SML - Synlait Milk Ltd

[Goob]

Period Ending

Dec-31-2018
Mar-31-2019
Jun-30-2019
Sep-30-2019
Dec-31-2019
Mar-31-2020
Jun-30-2020
Sep-30-2020
Dec-31-2020
Mar-31-2021
Jun-30-2021
Sep-30-2021
Dec-31-2021
Mar-31-2022
Jun-30-2022
Sep-30-2022
Dec-31-2022
Mar-31-2023
Jun-30-2023
Sep-30-2023


Total Revenues

20985.6
21270.2
21332.5
22291.8
22563.2
22245.1
23626.4
24169.7
25266.1
27121.1
27376.5
28579.1
29206
29463.2
29352.4
28534.2
28214.9
28039.6
27943.5
27494.1


Revenues
20875
21159.6
21199
22181.2
22400.5
22082.4
23442.6
24007
25019.6
26874.6
27043.9
28332.6
28800
29057.1
28986.2
28128.2
27841.3
27666
27632.8
27120.5


Finance Div. Revenues
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-


Insurance Division Revenues
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-


Other Revenues / Total
110.6
110.6
133.4
110.6
162.7
162.7
183.8
162.7
246.5
246.5
332.5
246.5
406
406
366.3
406
373.6
373.6
310.6
373.6


Total Revenues / CAGR 1Y
-0.0471
-0.0254
-0.0234
0.0443
0.0752
0.0458
0.1075
0.0842
0.1198
0.2192
0.1587
0.1824
0.1559
0.0864
0.0722
-0.0016
-0.0339
-0.0483
-0.0480
-0.0365





Gross Profit


Cost Of Revenues
14037.2
14336.8
14357
15156.5
15553.3
15284.9
16444.8
17129.6
19725
22047.3
22900.8
24534.4
23938.2
24002.6
24065.3
23383.9
23072.7
22919.4
22678.7
22428.9


Gross Profit

6948.3
6933.3
6975.4
7135.3
7009.9
6960.2
7181.6
7040.1
5541
5073.8
4475.7
4044.7
5267.8
5460.6
5287.2
5150.3
5142.2
5120.2
5264.8
5065.2


Gross Profit / CAGR 1Y
-0.0511
-0.0381
-0.0216
0.0237
0.0089
0.0039
0.0296
-0.0133
-0.2095
-0.2710
-0.3768
-0.4255
-0.0493
0.0762
0.1813
0.2734
-0.0238
-0.0623
-0.0042
-0.0165





Operating Income & Expenses


Selling General & Admin Expenses (Summary Subtotal)
5727.3
5662.7
5685.7
5800.5
5524.9
5697.1
5823.5
5764.4
4177.7
3731.5
3464.7
2960.1
4404.2
4498.5
4184.9
4157.9
4387
4291.9
4435.1
4438.3


R&D Expenses
58.5
61.7
59.7
62.1
68.1
73.5
79
88.7
72.8
73.8
77.2
73.8
89.3
84.4
78.2
79.5
84.7
88
91.4
85.6


Depreciation & Amortization - (IS)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-


Other Operating Expenses
94.6
98.2
70.8
63.5
86.9
20.1
48
48.4
86.4
143.4
137.2
153.3
103.6
98
109.2
88.6
92.7
95.3
116.9
117.6


Operating Income

1067.9
1110.7
1159.3
1209.2
1330
1169.5
1231.1
1138.7
1204.1
1125
796.6
857.5
670.7
779.6
914.8
824.3
577.8
645
621.3
423.7





Net Interest Expense


Net Interest Expenses
-176.7
-179.7
-128.1
-124.3
-82.8
-91.3
-89.2
-92.7
-63.1
-56.4
-57.6
-52.5
-78.4
-88.1
-108.2
-124
-120.6
-137.6
-150.1
-168.8


Interest Expense / Total
-227.1
-230
-185.2
-174.7
-147.9
-156.5
-132.2
-157.8
-103.7
-97
-103.5
-93.1
-109.9
-119.6
-145
-155.5
-159.9
-176.9
-182.9
-208.1


Interest And Investment Income
50.3
50.3
57.1
50.3
65.2
65.2
43
65.2
40.6
40.6
45.9
40.6
31.6
31.6
36.7
31.6
39.3
39.3
32.8
39.3





Earnings Before Taxes (EBT)


Income (Loss) On Equity Affiliates
-0.4
-2.1
-1.9
0
-
0.8
-5.1
-7.2
-
-1.1
3.8
1.2
-
0
-5.1
-4.1
-
1
7.6
10.1


Other Non Operating Income (Expenses)
-24.5
-51
-93.5
-67.2
-46.1
-10.4
-24.7
3.9
-40.6
-28.8
2.5
36.4
-43.7
-52.4
-20.8
-135.7
67
65
23.6
122.1


EBT / Excl. Unusual Items

861.1
872.7
932.8
1012.4
1189.7
1057.2
1099.3
1031.2
1091
1029.3
738
833.2
541.9
632.5
771.3
553.8
513.8
562.9
495.9
376.5


Restructuring Charges
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-


Impairment of Goodwill
-1.4
-1.4
-1.4
-1.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-


Gain (Loss) On Sale Of Assets
-79.7
-79.2
-51.7
-68.4
-31.4
-32
-20.8
-43.5
-2.7
3.3
18.2
10.9
66.5
63
38.3
69.3
-6
-27
-25.1
-89.4


Gain (Loss) On Sale Of Investments
-
0.8
4.2
3.7
-
-0.1
-0.1
-0.1
-
-
-
-
-4.6
-4.8
-4.7
-2.4
-21.2
-21.1
-21.4
-23.7


Other Unusual Items / Total
12.4
18.7
-7.2
-6.9
-84.5
-74.5
-64.9
-27.5
68.9
42
68.9
1.3
96.1
117.9
96.1
171.3
11.4
54.3
79.4
121


EBT / Incl. Unusual Items
792.3
811.5
876.7
939.3
1073.8
950.5
1013.5
960.2
1157.2
1074.6
825.1
845.3
699.9
808.6
901
791.9
497.9
569.1
528.7
384.4





Earnings from Operations | Net Income


Income Tax Expense
265.7
273.8
299.3
326.2
391.3
346.6
350.3
293.3
371.8
353.3
311.3
308.2
133
141.2
179.2
177.1
106.7
125.6
93.3
79.7


Earnings From Continuing Operations
526.6
537.8
577.4
613.1
682.5
603.9
663.2
666.8
785.4
721.3
513.8
537.1
566.9
667.3
721.8
614.9
391.2
443.6
435.5
304.7


Minority Interest (Income Statement)
-184.8
-190.6
-208.2
-226.4
-184
-169.6
-218.4
-180.5
-177.6
-90.7
41.3
83.9
25.4
-9.1
-109
-98.1
-30.5
-61.2
-18.3
9.2


Net Income - (IS)
341.8
347.2
369.2
386.7
498.4
434.4
444.8
486.3
607.8
630.6
555.1
621
592.3
658.2
612.8
516.7
360.7
382.3
417.2
313.9


Preferred Dividend and Other Adjustments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-


Net Income to Common Incl Extra Items
341.8
347.2
369.2
386.7
498.4
434.4
444.8
486.3
607.8
630.6
555.1
621
592.3
658.2
612.8
516.7
360.7
382.3
417.2
313.9


Net Income to Common Excl. Extra Items
341.8
347.2
369.2
386.7
498.4
434.4
444.8
486.3
607.8
630.6
555.1
621
592.3
658.2
612.8
516.7
360.7
382.3
417.2
313.9





Sorry for the large data dump, but here are Bright Dairy financials; each quarter is on a rolling 12 month basis so you can see the (downward) trend.

[Marilyn Munroe]

An unfortunate event for a New Zealand infant formula manufacturer;

https://www.rnz.co.nz/news/country/510587/shock-as-maui-milk-tells-suppliers-to-stop-milking

Boop boop de do
Marilyn

[whatsup]

An unfortunate event for a New Zealand infant formula manufacturer;

https://www.rnz.co.nz/news/country/510587/shock-as-maui-milk-tells-suppliers-to-stop-milking

Boop boop de do
Marilyn
!!
Really sad for a fledging industry which N Z inc needs .

[Sideshow Bob]

!!
Really sad for a fledging industry which N Z inc needs .

Relying on the daigou channel - absolute madness!!

Although to be fair, that bought A2 a bit of success back in the day…..

[billkiapi]

Nestlé announcement got my hopes up, but no- Nestlé didn't put money in when the ship is burning to the waterline Don't worry about the 130 million needed in days, let's make a fluff announcement

[Filthy]

Don't worry about the 130 million needed in days, let's make a fluff announcement

yep more fluff... as per! we aren't going to find out anything until results day anyway - 2nd April ...after its all happened - only thing is, there might be another horse in the savior race now "potential new commercial opportunities to work together with Nestle" - so maybe there is hope yet. although hope is not a strategy.

