutive years. It would not be easy for it to inject an extra $100m into Synlait. However, it would be possible for it to arrange loans to Synlait from Chinese banks in NZ, charging a very high-interest rate. If Synlait survives, Bright Dairy avoids a loss from its investment in Synlait (thus Bright's executives avoid punishment at home); if Synlait fails in 1-2 years' time, Bright delays the loss. The banks could recover loans. It would be small shareholders and milk suppliers who suffer.

[Filthy]

although the last few announcements did indicate that they had Bright support - 'steadfast' was I think one word used..... no real mention of A2 support though.....

[Balance]

From ATM's thread :


From FB

An acquisition will likely be value accretive for ATM shareholders


In this report we have conducted detailed analysis of a potential acquisition of SML Dunsandel, we have also explored (1) Bright Dairy, and (2) other assets ATM could look to acquire in NZ. We have structured the report into four core sections.


Dunsandel is an attractive asset: The key attraction is its GACC and SAMR licenses, we think asset value is likely NZ$500-700m.
Scenario analysis: Our base case is a ~+10% benefit to IF gross margins, broadly unchanged EBIT margins and ~+40% EPS uplift.
Bright Dairy background: Bright Dairy's gearing is low and it continues to have strategic goals to own international assets.
Dunsandel isn't the only option: Throughout the NZ IF market, ATM could diversify its supply chain in alternative ways.

Key value drivers remain robust under an acquisiton




EPS: FY25 central scenario EPS of NZ31cps (bull case of NZ38cps and bear case of NZ23cps). This compares to our FY25 EPS of NZ24cps (consensus; NZ26cps). Only under our bear case scenario over the medium term do we not expect EPS accretion.
Returns: We expect an acquisition to be return on equity accretive but return on capital dilutive. Even under our bull case scenario, medium/long-term return on capital is broadly consistent with our current forecasts. Under our bear case scenario, returns on capital remain above WACC. Our base scenario forecasts medium-term returns on capital and equity of ~16%.
Cash balance: Our FY24E net cash forecast is ~NZ$865m (ex acquisition), which represents ~30% of ATM's market capitalisation. Our base case scenario results in FY25 cash of ~NZ$415m (~13% of market capitalisation), bear and bull are ~NZ$300m (~10%) and ~NZ$530m (~17%) respectively. Thereafter, by FY27 we forecast cash balances of ~NZ$620m, ~NZ$850m, and ~NZ$1,080m under all three scenarios. This compares to our current base case of ~NZ$1,330m.

What could SML Dunsandel be worth?


We determine Dunsandel's property, plant, and equipment asset value is likely worth NZ$500m to NZ$700m. Share market and transactional evidence suggests that if a prospective buyer was looking to acquire the asset ~1x book value may be a best case scenario. Given the attraction of SML Dunsandel, should the asset be for sale we assume it would be a competitive process which should provide asset valuation support.

What we know with a high degree of certainty


Using mixed disclosure to decipher Dunsandel's asset value is a challenging task. We have assessed SML'sdisclosure since listing (including its IPO prospectus) to try to estimate today's Dunsandel asset value. What we know is:


SML has spent >NZ$700m in capital expenditure on its Dunsandel assets since FY08 (we also note PPE value at FY08 was ~NZ$80m). We note that within each financial year there is often material ‘other’ capex which generally includes: (1) intangibles, and (2) routine operational/maintenance capex, both of which we haven't included in the >NZ$700m.
Property, plant, and equipment asset value at FY17 was ~NZ$470m (prior to the impact of large Auckland acquisitions). We assume this includes ~NZ$12m related to the NZ Dairy Company purchase in 2017 (where SML was due to spend an additional ~NZ$30m capex for blending and canning capabilities).
Disclosed Dunsandel capex since FY17 is ~NZ$275m (excluding maintenance/other capex).
Total disclosed Auckland capex has been ~NZ$425m, but within ‘other’ capex it is likely higher.