[Filthy]

there might be another horse in the savior race now

[not that its even a race eh]

[Bikeguy]

It’s quite interesting that they haven’t gone to market for a capital raise?
Getting to late to bring one now?

[JimmyTrade]

Patiently awaiting HY24 report and deleveraging update.. If Synlait do manage to resolve financing issues without the sale of Dairyworks I wonder if they will take it off the market after all the reason for purchasing was to add some diversity to the business and its a profitable business (2023 NPAT 10M).

Is the only other alternatives being the company being acquired or capital rise (with a2m and bright dairy being guarantors). Public interest in a capital rise would surely be an all time low with no tangible positive forecasts. Synlait seem act late on market opportunities, spending large amounts of capex without securing a customer. The liquid products plant essentially idle with the production capacities of UHT cream reported in 2023.

Free cash flow generated by a2m 2017-2020 was immense with that now smothered out the focus seems to be adult nutrition but I don't know if they have a customer for this and what the production volumes as sales only shown my business unit (advance nutrition).

a2m report also stated Yashili is now producing formula for the Australia and South East Asia market now also (English label - a2m Gentle Gold) along with a2m owns manufacturing facility at Mataura Valley Milk. Although Synlait is still producing the chinese label a2m platinum how long until this manufacturer agreement is shared with Yashili with the exclusivity contract dissolved (contested by Synlait in courts).

[Sideshow Bob]

Here is an article on the same subject of the announcement....

https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/synlait-nestle-sign-deal-to-reduce-on-farm-emissions?fbclid=IwAR37ap7-KLmnUaOqK90-C4xI69YmzIP8rRX07baMBYV69nF0a0mAD0q25w0


Whats the saying....Nero fiddles while Rome burns??

- Major disagreement with your major customer and large shareholder.
- Share price at a record low
- Bonds are trading at 37.4%
- Going to make another significant loss.
- Heavily in debt, with agreements expiring at the end of the month
- Struggling to sell a major asset that you probably paid too much for
- Needing more pink paint

But get on TV for a talk fest with Nestle about reducing emissions.

What have I missed??

Omni-cluster......

[iceman]

Here is an article on the same subject of the announcement....

https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/synlait-nestle-sign-deal-to-reduce-on-farm-emissions?fbclid=IwAR37ap7-KLmnUaOqK90-C4xI69YmzIP8rRX07baMBYV69nF0a0mAD0q25w0


Whats the saying....Nero fiddles while Rome burns??

- Major disagreement with your major customer and large shareholder.
- Share price at a record low
- Bonds are trading at 37.4%
- Going to make another significant loss.
- Heavily in debt, with agreements expiring at the end of the month
- Struggling to sell a major asset that you probably paid too much for
- Needing more pink paint

But get on TV for a talk fest with Nestle about reducing emissions.

What have I missed??

Omni-cluster......

That sums it up nicely

[Muse]

Here is an article on the same subject of the announcement....

https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/synlait-nestle-sign-deal-to-reduce-on-farm-emissions?fbclid=IwAR37ap7-KLmnUaOqK90-C4xI69YmzIP8rRX07baMBYV69nF0a0mAD0q25w0


Whats the saying....Nero fiddles while Rome burns??

- Major disagreement with your major customer and large shareholder.
- Share price at a record low
- Bonds are trading at 37.4%
- Going to make another significant loss.
- Heavily in debt, with agreements expiring at the end of the month
- Struggling to sell a major asset that you probably paid too much for
- Needing more pink paint

But get on TV for a talk fest with Nestle about reducing emissions.

What have I missed??

Omni-cluster......

You forgot its Bcorp! So no worries then

[blackcap]

That sums it up nicely

The last thing Synlait need to focus on is reducing emissions. That goal should come last. There are more pressing matters. Talk about corporate nonsense.

[Sideshow Bob]

The last thing Synlait need to focus on is reducing emissions. That goal should come last. There are more pressing matters. Talk about corporate nonsense.

If not financially sustainable, then nothing else matters.....

[Toddy]

Everyone on the TV interview looked pretty relaxed.

I thought to myself, I should buy some shares as everything is obviously sorted.

What was I expecting. A tired looking CEO who has worked themselves into the ground trying to save the company.

[Bikeguy]

I’m in the red on this company so I’m not laughing however it is a very intriguing situation now, I am genuinely interested at what is going to play out come results day because regardless of looming payment due dates, crashing share price etc these guys are not panicking, no fire sales, no scrambling ( obvious scrambling anyway)

[Sideshow Bob]

Everyone on the TV interview looked pretty relaxed.

I thought to myself, I should buy some shares as everything is obviously sorted.

What was I expecting. A tired looking CEO who has worked themselves into the ground trying to save the company.

I thought exactly the same thing….

Continuous disclosure??

[Nor]

Should have been a red flag to sell when they bought the cheese factory. But easy to be wise in hindsight.

[Lego_Man]

I thought exactly the same thing….

Continuous disclosure??

The bonds are starting to look tantalising value providing an annualised return easily north of 30% to maturity - assuming no disasters!

[limmy]

Fully agree.

[Toddy]

3m shares on the offer at 70 that never got matched at close.

[Bikeguy]

3m shares on the offer at 70 that never got matched at close.

Wonder if they will surface again today…?

[Bikeguy]

No CR? No asset sales?
SML have to have done a deal with their ( new?) bankers??

[Sideshow Bob]

No CR? No asset sales?
SML have to have done a deal with their ( new?) bankers??

Half year results have been delayed until after Easter, which is after their banking arrangements have expired.

However if they have renewed, then definitely expect it to be announced under continuous disclosure rules......

[Bikeguy]

Half year results have been delayed until after Easter, which is after their banking arrangements have expired.

However if they have renewed, then definitely expect it to be announced under continuous disclosure rules......

You would think wouldn’t you?
Get the feeling it’s all going to land on reporting day somehow…

[Mr Slothbear]

Half year results have been delayed until after Easter, which is after their banking arrangements have expired.

However if they have renewed, then definitely expect it to be announced under continuous disclosure rules......


david bortulossi just waiting for that late night call at Easter

[billkiapi]

david bortulossi just waiting for that late night call at Easter

so true- the Synlait board has let this dispute play out, which seems to be inflated ego from Synlait towards their biggest customer A2M. My mum used to say don't bite the hand that feeds you, and Synlait should have reflected on that. It sounds like a toxic situation, driven by an uncontrolled aggressor inside Synlait. I hope the class action lawyers turn their attention on this and not on A2M. What a waste of value. Something like 700 mill lost in the last year.

[Bikeguy]

It’s their absolute nonchalance that has me intrigued, they have gone out of their way to keep the market in the dark…I may be very wrong but feel they have this sorted.

[billkiapi]

If they have it sorted, they really should tell the market. Anyone selling at low prices could miss out on SP gains if they withheld information…

[Bikeguy]

If they have it sorted, they really should tell the market. Anyone selling at low prices could miss out on SP gains if they withheld information…

I agree, they should disclose…but I think it will be a case of it just “magically “ happened around results time…
The big boys would have been reacting with some decent sell liquidity by now if SML were going to default,
Either way only another week till cards are laid out in the table,

[billkiapi]

I guess that goes to show how they operate if it’s true that they have an answer. Their obligation is to shareholders and bond holders as creditors, so withholding information is contrary to their duty. The alternative is that they don’t have a deal, and the argument with their biggest customer is significant

[Lego_Man]

It’s their absolute nonchalance that has me intrigued, they have gone out of their way to keep the market in the dark…I may be very wrong but feel they have this sorted.

Possibly they're stunned mullets with a sprinkling of gallows humour/resignation to their fate...

[Bikeguy]

Possibly they're stunned mullets with a sprinkling of gallows humour/resignation to their fate...

You could very well be right…going to be an interesting day when the cards are turned face up shortly

[Bikeguy]

I guess that goes to show how they operate if it’s true that they have an answer. Their obligation is to shareholders and bond holders as creditors, so withholding information is contrary to their duty. The alternative is that they don’t have a deal, and the argument with their biggest customer is significant

Yes, very fair what you are saying,
My experience in China was they tended to play it close to their chests and not always to the letter of the rules, more like “ the end justifies the means” but hey I’m not heavily experienced in Chinese business practices in general,

[Lego_Man]

Synlait are advertising for a new Head of Treasury.

https://www.seek.co.nz/job/74706310?type=promoted&ref=search-standalone#sol=9d51e8f7f3dbbe9e6604d72d23c3b87ec9f a4188

[Snoopy]

Synlait are advertising for a new Head of Treasury.

https://www.seek.co.nz/job/74706310?type=promoted&ref=search-standalone#sol=9d51e8f7f3dbbe9e6604d72d23c3b87ec9f a4188


I know a nautical bloke that might be interested. No not Sailor Boy. I am talking about a bloke called 'Long John Silver' who is familiar with treasure chests dotted around the place. Could be exactly what Synlait is after?

SNOOPY

[silverblizzard888]

I know a nautical bloke that might be interested. No not Sailor Boy. I am talking about a bloke called 'Long John Silver' who is familiar with treasure chests dotted around the place. Could be exactly what Synlait is after?

SNOOPY

Given Synlaits extremely high criteria it will likely be conditional on him changing his name from 'Long John Silver', to 'Long John Pink'. Gotta be a team player you know.

[Snoopy]

Given Synlaits extremely high criteria it will likely be conditional on him changing his name from 'Long John Silver', to 'Long John Pink'. Gotta be a team player you know.


Good to see you fully appreciate the 'Synlait ecosystem' pinkblizzard ;-)

SNOOPY

[Sideshow Bob]

I would have thought the Treasury was pretty bare at the mo.....

Maybe a future momentary filling up with an asset sale or capital raise, and then empty again. ;)

[bull....]

find out next week if sml going into receivership. looks like they ask bright dairy for loan or bank waiver. if neither happen lights out

[Balance]

Trading halt pending announcement on financial support from Bright Dairy.

https://www.nzx.com/announcements/428715

Convertible note issue of $150m to Bright Dairy? Say $150m at 5% pa convertible to SML shares at 75c (subject to shareholders' approval) - will deliver control to Bright Dairy in 2027.

Interesting crossing of SML bonds yesterday - 860,000 bonds crossed at 80c (37% yield to maturity) so who was the buyer?

[Bikeguy]

find out next week if sml going into receivership. looks like they ask bright dairy for loan or bank waiver. if neither happen lights out

I just can’t see the Chinese walking away from this, nor A2 being able to let them?

[Bikeguy]

Trading halt pending announcement on financial support from Bright Dairy.

https://www.nzx.com/announcements/428715

Convertible note issue of $150m to Bright Dairy? Say $150m at 5% pa convertible to SML shares at 75c (subject to shareholders' approval) - will deliver control to Bright Dairy in 2027.

Interesting crossing of SML bonds yesterday - 860,000 bonds crossed at 80c (37% yield to maturity) so who was the buyer?

I believe you are right, their strategy on how to benefit from the Covid situation has been actively in play for some time, and the share price dropping due to both the financial impacts along with the “ difficulties “ that have supposedly arisen with A2 has resulted in them being exactly where they want to be,
I’m not happy about it but I cannot help but feel a little bit of respect to them for the successful execution of their strategy.

[bull....]

I just can’t see the Chinese walking away from this, nor A2 being able to let them?

be interesting bright dairy didnt participate in capital raise when they owned 51% of company. now they own 39% so they didnt seem to care then about not retaining 51% ownership

[Bikeguy]

be interesting bright dairy didnt participate in capital raise when they owned 51% of company. now they own 39% so they didnt seem to care then about not retaining 51% ownership

Good point, this one is getting seriously interesting, what was the CR done at back then?

[bull....]

Good point, this one is getting seriously interesting, what was the CR done at back then?

2 odd ? was yr's ago when synliat was on the march higher so was strange they didnt participate

[Bikeguy]

2 odd ? was yr's ago when synliat was on the march higher so was strange they didnt participate

It’s interesting for sure?
If they do play it the way you outlined will be a very smart play on their part,
I would be happy if I was sitting outside this one watching with no skin in the game, but unfortunately very underwater on SML,
Cards will be revealed one way or another now,

[Newman]

[Convertible note issue of $150m to Bright Dairy? Say $150m at 5% pa convertible to SML shares at 75c (subject to shareholders' approval) - will deliver control to Bright Dairy in 2027.

Interesting crossing of SML bonds yesterday - 860,000 bonds crossed at 80c (37% yield to maturity) so who was the buyer?[/QUOTE]

I would expect a demand of 9-10% interest rate if convertible notes issued because Synlait has no options.

[Balance]

[Convertible note issue of $150m to Bright Dairy? Say $150m at 5% pa convertible to SML shares at 75c (subject to shareholders' approval) - will deliver control to Bright Dairy in 2027.

Interesting crossing of SML bonds yesterday - 860,000 bonds crossed at 80c (37% yield to maturity) so who was the buyer?

I would expect a demand of 9-10% interest rate if convertible notes issued because Synlait has no options.[/QUOTE]

The Chinese plays the long game - like they have with the EV market.

[Lego_Man]

[Convertible note issue of $150m to Bright Dairy? Say $150m at 5% pa convertible to SML shares at 75c (subject to shareholders' approval) - will deliver control to Bright Dairy in 2027.

Interesting crossing of SML bonds yesterday - 860,000 bonds crossed at 80c (37% yield to maturity) so who was the buyer?

I would expect a demand of 9-10% interest rate if convertible notes issued because Synlait has no options.[/QUOTE]

Interesting too that they talk about financial assistance from Bright Dairy but not A2, final confirmation that the latter are happy to see them go to the wall.

[Bikeguy]

I would expect a demand of 9-10% interest rate if convertible notes issued because Synlait has no options.

Interesting too that they talk about financial assistance from Bright Dairy but not A2, final confirmation that the latter are happy to see them go to the wall.[/QUOTE]

I don’t really understand why A2 would be happy to see SML go to the wall?
Would that not put A2 in a position (currently) of not having the manufacturing capability for the product that produces their main revenue for their main market?

[Balance]

I would expect a demand of 9-10% interest rate if convertible notes issued because Synlait has no options.

Interesting too that they talk about financial assistance from Bright Dairy but not A2, final confirmation that the latter are happy to see them go to the wall.[/QUOTE]

Who knows what kind of discussions are going on between Bright & ATM?

[Bikeguy]

Who knows what kind of discussions are going on between Bright & ATM?[/QUOTE]

Well said, this is a very symbiotic relationship and neither stand to benefit really if the other falls…
When these cards are played we are going to see what has really been going on…who ever benefits the most will show who’s pulling the strings…

[billkiapi]

seems that the Synliar and A2 relationship is broken, and it sounds like it was self inflicted. lots of assumptions out there, and we will see on Tuesday. I think we will see a great gooey mess of ego driven damage to A2 relationship but there may be a stay if execution for Synliar

[JimmyTrade]

The big reveal tomorrow!

[Newman]

The big reveal tomorrow!

The title is interesting though the article does not reveal any new information. https://www.rnz.co.nz/news/business/513122/synlait-investors-crossing-fingers-as-troubled-milk-producer-releases-first-half-results

[Sideshow Bob]

https://www.nzx.com/announcements/428830

Key financial metrics:

• Revenue up 3% to $793.5 million.
• Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $19.9 million. Adjusted EBITDA was $36.1 million.
• Net loss after tax was ($96.2) million. Adjusted net loss after tax was ($17.4) million.
• Net debt up 8% to $559.0 million.
• Gross profit down 47% to $43.6 million.
• Forecast base milk price for the 2023 / 2024 season is $7.80 per kg/MS up from $7.50 per kg/MS.

Full year 2024 (FY24) guidance statement

Synlait has updated its FY24 guidance.

The previously announced guidance stated that earnings before interest, taxes, depreciation, and amortization (EBITDA) performance was expected to be broadly flat or down compared to FY23. Synlait’s FY23 EBITDA was $90.7 million.

Synlait now expects the FY24 EBITDA result to be significantly down on FY23 within the range of $45 million to $60 million, excluding a non-cash adjustment for the product costing method change of approximately $17 million.

The FY24 EBITDA result is impacted by:

• Softening demand and/or margins across all business units.
• Adverse foreign exchange and product mix.
• Increased operating expenses e.g., legal costs, inventory management, and a range of other costs.

In addition to the above, Synlait is facing material uncertainties in respect of the timings and outcomes of various deleveraging options which are currently progressing. The deleveraging options include an equity raise, a North Island strategic asset review, and the sale of Dairyworks.

The half-year financial statements further detail these material uncertainties. All shareholders are encouraged to review this disclosure in detail.

The Board and Management remain fully committed to deleveraging Synlait's balance sheet and continuing the focus on improving profitability for the balance of 2024.
The FY24 EBITDA guidance excludes all current and future impairments relating to Synlait and Dairyworks.

Conference call details:

CEO Grant Watson and CFO Rob Stowell will host a webcast briefing on the result at 11.00am (New Zealand time). Participants can register for the webcast here:
https://ccmediaframe.com/?id=SPQQa98o

[Sideshow Bob]

The banking syndicate remains supportive, with amendments confirmed:Balance sheet options narrowed Synlait well supported


• Extension of the $130 million prepayment from 28 March 2024 to no later than 15 July 2024.
• An additional $30 million of short-term funding from 28 March 2024 to 27 June 2024.
• Amendment of the shareholders’ funds covenant from $600 to $400 million (an ‘at all times’ covenant).
• Amendment of the interest cover ratio is reduced from 2.25x to 1.75x for FY24.