~NZ$90m for Abbott (new customer) additions
​​​​​​​~NZ$28m for Pokeno land
~NZ$260m for original Pokeno build
~NZ$50m for NZ Dairy Company/Blending & Canning


Insourcing could be a ~+10% benefit to ATM's IF gross margins


We have undertaken detailed analysis attempting to assess what the benefit to ATM's IF gross margins may be if it was to takeover Dunsandel and insource production. Our base case is that we assess it could be a ~+10% benefit to ATM's IF gross margins. This excludes the impact of ATM likely having to inherit Ingredients production (NZ milk curve and depressed ATM volumes won't allow IF production for ATM all year round). We discuss the impact of Ingredients production further through the report.

[Newman]

Forsyth Barr mentioned this possibility months ago. https://businessdesk.co.nz/article/primary-sector/is-a2-milk-eyeing-up-synlaits-dunsandel.

But nothing happened.

[Balance]

Forsyth Barr mentioned this possibility months ago. https://businessdesk.co.nz/article/primary-sector/is-a2-milk-eyeing-up-synlaits-dunsandel.

But nothing happened.

Guess all will be revealed comes mid March.

Point is that SML has options rather than no option.

I will not be a shareholder in the interim though!

[Rawz]

Guess all will be revealed comes mid March.

Point is that SML has options rather than no option.

I will not be a shareholder in the interim though!
Do you still hold the bonds?

[Balance]

Do you still hold the bonds?

Yup - I do. And relaxed about it.

Directors will be well aware of the Mainzeal case if SML is still trading as an insolvent entity.

[blackcap]

Do you still hold the bonds?

Bonds are interesting the way they are priced. It might be at 35% but because of the short datedness, as someone pointed out to me yesterday, you still get 80 cents in the dollar for them currently. Rather be a bond holder at the moment than a stockholder.

[Newman]

NBR: No contact from Synlait on capital raise, says A2 Milk CEO
https://www.nbr.co.nz/investment/no-contact-from-synlait-on-capital-raise-says-a2-milk-ceo/

[billkiapi]

Lord knows what they are cooking up- but it better be good given the current market info is 130M due soon, 180M due on bonds in December. Manziel suggests they need to take a sober view of 12 months liquidity....

[Marilyn Munroe]

"Keith Woodford says Synlait is in big trouble with losses mounting up and no easy answers."

https://www.interest.co.nz/rural-news/126460/keith-woodford-says-synlait-big-trouble-losses-mounting-and-no-easy-answers

Boop boop de do
Marilyn

[whatsup]

"Keith Woodford says Synlait is in big trouble with losses mounting up and no easy answers."

https://www.interest.co.nz/rural-news/126460/keith-woodford-says-synlait-big-trouble-losses-mounting-and-no-easy-answers

Boop boop de do
Marilyn

Says it all , what a dilemma

[Newman]

No worry. Bright Dairy and A2 milk would find a solution. Some persons at Synlait have to leave in exchange for the safety of their assets. The sooner the better for all.

[Newman]

Bright Dairy invested $200m in total on Synlait. It A2milk would need to make Bright Dairy happy ($200m+ for its 39% shareholding?) to buyout Synlait. If so, A2milk would need at least $400m for the 80% of Synlait shares that it does not own. On top of that are a $130m loan payable immediately and $180m bonds. Altogether, A2milk needs to pay more than $700m.

[Balance]

"Keith Woodford says Synlait is in big trouble with losses mounting up and no easy answers."

https://www.interest.co.nz/rural-news/126460/keith-woodford-says-synlait-big-trouble-losses-mounting-and-no-easy-answers

Boop boop de do
Marilyn

Good article exploring the options being considered (and negotiated behind the scene).

ATM : "Without Synlait, which holds the licence for manufacture of Chinese-labelled ‘a2 Platinum’, a2Milk is in big trouble. It would mean a2Milk would need to obtain an equivalent licence for its majority-owned Mataura Milk in Southland. Obtaining that licence could be a long process, and there is also a long herd-conversion process before Mataura will have the necessary volume of A2 milk."

Bright : "Bright cannot increase its shareholding unless it offers to purchase all shares. Would it be willing to buyout the company itself, or alternatively sell its shares in a buyout? Bright’s public response until now has been that it is happy with its current shareholding and intends to stay as a long-term shareholder. That could change either way. If Bright really wanted to, it could find funds to purchase 100 percent of Synlait. However, there is a big fly in the ointment, with that being a2Milk."

The only thing close to a certainty is that something big now has to happen. The Synlait of the future is going to be very different to the current Synlait.