The Board has received a letter of support from Bright Dairy, which owns 39.01% of Synlait, that reinforces its ongoing support for the company.

[Leemsip]

wow thats terrible...
stock should seriously tank today?

[Sideshow Bob]

wow thats terrible...
stock should seriously tank today?

Tank Further.....

[bull....]

wow thats terrible...
stock should seriously tank today?

definate lights out date :scared:

[Gerald]

Apparently the best offer for Dairyworks was $86m ($117-31.1) which isn't too bad, they should have taken it.

[Sideshow Bob]

So what was in there that meant they put back their reporting date?

Have they been busy over Easter counting the beans and trying to flog the silver??

[Snoopy]

The banking syndicate remains supportive, with amendments confirmed:Balance sheet options narrowed Synlait well supported


• Extension of the $130 million prepayment from 28 March 2024 to no later than 15 July 2024.
• An additional $30 million of short-term funding from 28 March 2024 to 27 June 2024.
• Amendment of the shareholders’ funds covenant from $600 to $400 million (an ‘at all times’ covenant).
• Amendment of the interest cover ratio is reduced from 2.25x to 1.75x for FY24.

The Board has received a letter of support from Bright Dairy, which owns 39.01% of Synlait, that reinforces its ongoing support for the company.


Highlights for me from note 2 of the financial statements that shareholders are urged to read

-------------------------


Financial position

The Group obtained an amendment to the shareholder funds covenant (reduced from a requirement of $600m at all times to $400m at all times) and interest coverage ratio (reduced from a requirement of 2.25x to 1.75x for the 31 July 2024 covenant test) to allow additional time for deleveraging options to be executed by no later than 31 July 2024.

The working capital facilities as specified in note 12, expire on 1 October 2024 and will require refinancing. The revolving credit facility expires on 1 October 2025.


Equity Raise

An equity raise will be required by 31 July 2024, as a primary means in which to remain a going concern, in that it would be required in order to continue to comply with banking covenants and improve the Group’s credit quality sufficiently to retain the support of the Group’s banking syndicate and allow for the successful repayment and refinancing of syndicated debt facilities on 30 September 2024 and the subordinated bonds on 17 December 2024.



Alternative forms of financing

The Group is progressing alternative financing options, including:

i/ restructuring the banking syndicate to add additional banks or obtaining financing through a perpetual capital note (if required). The perpetual capital note could provide preferred equity funding of $100m to $150m to repay debt as part of the wider deleveraging programme, if required. The Group is well progressed with the perpetual capital note.
ii/ The Group has had positive initial discussions on a potential restructure of the banking syndicate .


Letter of support from Bright Dairy

As referred to above and within the subsequent events note 17, on 28 March 2024 the Group received a binding letter of support from Bright Dairy, the ultimate owner of the Group’s major shareholder, which indirectly owns 39.01% of the shares in the Group. The letter includes:

i/ a commitment to participate in a future equity capital raising (subject to certain terms and conditions including consideration of current shareholding structure) AND
ii/ to extend up to a $130m inter-company bridging loan at the request of Synlait to ensure short term liquidity requirements can be met (if required), subject to the Group and Bright Dairy receiving all necessary approvals. (Snoopy note: this effectively extends the bank's 'absolutely last chance deadline' of 14th July 2024 for debt repayment of $130m out a bit)
iii/ In addition, it provides support for the deleveraging options which are currently progressing.

-----------------------


All the rest is simply bluster. Notable by omission is any support by the second largest shareholder A2 milk. They are still involved in mediation over an contractual dispute. I think we can read from that A2 are not supportive of Synlait.

SNOOPY

[bull....]

if the equity raise fails because of lack of support lights out.
bright dairy support is for working capital not repayment of debt and looks like it is made against some form of asset guarntee for the support
dairyworks wriiten down for lower sell price i imagine , but wont help situation much as far as insolvency goes

[Lego_Man]

if the equity raise fails because of lack of support lights out.
bright dairy support is for working capital not repayment of debt and looks like it is made against some form of asset guarntee for the support
dairyworks wriiten down for lower sell price i imagine , but wont help situation much as far as insolvency goes

They have rolled the dice and failed. Even 9 months ago a capital raise could have been executed successfully although not optimally...now the company arguably is in a death spiral.

I have no idea where this thing trades now as there is zero incentive to hold before the cap raise.

[whatsup]

The banking syndicate remains supportive, with amendments confirmed:Balance sheet options narrowed Synlait well supported


• Extension of the $130 million prepayment from 28 March 2024 to no later than 15 July 2024.
• An additional $30 million of short-term funding from 28 March 2024 to 27 June 2024.
• Amendment of the shareholders’ funds covenant from $600 to $400 million (an ‘at all times’ covenant).
• Amendment of the interest cover ratio is reduced from 2.25x to 1.75x for FY24.

The Board has received a letter of support from Bright Dairy, which owns 39.01% of Synlait, that reinforces its ongoing support for the company.

Kicking the can further down the road if I ever saw on ann such as this Q that needs an answer, what will the extra 3 months give it in an worsening climate for the company ?

[Snoopy]

I have no idea where this thing trades now as there is zero incentive to hold before the cap raise.


Not sure about the shares. But the pre-market quote for SML010 bonds shows a buyer there for the bonds if someone will hand them over for a 39.9% yield rate (last trade at 37%). So far no existing bondholders have fronted up to take up the offer.

SNOOPY

[Rawz]

This is why you never buy stocks with or close to 40% leverage.

[Sideshow Bob]

Down 11c, last trade at 64c..........

Buy side predictably thin!

[Rawz]

Was trying to think why Bright would participate or lead a cap raise? Or why advance the $150m? They would only be helping the bond holders and other small shareholders. Like just let SML go into liquidation and buy the assets in the coming fire sale.

Bright has already invested $82m into SML. Only to see it essentially fail. Why put another dime in?

[Rawz]

As the major shareholder, Bright, has completely stuffed this up. What started as (i assume) the Chinese looking to secure supply has turned into a financial disaster that they will have to start all over to secure that same supply.

All good 440 SML employees creamed it earning $100k+ pa. Suppose thats not that much these days. 47 get paid over $200k pa.

[Bikeguy]

Was trying to think why Bright would participate or lead a cap raise? Or why advance the $150m? They would only be helping the bond holders and other small shareholders. Like just let SML go into liquidation and buy the assets in the coming fire sale.

Bright has already invested $82m into SML. Only to see it essentially fail. Why put another dime in?

Foreign ownership laws would prevent them doing that…
They have done exactly what they wanted to do, the SP is cheap as chips, everyone else is going to be to scared to participate, A2 are going to be forced to participate to protect their 20%, and Bright are going to come out of this owning it for a fraction of what it would and should of cost…

[ralph]

Was trying to think why Bright would participate or lead a cap raise? Or why advance the $150m? They would only be helping the bond holders and other small shareholders. Like just let SML go into liquidation and buy the assets in the coming fire sale.

Bright has already invested $82m into SML. Only to see it essentially fail. Why put another dime in?

They obviously need that milk in china & will keep the source One way or another,
It's a resource china need /want with or without the woke pink brigade wasters, dunsandel will keep churning out the products needed, possibly change of name less woke more profit driven .
Plenty of puff left in this butt

[Bikeguy]

A2 must be fuming, they are going to be forced to pay to protect their position or lose their blocking stake in their only “current “ viable production facility

[Rawz]

Foreign ownership laws would prevent them doing that…
They have done exactly what they wanted to do, the SP is cheap as chips, everyone else is going to be to scared to participate, A2 are going to be forced to participate to protect their 20%, and Bright are going to come out of this owning it for a fraction of what it would and should of cost…

Yes Bright have SML exactly where it wants it. Unprofitable. Debt laden. Burning cash. Too much supply not enough customers.

You are giving them too much credit.

Bright are in a very difficult position now having to throw in even more money. They will be counting their lucky stars they let their original 51% ownership be diluted to 39% when SML listed.

Why would A2 participate? A2 don't need to protect anything. Synlait have too much capacity and talk of a big new customer has turned out to be dreamland stuff. Synlait or any new owner of Synlait assets would be begging for A2s custom.

[Leemsip]

This turd is holding up pretty good which is surprising. I would expect to see 50c soon.... cap raise will be challenging to get away without a decent discount.

[Bikeguy]

Yes Bright have SML exactly where it wants it. Unprofitable. Debt laden. Burning cash. Too much supply not enough customers.

You are giving them too much credit.

Bright are in a very difficult position now having to throw in even more money. They will be counting their lucky stars they let their original 51% ownership be diluted to 39% when SML listed.

Why would A2 participate? A2 don't need to protect anything. Synlait have too much capacity and talk of a big new customer has turned out to be dreamland stuff. Synlait or any new owner of Synlait assets would be begging for A2s custom.

I may be giving them to much credit, and I certainly do not think that they have been able to create the circumstances of which have been part of this, Covid etc, however yes I do think they have used the circumstances to their best outcome…the fact that Bright are taking the position they have in today’s announcement shows their intent?
We are talking about a country that pretty much took a 900 billion hit (evergreen) and it’s not even really mentioned globally…
A few hundred million to these guys is nothing in their quest for food security,
Just my thoughts though…

[Newman]

[QUOTE=Bikeguy;1046957]Foreign ownership laws would prevent them doing that…QUOTE]

Could you explain a little bit more?

[Mel]

I may be giving them to much credit, and I certainly do not think that they have been able to create the circumstances of which have been part of this, Covid etc, however yes I do think they have used the circumstances to their best outcome…the fact that Bright are taking the position they have in today’s announcement shows their intent?
We are talking about a country that pretty much took a 900 billion hit (evergreen) and it’s not even really mentioned globally…
A few hundred million to these guys is nothing in their quest for food security,
Just my thoughts though…
I agree, food security is a key element in the equation, and this is much bigger than just Bright as a corporate entity.

[Bikeguy]

[QUOTE=Bikeguy;1046957]Foreign ownership laws would prevent them doing that…QUOTE]

Could you explain a little bit more?

My understanding is that SML would be classed as a significant business assets (exceeds NZ$100 million and related to use of the land, dairy farming etc) and as such would require OIA Consent,

[Rawz]

I may be giving them to much credit, and I certainly do not think that they have been able to create the circumstances of which have been part of this, Covid etc, however yes I do think they have used the circumstances to their best outcome…the fact that Bright are taking the position they have in today’s announcement shows their intent?
We are talking about a country that pretty much took a 900 billion hit (evergreen) and it’s not even really mentioned globally…
A few hundred million to these guys is nothing in their quest for food security,
Just my thoughts though…

Yes but Bright had the supply secured at $82m investment. Nothing needed to be done. They had 4 directors on the board. Total control.

Now they have to put in more capital. Likely close to $200m. Yes it maybe small change for them but still i bet their request for funds is on some desk somewhere in China and the body behind that desk will be asking some hard questions about the absolute waste of company money. To secure the same supply.. The Bright employees in charge of the Synlait investment have completely buggered this up.

The Bright Dairy decision maker in China will be asking how can they secure supply with the least amount of capital required? And one option is to let SML go into liquidation.

[Bikeguy]

Yes but Bright had the supply secured at $82m investment. Nothing needed to be done. They had 4 directors on the board. Total control.

Now they have to put in more capital. Likely close to $200m. Yes it maybe small change for them but still i bet their request for funds is on some desk somewhere in China and the body behind that desk will be asking some hard questions about the absolute waste of company money. To secure the same supply.. The Bright employees in charge of the Synlait investment have completely buggered this up.

The Bright Dairy decision maker in China will be asking how can they secure supply with the least amount of capital required? And one option is to let SML go into liquidation.

I think all the points you make are fair ones,

I just feel Bright signalling their intentions publicly to fully participate in CR is telling, but hey I do not know for sure, reading the tea leaves

[Filthy]

i/ a commitment to participate in a future equity capital raising (subject to certain terms and conditions including consideration of current shareholding structure) SNOOPY

I wonder what the terms & conditions actually are; and what the consideration of structure is? maybe that means they do/dont want ATM to join in? - they have also omitted a key word in my view: 'fully' participate vs participate.

could a spinoff of dairyworks be considered - might be able to command a slightly higher price; although if not - think they would've been best to take the ~$86M and raise the rest from there.

I still maintain that the best time would've been in tandem with the SAMR re-reg at ~$1.80 in June. Too focused on B-corp and not maintaining shareholder value. asleep at the wheel.

net debt still going up. probably to pay for the inflated wage bill for all of those employees over $100K - a really high % of their workforce from memory. need to make a concerted effort with some cuts - like all other companies at the moment.

company has good bones and some great stainless steel - just bad management which needs sorting. need to send over some of the young guns from SKL & get customer focused again - make peace with ATM. lots of shareholders probably own both companies, and no doubt a lot of ordinary NZ'ers through kiwisaver. would be great for them to actually work together - better for NZ Inc.

[Poet]

Consideration of structure

Probably referring to brightstar ability to increase shareholding above their current 39%
If they participate in cap raise, this will almost certainly raise their shareholding above 39 and could even see them above 50%

[Snoopy]

Consideration of structure

Probably referring to brightstar ability to increase shareholding above their current 39%
If they participate in cap raise, this will almost certainly raise their shareholding above 39 and could even see them above 50%


Yes that was my thought as well Poet. If Bright increase their holding to above 50% as a result of the capital raise, that might trigger the takeovers code where they have to make a bid for the whole company. Given Bright nominally have control already with their 39% stake I am not sure how this would work in practice, because you could argue that even with a Bright stake boosted to more than 50%, effective control of the company has not changed. Perhaps it is up to the NZX to 'tick that box' and say that if Bright go over 50% as a result of the capital raising, that doesn't mean they have to make an offer for all the rest of the shares? Mind you, I don't believe there is any legal requirement to make a fair offer to minority shareholders. Bright might just make a miserly offer at the capital raising price, and hope most minority shareholders reject it?

SNOOPY

[billkiapi]

They're not asleep at the wheel, they have an argument with their biggest customer by far, and second largest shareholder A2M. Form the little we have seen about that publicly, it looks like total arrogance from SML dealing with A2M which backfired on SML. The peripheral arguments with vendors and staff don't seem to paint SML in a good light, more like trying to get one over A2M. Net result is shareholders get dumped on, while class action lawyers circle Synlait like vultures trying to tease out some profit from shareholder misery. A clean out at board and management is what is needed- maybe then A2M might consider downing weapons.

[Newman]

Capital raising would be pro-rated, and require an underwriter to pick up untaken ones. Could Bright be a underwriter or the untaken allocation be issued as preference shares?

[Marilyn Munroe]

[QUOTE=Newman;1046968]

My understanding is that SML would be classed as a significant business assets (exceeds NZ$100 million and related to use of the land, dairy farming etc) and as such would require OIA Consent,

My guess is the Overseas Investment Office would be keen to approve if the alternative was business closure and loss of jobs.

Boop boop de do
Marilyn

[Nor]

Like that waka jumping legislation that suddenly didn't work when it didn't suit.

[Bikeguy]

[QUOTE=Bikeguy;1046970]

My guess is the Overseas Investment Office would be keen to approve if the alternative was business closure and loss of jobs.

Boop boop de do
Marilyn

I believe the same,

[whatsup]

Can someone please post the link to Keith Woodfords link re his todays very succent commintary regarding the sad state of SML ?

[kiora]

"Keith Woodford says Synlait cannot survive without major asset sales plus major new equity"
https://www.interest.co.nz/rural-news/127103/keith-woodford-says-synlait-cannot-survive-without-major-asset-sales-plus-major

[bull....]

"Keith Woodford says Synlait cannot survive without major asset sales plus major new equity"
https://www.interest.co.nz/rural-news/127103/keith-woodford-says-synlait-cannot-survive-without-major-asset-sales-plus-major

light's out highest probability then bright and a2 pick over the carcass

The Directors say: “As at 31 January 2024, the Group recorded an after-tax loss for the six months of $92.2m, operating cash outflows of $98.1m and a working cash deficit of $204.9m, with loans and borrowings due for repayment and/or refinancing in the next twelve months of $514.1m ”.

Further down they refer to Synlait’s “current liabilities exceeding its current assets by $204.9m” and that Synlait is “unable to repay these debts on demand without additional support from shareholders or other sources of capital”. They then add that Synlait’s “successful execution of an equity raise, in combination with other deleveraging options by 31 July 2024… is critical to the ability of the group to continue as a trading concern”.

Auditors Price Waterhouse Cooper in their signoff draw attention to these same statements. They then reinforce this by saying in their own words that: “The ability of the Group to continue trading as a going concern is dependent on the ability of the Directors to successfully execute an equity raise in combination with other deleveraging options by 31 July 2024”.

[Toddy]

Atleast its been a long slow strangle giving mum and dad punters plenty of time to exit at a reasonable share price. Leaving the mess and games for the big boys.

[winner69]

If they ‘survive’ current crisis Woodford comment below is telling

An issue that was not discussed in the audio hook-up is the major issue of farmer loyalty. Most of the farmer-suppliers are tied to Synlait through to June 2026, but a small number can and will leave this year. Many plan to submit ‘cease to supply’ statements by June of this year, which will allow them to depart in June 2026.