[billkiapi]

Having said that, didn't I read that ATM working with Yashili now for EL product. Yashili is a big player with SAMR.

[Balance]

Having said that, didn't I read that ATM working with Yashili now for EL product. Yashili is a big player with SAMR.

Another Chinese owned company.

[whatsup]

Bright Dairy invested $200m in total on Synlait. It A2milk would need to make Bright Dairy happy ($200m+ for its 39% shareholding?) to buyout Synlait. If so, A2milk would need at least $400m for the 80% of Synlait shares that it does not own. On top of that are a $130m loan payable immediately and $180m bonds. Altogether, A2milk needs to pay more than $700m.

So B Dairy,s share owe them $2.30 = without knowing if they are invested in the notes !, q is how much of a hit will they be willing to take to get out of this mess .50 ?

[Balance]

So B Dairy,s share owe them $2.30 = without knowing if they are invested in the notes !, q is how much of a hit will they be willing to take to get out of this mess .50 ?

From Bright's perspective, this could be the best opportunity for them to get SML on the cheap.

But for ATM, there would already be a takeover at $1.00 imo.

The Chinese have already showed that they are prepared to buy and indeed, pay up for assets in the food sector which serves the strategic purpose of securing food supply for China.

[Bikeguy]

I just don’t see Bright getting off the bus, we are talking about the Chinese govt and their food security strategy…the money required in this situation is simply not material to them, the sums are too small …one way or another, either with their banks or what ever arrangement they decide to use these debts will be serviced and they will continue to own both SML and with the SAMR the channel partner that distributes it back to them.

[aperitif]

Bond offer TCs, note change of control

https://www.synlait.com/wp-content/uploads/2019/12/Synlait-Final-Terms-Sheet_6-Dec-2019.pdf

[Goob]

That's the extra juice under a near-term A2 / Bright takeover. Get par before December!

[Sideshow Bob]

Business Desk Today (paywalled)



Synlait's bankers will 'extend and pretend' (https://businessdesk.us20.list-manage.com/track/click?u=786ac0b2dc4f2240875208882&id=5590b6640e&e=3b6f9185d3)


Debt-laden Synlait’s banks will be happy to extend and pretend to keep loan books looking healthy, a fund manager says.
The New Zealand stock exchange (NZX)-listed milk company has a $130 million debt repayment due at the end of March and $180m of bonds falling due in December.

Read on » (https://businessdesk.us20.list-manage.com/track/click?u=786ac0b2dc4f2240875208882&id=1a5bcd2576&e=3b6f9185d3)




Saying thoughts are that banks would be willing to relax covenants rather than distressed loans on their books, and also more oversight.

FB reckons they need $150m to allay concerns.

[Goob]

Does anyone have a good idea of what all of A2's options are for sourcing SAMR approved IF with the A2 protein? Before the ATM earnings call I was under the impression Synlait was their only viable option but seems that's not the case (text below from earnings call).

Q: Okay. That's good. And then just like maybe a submission for (indiscernible]. I guess, just coming back to the supply chain estimation but I guess, you're forming these new close associations plus usually in any other Indian multichip stuff -- look, I'm thinking on the China label side, do they have like brand slots or the SAMR approached that you could potentially further that relationship with? Is that part of something? Or would that run against, I guess, recent guidance from the SAMR themselves that you need to have ownership directly when you licenses in the future?

David Bortolussi Executive
Yes. Adrian, that's not currently our plan. New milk registrations in the facility, which separately utilized and Yashili have 2 registrations, but in the (indiscernible] registration, which are utilized as well. So there is one baking in the pot, if you like it initially, but I think they've probably got other plans for that. So that's not our intention at the moment.
It's a commercial relationship focused on the table.

Q: Okay. Can you just talk more broadly about some of the recent direction from SAMR in terms of what it means for new SAMR licenses in terms of what your interpretation is of while we look at it publicly in condo will a third-party manufacturing in a relationship is a bit tough, but what's the view on that?

Well, domestically, within China OEM or ODM relationships are not possible in the infant category.
There have been variations of that internationally. But the important thing for the brand owner and the manufacturing facilities to demonstrate close association. And I mentioned earlier that, that's not specifically defined. It's more an assessment by SAMR on the facts and circumstances as you go through license approvals or renewals.
And we've seen cases where that close association is typically demonstrated through a degree of equity ownership in part or all of the facility, and we've seen various forms of that internationally as well as locally.
So it's not a hard-and-fast rule, and it's a careful assessment of what's appropriate in the circumstances and working in a cooperative way with some to achieve your objectives. So we are definitely reviewing. As I've said in the past, we are reviewing M&A and JV options likely within in New Zealand and elsewhere. It's too early for us. I mean, there's lots of things that we're looking at.
And hopefully, we'll make meaningful progress on that this year and be able to announce something, but it's one of those things when you - in terms of those types of investments, you can't say anything until something is completely done. So we're still progressing things.



So ATM are actively reviewing options in NZ and internationally, with a requirement that the brand owner and manufacturer has to show a 'close association', which can be a small ownership stake.

- Based on the above Yashili NZ (Chinese-owned) have a spare SAMR product slot presumably at their Pokeno plant which is right next to Synlait's site. However, not sure how viable this is from a capacity perspective for A2. A2 would also need an equity stake in Yashili. Are there any other SAMR approved manufacturer in NZ ex Synlait?
- The other, presumably less desirable, options is going overseas. I don't know much about the whole A2 protein but is there anywhere else in the world where it's produced at scale with SAMR approval? The CEO's comments suggest there is but does anyone have knowledge of this?

[Newman]

[QUOTE=Sideshow Bob;1041477]Business Desk Today (paywalled)

[Synlait's bankers will extend and pretend]

That's sensible. Chinese banks had stepped in last year. Their relationships with Synlait would be long-term.

A2milk cannot be successful in buying out Synlait at $1/share.

[Newman]

[Based on the above Yashili NZ (Chinese-owned) have a spare SAMR product slot presumably at their Pokeno plant which is right next to Synlait's site. However, not sure how viable this is from a capacity perspective for A2. A2 would also need an equity stake in Yashili. Are there any other SAMR approved manufacturer in NZ ex Synlait? ]

Yashili probably does not need A2m at all to sell A2 IF to China.

[Balance]

[Based on the above Yashili NZ (Chinese-owned) have a spare SAMR product slot presumably at their Pokeno plant which is right next to Synlait's site. However, not sure how viable this is from a capacity perspective for A2. A2 would also need an equity stake in Yashili. Are there any other SAMR approved manufacturer in NZ ex Synlait? ]

Yashili probably does not need A2m at all to sell A2 IF to China.

As if the China government/authorities is/are going to allow a foreign company like ATM to undermine one of their state owned entities! In this case, Bright & SML!

[Bikeguy]

As if the China government/authorities is/are going to allow a foreign company like ATM to undermine one of their state owned entities! In this case, Bright & SML!

Very well said…

[billkiapi]

Yashili seem to have a lot of capacity, and probably would kill for a customer to take that capacity. Yashili have the same Chinese owner as Bellamys Organic who also seem to be having their own issues over there but I do not know what that would mean for A2M

[aperitif]

Chopin will have deep knowledge of Yashili supply chain also.

https://www.nzx.com/announcements/402090

Crazy to think of the multiple they(Mengniu) paid for Bellamy’s in 2019.

https://img3.gelonghui.com/pdf/20574-7b0c2423-a261-4adc-90ef-d1b60745d739.pdf

[aperitif]

From FB

“Bodco (Hamilton): While this is just a blending and canning facility (it is these operations that hold a SAMR license), we find it interesting given its previous strong ties to MVM, and was previously supplied by MVM (we understand this isn't the case now). The founding shareholders of Bodco are also the founding shareholders of MVM and China Animal Husbandry group, a Chinese state-owned commercial enterprise that invested in Bodco in 2016 and is ATM's current partner at MVM. Bodco had a 5.6% initial share in MVM. ​​​​​​​Bodco was a loss making entity and had net debt in excess of PPE (& working capital) value at its last available accounts in 2021. It appears as if Bodco already at least has its Pharmalac brand holding one of the three CL brand slots. As of December 2021 PPE value was NZ$12.6m, total asset value of NZ$30m, and NTA ~-NZ$10m. A reasonable scenario in our view is ATM acquiring Bodco's Hamilton based blending and canning facility for potentially NZ$50m–$60m and insourcing production at MVM. While currently regulatory settings allow this, we do note that this may not be the most viable option long term, with potential regulatory settings changes whereby processing and blending & canning facilities are required to be integrated (this currently isn't the case). We understand that acquiring a ‘brand transfer’ from one site to another isn't easy, and there are significant risks associated with it. We note speed to CL access, along with ability to gain it, is also an important consideration for ATM”