These farmers do have other options in 2026, or earlier if Synlait fails in its contractual requirements to pay a competitive price. The cash required to join Fonterra is now much less than a few years ago. Pokeno farmers also have at least two other Waikato processors available. In contrast, no-one is going to sign up to a new supply contract with Synlait in the current environment

My judgment is that Synlait has no long-term future without the unconstrained loyalty of its farmer-suppliers. I doubt whether that loyalty is now recoverable as long as Synlait is limping along. Synlait will certainly not regain that loyalty if there is any risk going forward of being constrained in any way by lack of capital..

[Sideshow Bob]

From Business Desk, paywalled.

Fonterra says they are lining up......

https://businessdesk.co.nz/article/primary-sector/enter-fonterra-cash-strapped-synlaits-new-threat?utm_source=7am+Headlines+from+BusinessDesk&utm_campaign=accb050b89-7am+Headlines&utm_medium=email&utm_term=0_617c2ef34a-accb050b89-402467359

[Rawz]

Synlait is in a full on death spiral

[whatsup]

I guess that Fonterra is playing the long game, patience should be rewarded as IMHO its the only game in town apart for a massively delutary cash issue.
Unless the current SML share holders step up and take a massive hit on the chin which imo still does not solve their situation due to a massive debt pile which they have just added to.
Fonterra has cash and imo its in their interest to see SML fail !!, so sad really sad for N Z inc !!

[silverblizzard888]

Looks like a fire sale is happening either way and it'll definitely be either part of or all the North Island assets, which intern they will lease back and incur higher operating expenses. Dairyworks will have to go at a cut price too, the sad reality is that might not even be enough to fill the gap now with debt growing and losses mounting. Thats really the only way and probably better then going into liquidation. The death blow is when they have to announce a capital raising at a depressed price and the only one to really benefit is Bright acquiring a larger holding of the company.

In saying that, if they can pull off this great escape from liquidation, their south island assets easily outweigh their current valuation and there is a decent upside assuming the capital raising isn't extremely dilutive.

[Nor]

I was at the AGM in 2016 or was it 2015 and a representative of the shareholders association who was there commented to me on their high debt even then. It must have been terribly managed for things to have only got worse in the 7 or 8 years available to them since.

[Toddy]

I guess that Fonterra is playing the long game, patience should be rewarded as IMHO its the only game in town apart for a massively delutary cash issue.
Unless the current SML share holders step up and take a massive hit on the chin which imo still does not solve their situation due to a massive debt pile which they have just added to.
Fonterra has cash and imo its in their interest to see SML fail !!, so sad really sad for N Z inc !!

It's not sad to see Fonterra do well. And Fonterra is our largest NZ Inc Brand.
The Synlait assets aren't going anywhere. They will just be owned by someone else. Someone who can run them better and have the backing of the farmer suppliers.

I'm having flashbacks of Fortex and the poor farmers trying to get their stock out of the yards, past the security guards who were their drinking buddies.

[silverblizzard888]

I was at the AGM in 2016 or was it 2015 and a representative of the shareholders association who was there commented to me on their high debt even then. It must have been terribly managed for things to have only got worse in the 7 or 8 years available to them since.

Its been managed with people with pink hammers looking for pink nails to hammer.

[winner69]

I was at the AGM in 2016 or was it 2015 and a representative of the shareholders association who was there commented to me on their high debt even then. It must have been terribly managed for things to have only got worse in the 7 or 8 years available to them since.

Was that the ASM where shareholders gave the Board and management a standing ovation for doing a brilliant job

[Sideshow Bob]

I was at the AGM in 2016 or was it 2015 and a representative of the shareholders association who was there commented to me on their high debt even then. It must have been terribly managed for things to have only got worse in the 7 or 8 years available to them since.

It has been a very slow moving train wreck, with a litany of disasters, poor acquisitions and poorer decision making.

[Nor]

Don't remember. Mainly remember being disappointed by the tour of the factory which consisted of walking along a passageway and peering through a few windows.

[whatsup]

Isnt there an issue of the ownership of the ground that SML occupies or has that been sorted?

[Rawz]

wonder what Balance's views are now on the bonds?

[Goob]

What earnings multiple would you pay for a dairy processing company?

Reason I ask is that I'm wondering why Synlait haven't sold for $120m (wrote down net assets to that to reflect offers; see comment below). That's good IMO. Did ~$10m NPAT last full year and just did another $5m. I wouldn't pay more than 12x earnings for a capital intense dairy processor, which as an industry probably have dreadful base-rate shareholder returns. I say sell it.

"There was a $31.1 million adjustment recorded to write down the net assets of Dairyworks to fair value less costs of disposal to reflect the value of non-binding offers received."

[Grimy]

wonder what Balance's views are now on the bonds?

43.5% ask and no bidders........

[Rawz]

43.5% ask and no bidders........

if you are a shareholder and you believe in SML you are better to sell your shares and buy the bonds imo

[Lego_Man]

43.5% ask and no bidders........

No bids on the OTC market either. Previously a bank was making a 2 sided market, now they are only offered.

Bearing in mind that due to the maturity effect these large yield blowouts are still only equating to a small relative face value/price move at this stage.

[Toddy]

43.5% ask and no bidders........

You can get a 79 percent return by backing the Warriors this coming Saturday on the TAB. And you don't have to wait until xmas to know whether or not you are going to be paid out.

What parameters would one be using to even contemplate adding SML bonds to their portfolio.

[Lego_Man]

If i was a hedge fund i'd be running a pairs trade of long the bonds, short the equity.

[Toddy]

Good call. I'm picking the sp to come under constant pressure heading down to 50 cents.

[Sideshow Bob]

At least 50 farmers want out according to BusinessDesk (paywalled).

Big chunk of their supply.....

https://businessdesk.co.nz/article/primary-sector/synlaits-dilemma-how-many-farmers-want-out?utm_source=7am+Headlines+from+BusinessDesk&utm_campaign=a8176e38c4-7am+Headlines&utm_medium=email&utm_term=0_617c2ef34a-a8176e38c4-402467359

[Sideshow Bob]

Where have the board been in all this?

Massive destruction of value
Debt/losses continuing to mount up
Poor acquisitions and expansion
'Toxic' relationship with their major customer
Suppliers looking to leave
Much negatively publicity
Kicking the can down the road

Appreciate that much of the board is relatively new and many of these are legacy issues they have to deal with/unwind - 4 of the 8 (including the chairman) have been appointed from 2022 onwards, but Ruth, John and some of the Bright reps have been there much longer.

Their delays have put Synlait in a much worse situation than if they'd done a capital raise or sold assets earlier?

I've always found the situation interesting that Bright have 3 directors for their 39%, but A2 have none for their 19%. How deep does the Bright influence run??

[Rawz]

Where have the board been in all this?

Massive destruction of value
Debt/losses continuing to mount up
Poor acquisitions and expansion
'Toxic' relationship with their major customer
Suppliers looking to leave
Much negatively publicity
Kicking the can down the road

Appreciate that much of the board is relatively new and many of these are legacy issues they have to deal with/unwind - 4 of the 8 (including the chairman) have been appointed from 2022 onwards, but Ruth, John and some of the Bright reps have been there much longer.

Their delays have put Synlait in a much worse situation than if they'd done a capital raise or sold assets earlier?

I've always found the situation interesting that Bright have 3 directors for their 39%, but A2 have none for their 19%. How deep does the Bright influence run??

What a disaster aye.

there is this general thought that Bright have invested into SML to secure supply for the motherland. Yet one of SML issues is they have too much capacity and are screaming out for more customers. Why cant Bright just make arrangements back home and absorb that extra supply back into the mainland?? Doesnt really add up.

[Toddy]

Bonds flying off the shelf at 50 percent.

[Newman]

It is incorrect to believe that China has to buy dairy products from New Zealand, and totally wrong to insist that Synlait is essential to China.

The directors appointed by Bright have little experience in running business in New Zealand, they rely on CEO to rescue the business, who seems capable in useless talking.

If capital injection itself can solve problems, I guess Bright would. How to prove debt is the only problem?

[Sideshow Bob]

Bonds flying off the shelf at 50 percent.

TAB next race to go, and pick a nag by number, name or colours you like.

A much better bet.

[Goob]

No bids on the OTC market either. Previously a bank was making a 2 sided market, now they are only offered.

Bearing in mind that due to the maturity effect these large yield blowouts are still only equating to a small relative face value/price move at this stage.

Agree. People getting too worked up by change in quoted "price" on NZX (which I believe is the only market that quotes bond prices as their annualised YTM :confused:). Price has drifted down from 80 before the result to 75 now; nothing too crazy.

[Newman]

751,000 SML010 bonds changed hands. Bondholders start to act according to their own judgments.

[Lego_Man]

751,000 SML010 bonds changed hands. Bondholders start to act according to their own judgments.

71c on the dollar now. Genuinely pricing in impairment/haircut.