[Goob]

Very well spotted on Chopin there aperitif. Thanks

[Newman]

NZ Herald quoted David Bortolussi (CEO of A2 Milk) saying:

”From a shareholder point of view, the capital structure of Synlait is a concern for the company and its shareholders.”

”We would prefer it if they addressed that through the current plan – the exit of Dairyworks – and hopefully through the continued support of the banking syndicate"

Synlait is looking at alternative options.

[Goob]

List of SAMR registered manufacturers in NZ: https://www.mpi.govt.nz/dmsdocument/21146/direct

[Sideshow Bob]

https://www.nzx.com/announcements/426787

Tao Zhang, the Deputy Finance Director of Bright Dairy & Food Co., Ltd (Bright Dairy), has been elected as one of the Bright Dairy Appointed Director’s on the Synlait Milk Limited (Synlait) Board.

Tao replaces Liu Ruibing (Ryan), who resigned as CFO of Bright Dairy Holding Limited (Bright Dairy) for personal reasons, and subsequently stood down as a Bright Dairy appointed Director of Synlait Milk Limited earlier this month.

Tao’s appointment is effectively immediately.

Bright Dairy has a 39.0% shareholding in Synlait.

About Tao
Tao Zhang is a Chinese Certified Public Accountant and an Australian Certified Public Accountant. Before joining Bright Dairy, Tao has held various leadership finance roles at several companies, including the Manager of Shanghai Donghua Accounting Firm, the General Manager of Financial Department of Pengxin International Mining, the Financial Director of Shanghai Pengpo New Energy Development, and the Financial Director of InterChina Water Treatment.

[Sideshow Bob]

Keith Woodford in Farmers Weekly

https://www.farmersweekly.co.nz/opinion/where-does-synlaits-future-lie/

[Filthy]

440 staff getting paid over $100K.... forget tech, go work for these guys.

all those highly paid people and they still manage to fall out with their No1 customer.

https://www.nzx.com/announcements/426970

well its a good start. hopefully the restructure(s) will go a bit deeper though eh

[Balance]

Keith Woodford in Farmers Weekly

https://www.farmersweekly.co.nz/opinion/where-does-synlaits-future-lie/

Several key points to note :

"If Bright really wanted to, it could find funds to purchase 100% of Synlait. However, there is a big fly in the ointment – a2Milk. a2Milk is the second biggest Synlait shareholder with a 19.9% shareholding, theoretically headquartered in NZ but with all senior executives based in Australia, China and the United States. Most of the share trading occurs in Australia despite it being a NZ company. Like Bright, a2Milk can only increase its percentage of shares by offering to buy all shares."

"Without Synlait, which holds the licence for manufacture of Chinese-labelled “a2 Platinum”, a2Milk is in big trouble. It would mean a2Milk would need to obtain an equivalent licence for its majority-owned Mataura Milk in Southland. Obtaining that licence could be a long process, and there is also a long herd-conversion process before Mataura will have the necessary volume of A2 milk."

[Newman]

https://www.nzx.com/announcements/426970

well its a good start. hopefully the restructure(s) will go a bit deeper though eh

Restructuring and pay cuts would be prerequisites for bank loans or capital raising.

[whatsup]

Several key points to note :

"If Bright really wanted to, it could find funds to purchase 100% of Synlait. However, there is a big fly in the ointment – a2Milk. a2Milk is the second biggest Synlait shareholder with a 19.9% shareholding, theoretically headquartered in NZ but with all senior executives based in Australia, China and the United States. Most of the share trading occurs in Australia despite it being a NZ company. Like Bright, a2Milk can only increase its percentage of shares by offering to buy all shares."

"Without Synlait, which holds the licence for manufacture of Chinese-labelled “a2 Platinum”, a2Milk is in big trouble. It would mean a2Milk would need to obtain an equivalent licence for its majority-owned Mataura Milk in Southland. Obtaining that licence could be a long process, and there is also a long herd-conversion process before Mataura will have the necessary volume of A2 milk."

So whats stopping Bright Dairy buying the lot, Synlait, ATM et al there by guaranteeing the BNZ and underwriting the C Nts, with that the new enterty will have a fantastic future in its home country.

[Newman]

So whats stopping Bright Dairy buying the lot, Synlait, ATM et al there bye guaranteeing the BNZ and underwriting the C Nts, with that the new enterty will have a fantastic future in its home country.

Bright Dairy itself is under pressure because of poor financial performance in China. It might be unable to inject $100m for capital raising, let alone buy out Synlait. Even if it can find $100m, it would want to give Synlait management a warning that their jobs are at risk if they cannot improve performance.

[Bikeguy]

I have had some involvement working in China, one of my experiences with Bright (purchasing CSR Sugar) has given me an understanding of how they operate…it’s only my thoughts however I feel these sums are truly very insignificant to them…they will not lose either face or $$ when this washes through. Remember we are talking about a country that just had a business fall over to the tune of 300 billion, and where do you see the effect? They have so much financial power that they deadened even something as big as that…Synlait is a very small piece of a very large machine and they will not dismantle that machine , their strategy which has been built to provide food security to their nation, now and for the future.

[Balance]

Bright Dairy itself is under pressure because of poor financial performance in China. It might be unable to inject $100m for capital raising, let alone buy out Synlait. Even if it can find $100m, it would want to give Synlait management a warning that their jobs are at risk if they cannot improve performance.

Not sure where you get your information about Bright Dairy from but their latest financials (CNY) for ye Dec 2023 showed :

Sales 29.81B vs 28.22B in 2022
Net Profit 671M vs 360.7M in 2022
No debt
Market Cap 12.6B

NZ$1 = CNY 4.4

Reason why Bright Dairy cannot move to buy out SML per the article is that it needs ATM to agree. And ATM could buy SML but it needs Bright Food to agree!

[Newman]

[QUOTE=Balance;1042732]Not sure where you get your information about Bright Dairy from but their latest financials (CNY) for ye Dec 2023 showed :]

Late Last year, the Shanghai Municipal Government gave ca $100m to Bright Dairy for the exchange of 4 ha of land. Its CFO "quit" weeks ago.

[Balance]

I have had some involvement working in China, one of my experiences with Bright (purchasing CSR Sugar) has given me an understanding of how they operate…it’s only my thoughts however I feel these sums are truly very insignificant to them…they will not lose either face or $$ when this washes through. Remember we are talking about a country that just had a business fall over to the tune of 300 billion, and where do you see the effect? They have so much financial power that they deadened even something as big as that…Synlait is a very small piece of a very large machine and they will not dismantle that machine , their strategy which has been built to provide food security to their nation, now and for the future.

Point very well made, Bikeguy.

That's why they paid up and bought into quite a number of NZ food companies.

[Balance]

Late Last year, the Shanghai Municipal Government gave ca $100m to Bright Dairy for the exchange of 4 ha of land. Its CFO "quit" weeks ago.

Link to the infor?

Do the financials tell you that Bright Dairy are under pressure and suffering poor financial performance?

Here's the link of the financials FYI :

https://www.marketscreener.com/quote/stock/BRIGHT-DAIRY-FOOD-CO-LTD-6496293/finances/#AL

[Newman]

Link to the infor?

Do the financials tell you that Bright Dairy are under pressure and suffering poor financial performance?

Here's the link of the financials FYI :

https://www.marketscreener.com/quote/stock/BRIGHT-DAIRY-FOOD-CO-LTD-6496293/finances/#AL

In late March 2023, Bright Dairy reported its 2022 net profit of ￥3610M, down 39%.

Further, Bright Dairy would need Chinese governmental approval to transfer money overseas (e.g., participating in capital raising), which is becoming harder.

[Balance]

Late Last year, the Shanghai Municipal Government gave ca $100m to Bright Dairy for the exchange of 4 ha of land. Its CFO "quit" weeks ago.

Nothing to do with 'give' - in fact, Bright Dairy sold the land in Pudong Shanghai.