[Waikaka]

What a train wreck. I see some terrible companies (and management) dredging the gutter but this company has reached some spectacular levels of incompetency.

Still ,held my nose and have taken a small position and will participate in the hugely discounted capital raise.

I expected a terrible capital raise (~50mil), Pokeno sold at fire sale (maybe 50% of book value?), dairy works sold for about 100mil. That should clear most of the debt, staggering that they now owe ~560 million and didn't cap raise when share price was higher. They are going to get slaughtered selling these factories.

My only hope is that the whole board and management change and some calm level headed people come in to run a much smaller but still profitable company. So many assets that even these clowns will struggle to wipe out the entire business.

Such a waste.

[JeremyALD]

What a train wreck. I see some terrible companies (and management) dredging the gutter but this company has reached some spectacular levels of incompetency.

Still ,held my nose and have taken a small position and will participate in the hugely discounted capital raise.

I expected a terrible capital raise (~50mil), Pokeno sold at fire sale (maybe 50% of book value?), dairy works sold for about 100mil. That should clear most of the debt, staggering that they now owe ~560 million and didn't cap raise when share price was higher. They are going to get slaughtered selling these factories.

My only hope is that the whole board and management change and some calm level headed people come in to run a much smaller but still profitable company. So many assets that even these clowns will struggle to wipe out the entire business.

Such a waste.

Can I ask what would make you take a position given the above? As you have said they are on a hiding to nothing given their immediate need to sell assets and raise capital.

[Rawz]

Can I ask what would make you take a position given the above? As you have said they are on a hiding to nothing given their immediate need to sell assets and raise capital.

I was thinking the same. Like after the cap raise and asset sales it’s still a poorly run business.

[Rawz]

The only way I would invest in this is if I could calculate what the EPS would be after cap raise and asset sale of north island assets and then put a P/E of 6 what remains. That would be my target price and if the spot price is 50% below that I would have a punt.

I can’t calculate that. Well can’t be bothered to try, as there are many easier investments out there where literally management are telling us what future earning are. So I say why bother?

[Newman]

How many Synlait shares are held by farmers? If the percentage is high, then Bright and A2M have to take into account the farmer's feelings when deciding on asset sales and capital raising. Let Synlait become bankrupt and buy its valuable assets cheaply would be an option for Bright and A2M, but if farmers refuse to supply milk to them, they would have to rethink. In addition, Bright's representatives on Synlait's board must assess the chance of spending many years of life in prison if Bright's $200 m investment in Synlait disappears. That's the current operation in which the Chinese government punishes those who are responsible for business failure.

[Waikaka]

Can I ask what would make you take a position given the above? As you have said they are on a hiding to nothing given their immediate need to sell assets and raise capital.

Fair enough,

Total market cap is currently ~140 million.
Property is ~1 billion, whatever 'other assets' are ~500 million maybe milk powder in the warehouse and utes?


If I figure they get 50c in the dollar on property, milk powder etc so $750 million dollars


Debt is ~560 million. So 750-560 = 190mil


So figure I am buying $190 million worth of milk factory for $140 million.


Or another way to put it would be Debt = Pokeno + Dairy works + whatever I put into the cap raise so I don't get diluted.


So for 140 million I bought Dunsandel, hell in 2020 Synlait bought 582 hectares of dairy for 25.7 million next to Dunsandel that's probably easy enough to sell.


Anyway I don't over science it to take a starting position. Def don't listen to management forecast profit. If the price is a bit lower than the assets and the business isn't in terminal decline then take a punt. Learn more as the position gets larger.

[Waikaka]

How many Synlait shares are held by farmers? If the percentage is high, then Bright and A2M have to take into account the farmer's feelings when deciding on asset sales and capital raising. Let Synlait become bankrupt and buy its valuable assets cheaply would be an option for Bright and A2M, but if farmers refuse to supply milk to them, they would have to rethink. In addition, Bright's representatives on Synlait's board must assess the chance of spending many years of life in prison if Bright's $200 m investment in Synlait disappears. That's the current operation in which the Chinese government punishes those who are responsible for business failure.

I suppose farmers might privately own shares but don't think there is a 'farmer block' in the share register per se.

39% Bright Dairy = 100% participation in cap raise
20% A2 = Maybe 0% in cap raise
15% Big Insto's = Prob support
26% Small retail = maybe 50% participation if lucky.
(cribbed from Craig's research note)

Don't know anything about how China does it but glad I have a NZ passport.

[whatsup]

What a train wreck. I see some terrible companies (and management) dredging the gutter but this company has reached some spectacular levels of incompetency.

Still ,held my nose and have taken a small position and will participate in the hugely discounted capital raise.

I expected a terrible capital raise (~50mil), Pokeno sold at fire sale (maybe 50% of book value?), dairy works sold for about 100mil. That should clear most of the debt, staggering that they now owe ~560 million and didn't cap raise when share price was higher. They are going to get slaughtered selling these factories.

My only hope is that the whole board and management change and some calm level headed people come in to run a much smaller but still profitable company. So many assets that even these clowns will struggle to wipe out the entire business.

Such a waste.

I think its a total waste of time thinking about a C R at this stage, what the most important question that should be on every S Her lips is " whats the supplier loyalty ", from todays Business news there is considerable cocky flight despite it taking two years for them to leave and IMHO with SMLs deterating financial strength this will only accelerate !

IMHO SML is an unavoidable train wreck, an investment at present for the very brave, as Ive already said I think it will be bought out by Fonterra but Q is at what price ?

[Rawz]

NZ RegCo should issue one of those TRADE WITH CAUTION announcements for SML lol..

[Filthy]

very soon these guys would've sold off a couple of their best factories, at heavily discounted prices (so.... they will be left with the s**t ones that no-one wants/they cant sell - dont need a north island strategic review to tell you that...) plus they will likely lose their biggest customer (matter of time), and maybe some or most of their raw supply, which is now under pressure from the sound of it (farmers leaving them). they essentially wont have a business anymore (the trifecta of customer/product/factories = dead) - at least in the short term anyway. That's before you even consider & resolve the debt issue; which requires such a huge amount, so def a CR of sorts, at a huge discount... against a falling SP & with retail at the bottom of the heap. maybe at mid teens, low 20s. so the pay back period to break even from your lower avge SP would be what... 5/10 years+? - and that's IF they survive. plus may need working capital on top of that to get over this hump and take the business in a different direction. I confess, I took a small punt on SML at SAMR time (oops!), but crystalized the loss - better to move on. funds reallocated to MNW, which I'm starting to accu. grass is way greener over there. agree rawz - trade with caution lol.

[ralph]

Fair enough,

Total market cap is currently ~140 million.
Property is ~1 billion, whatever 'other assets' are ~500 million maybe milk powder in the warehouse and utes?


If I figure they get 50c in the dollar on property, milk powder etc so $750 million dollars


Debt is ~560 million. So 750-560 = 190mil


So figure I am buying $190 million worth of milk factory for $140 million.


Or another way to put it would be Debt = Pokeno + Dairy works + whatever I put into the cap raise so I don't get diluted.


So for 140 million I bought Dunsandel, hell in 2020 Synlait bought 582 hectares of dairy for 25.7 million next to Dunsandel that's probably easy enough to sell.


Anyway I don't over science it to take a starting position. Def don't listen to management forecast profit. If the price is a bit lower than the assets and the business isn't in terminal decline then take a punt. Learn more as the position gets larger.


That is a very sober unbiased way of looking at this mess instead of joining the downrampers feast like a sheep.
Thanks for the heads up

[Ferg]

That is a very sober unbiased way of looking at this mess instead of joining the downrampers feast like a sheep.
Thanks for the heads up

I agree - I was going to post last night but it got a bit late. Waikaka's post was a refreshingly simple way of looking at this. Although, the big unknowns will be the discount applied to asset values under a fire sale scenario, and how much the liabilities will grow if not repaid under pain of penalties. I ran a few numbers and ended up with an orderly breakup value of around $300m which is a return of 2:1....I was much more generous than 50% on the current assets, and other assets were a mixed bag of discounts (from 10-100%). The other unknowns is how much one needs to tip in via CR (assuming there is one*) to ensure there is a relatively orderly realisation of assets values and if they can trade profitably in the meantime.

*Although the auditors in the latest IR had this to say:

The successful execution of an equity raise in combination with other deleveraging options by 31 July 2024...is critical to the ability of the Group to continue trading as a going concern.

[Mr Slothbear]

Fair enough,

Total market cap is currently ~140 million.
Property is ~1 billion, whatever 'other assets' are ~500 million maybe milk powder in the warehouse and utes?


If I figure they get 50c in the dollar on property, milk powder etc so $750 million dollars


Debt is ~560 million. So 750-560 = 190mil


So figure I am buying $190 million worth of milk factory for $140 million.