[Balance]

In late March 2023, Bright Dairy reported its 2022 net profit of ￥3610M, down 39%.

Further, Bright Dairy would need Chinese governmental approval to transfer money overseas (e.g., participating in capital raising), which is becoming harder.

All transfers of money out of China need Chinese government approval - all. And yes, while the China government has gotten much tougher with granting approval, the government has also at the same time allowed companies to invest overseas as long as the investments are beneficial and not simply to transfer funds out of China into speculative or into overseas foreign currency holding accounts.

You are referring to F2022 results which are 1 year old and out of date. Try looking at the latest results.

Meanwhile, Bright Food credit rating has been affirmed at 'A-', same as AIA to put it in perspective.

https://www.fitchratings.com/research/corporate-finance/fitch-affirms-bright-food-rating-at-a-outlook-stable-04-01-2024

Fitch Ratings has affirmed China-based food conglomerate Bright Food (Group) Co., Ltd.'s (BFG) Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'A-' with a Stable Outlook. The agency has also affirmed the Long-Term Foreign-Currency IDR of BFG's offshore subsidiary, Bright Food International Limited (BFI), at 'BBB+' with a Stable Outlook.

[Sideshow Bob]

https://www.nzx.com/announcements/427161

George Adams has been appointed as an Independent Director of Synlait Milk Limited.

George’s appointment to the Board is effective 21 March 2024. George will formally stand for election by Synlait shareholders at the company’s Annual Meeting in December 2024.

The Board has assessed George to be an Independent Director. George’s appointment means Synlait returns to having three Independent Directors as required under its constitution.

Synlait has two standing Committees appointed by the Board. George will be a member of the Audit and Risk Committee and the People, Environment and Governance Committee. Bright Dairy Appointed Director Edward Yang will also return as a member of the People, Environment and Governance Committee.

George Adams’ biography

George has outstanding commercial and governance experience with over 30 years of international business experience in the fast-moving consumer goods and telecommunications industries and an occupational health and safety background.

Before focussing on governance, George held a range of executive leadership positions. Notably he was, Managing Director of Coca-Cola Amatil New Zealand and Finance Director of British Telecom, Northern Ireland. George's previous governance highlights include being Chair of Bell Tea & Coffee, Chair of the New Zealand Grocery Council and Occupational Health and Safety Board and a Director of Hellers Group and Tegel Foods.

Today, George is Chair of NZX-listed Bremworth Limited, Director of NZX-listed Arborgen, and Chair of the Business Leaders Health & Safety Forum.

[Balance]

https://www.nzx.com/announcements/427161

George Adams has been appointed as an Independent Director of Synlait Milk Limited.

George’s appointment to the Board is effective 21 March 2024. George will formally stand for election by Synlait shareholders at the company’s Annual Meeting in December 2024.

The Board has assessed George to be an Independent Director. George’s appointment means Synlait returns to having three Independent Directors as required under its constitution.

Synlait has two standing Committees appointed by the Board. George will be a member of the Audit and Risk Committee and the People, Environment and Governance Committee. Bright Dairy Appointed Director Edward Yang will also return as a member of the People, Environment and Governance Committee.

George Adams’ biography

George has outstanding commercial and governance experience with over 30 years of international business experience in the fast-moving consumer goods and telecommunications industries and an occupational health and safety background.

Before focussing on governance, George held a range of executive leadership positions. Notably he was, Managing Director of Coca-Cola Amatil New Zealand and Finance Director of British Telecom, Northern Ireland. George's previous governance highlights include being Chair of Bell Tea & Coffee, Chair of the New Zealand Grocery Council and Occupational Health and Safety Board and a Director of Hellers Group and Tegel Foods.

Today, George is Chair of NZX-listed Bremworth Limited, Director of NZX-listed Arborgen, and Chair of the Business Leaders Health & Safety Forum.

Holy Crxp - Bremworth & Arborgen!

Not exactly confidence boosting for suffering shareholders!

[Filthy]

Holy Crxp - Bremworth & Arborgen!

MD of CCA not too bad I guess. but agree Balance, holy Crxp lol

[blackcap]

Holy Crxp - Bremworth & Arborgen!

Not exactly confidence boosting for suffering shareholders!

Yeah when I saw George Adams I thought CRAP.