Or another way to put it would be Debt = Pokeno + Dairy works + whatever I put into the cap raise so I don't get diluted.


So for 140 million I bought Dunsandel, hell in 2020 Synlait bought 582 hectares of dairy for 25.7 million next to Dunsandel that's probably easy enough to sell.


Anyway I don't over science it to take a starting position. Def don't listen to management forecast profit. If the price is a bit lower than the assets and the business isn't in terminal decline then take a punt. Learn more as the position gets larger.


sure I see your logic but then why not compare it to another business where NTA is significantly higher than the share price.

two examples that come to mind ryman shareprice 60% of NTA. No ESG BS. No b corp BS. Strong track record and still hugely profitable.

or seeka, NTA almost double shareprice without all the concerns present with Synlait, which are many.

[Waikaka]

sure I see your logic but then why not compare it to another business where NTA is significantly higher than the share price.

two examples that come to mind ryman shareprice 60% of NTA. No ESG BS. No b corp BS. Strong track record and still hugely profitable.

or seeka, NTA almost double shareprice without all the concerns present with Synlait, which are many.

Absolutely valid point,

In my situation I prefer to have a diversified bundle of garbage, that means constantly on the hunt for companies on their knees. Bought all sorts of crazy things over the years.

One of the fun things is when people look in the gutters they all find different things they think are cheap. Makes it great fun. I wonder in a fire sale Ryman may well only get 60c on the dollar for book value. For Synlait I wrote down the book value of property by 50% if I did the same to Ryman NTA, perhaps the market cap would be greater than NTA. Not sure.

[Sideshow Bob]

https://www.nzx.com/announcements/429245

Shuffling the deck chairs.....

[billkiapi]

Rob Stowell has been in CFO role for the entire time this business has suffered huge shareholder value losses and a fight with A2M- why they'd appoint him to oversees risk and compliance I cannot figure out. Surely he is part of their problem- debt laden, revolving door, ego led customer relationship and fight with vendors.

[Toddy]

Rob Stowell has been in CFO role for the entire time this business has suffered huge shareholder value losses and a fight with A2M- why they'd appoint him to oversees risk and compliance I cannot figure out. Surely he is part of their problem- debt laden, revolving door, ego led customer relationship and fight with vendors.

Exactly my thoughts.
Also, strategic review, whatever. The CFO already knows the numbers and what each asset is worth.

There would of been numerous meeting about strategy and asset valuations.

And all would be upto date as would be resubmitted to the banks when groveling over and over.

This new job title and scope just does not make sense.

[Newman]

Exactly my thoughts.
Also, strategic review, whatever. The CFO already knows the numbers and what each asset is worth.

There would of been numerous meeting about strategy and asset valuations.

And all would be upto date as would be resubmitted to the banks when groveling over and over.

This new job title and scope just does not make sense.

Can anyone give an example of sensible decisions that Synlait's Board and Executives made in the past 2 years?

[silverblizzard888]

They didn't have the foresight to do a strategic review until the debt was due? Sums up the forward thinking of the company at the moment.

[bull....]

Westland Delivers Strong Profit Result For 2023Westland Milk Products has delivered a strong profit result for the second successive year.

https://www.scoop.co.nz/stories/BU2404/S00128/westland-delivers-strong-profit-result-for-2023.htm

[whatsup]

Fair enough,

Total market cap is currently ~140 million.
Property is ~1 billion, whatever 'other assets' are ~500 million maybe milk powder in the warehouse and utes?


If I figure they get 50c in the dollar on property, milk powder etc so $750 million dollars


Debt is ~560 million. So 750-560 = 190mil


So figure I am buying $190 million worth of milk factory for $140 million.


Or another way to put it would be Debt = Pokeno + Dairy works + whatever I put into the cap raise so I don't get diluted.


So for 140 million I bought Dunsandel, hell in 2020 Synlait bought 582 hectares of dairy for 25.7 million next to Dunsandel that's probably easy enough to sell.


Anyway I don't over science it to take a starting position. Def don't listen to management forecast profit. If the price is a bit lower than the assets and the business isn't in terminal decline then take a punt. Learn more as the position gets larger.

Waik..., Do they still own the land at Dunsandel ? if so whats the value of the land now that the bloom has disappeared off the dairy conversion ?

[Waikaka]

Waik..., Do they still own the land at Dunsandel ? if so whats the value of the land now that the bloom has disappeared off the dairy conversion ?Who knows. I just wrote it down 50% with the rest of the property. Plenty of margin of safety being overly cautious. I suspect if dairy farms were worth less than 50% they were than 2 years ago I would have seen it in the news.

[Waikaka]

Can anyone give an example of sensible decisions that Synlait's Board and Executives made in the past 2 years?

God I hate ending up defending terrible companies. Its NZR all over again.

Things they did well:
They built Pokeno and liquid milk plant at Dunsandel on budget.
Diversified geography and product mix.
Renewed export license to China in 2023 from Dunsandel last to 2027 so good job.


Things they did poorly:
Spend too much on low margin dairy factories that are underutilised.
Have too much debt.
Not reduce debt when they had a chance.
Realise that Covid lockdowns might mean less babies in China. Meaning less demand
Annoy A2M and suppliers.
Focused on ESG rather than making milk powder efficiently

[billkiapi]

Business Desk asks if George Adams in Synlait's new chair. I'm sure he's smart enough to be aware of director litigation risk, esp after Manziel decision. Why he'd want to increase exposure in December is lost on me- unless he knows something we don't (which is a more serious problem for the Synlait board). I hope they all get sued for this value descrutction

[Grimy]

Chris Lee in his weekly newsletter today has a piece on Synlait.

[Sideshow Bob]

Chris Lee in his weekly newsletter today has a piece on Synlait.

Interesting read - thanks for highlighting.

Here is the link - https://www.chrislee.co.nz/taking-stock

[billkiapi]

That Chris Lee article sums it up- childish governance driven by a vainglorious founder is what I take from that. No wonder A2M has tried to extract itself- what don’t we know yet?

[Newman]

Business Desk asks if George Adams in Synlait's new chair. I'm sure he's smart enough to be aware of director litigation risk, esp after Manziel decision. Why he'd want to increase exposure in December is lost on me- unless he knows something we don't (which is a more serious problem for the Synlait board). I hope they all get sued for this value descrutction

People need jobs, and George Adams's litigation risk is probably quite low because troubles occurred before becoming a director in March 2024.

[Sideshow Bob]

Looks like might close the week under 60c......

[billkiapi]

Made it to 0.57… what a disaster.

[Rawz]

https://www.farmersweekly.co.nz/news/fonterra-closing-plants-at-two-waikato-sites/

Fonterra closing some plants. Getting ready to pick up some Pokeno assets??

[whatsup]

Made it to 0.57… what a disaster.

.54 and falling atm.

[billkiapi]

0.51 - when do banks put this dog out of its misery

[Lego_Man]

Equity and bonds tanking...the latter now 66-67c on the dollar.

[Ggcc]

0.51 - when do banks put this dog out of its misery

When they reach a deal for ATM buy out all individual shareholders and work together with Bright Dairy at a fraction of the cost. Maybe just walk in when receivers come in.

[Newman]

When they reach a deal for ATM buy out all individual shareholders and work together with Bright Dairy at a fraction of the cost. Maybe just walk in when receivers come in.

That is an unlikely outcome for a simple reason: Bright Dairy spent ca. $200 m for its 39% shareholding, and none of its directors dares to sell its shares to anyone at a huge loss. ATM cannot buy out individual shareholders only.

[Bikeguy]

What is to stop Bright simply increasing its position significantly through a CR, which A2 is going to have to participate in or lose its blocking stake, then Bright simply keeps this business afloat and switches its A2 infant formula to supply the likes of Neatle? I believe the average Chinese consumer ( or any consumer) has the intelligence to quickly work out that it’s say the same product made by the same supplier in a different tin? And as Nestle are a very powerful entity in their own right I can imagine their marketing and ability to put it into the market at an attractive price point is very real…
I am invested in both companies, but let’s be real, A2 effectively controls very little, that was proved with Covid, and what’s going on between these two is either a jack up so they can both increase their ownership at our expense or it’s a real relationship breakdown alongside a balance sheet that needs deleveraged, nothing which businessmen at this level should not be able to resolve,
Either way time for some professional from both sides, unless like I suspect it’s the first option…

[Ggcc]

That is an unlikely outcome for a simple reason: Bright Dairy spent ca. $200 m for its 39% shareholding, and none of its directors dares to sell its shares to anyone at a huge loss. ATM cannot buy out individual shareholders only.

Bright Dairy will want a deal as for the directors they might be happy walking with some money rather than a receivership notice. Of course unless they have a plan that gets them out of that. ATM will negotiate if it is beneficial to the company, maybe Bright Dairy gets a percentage in ATM

[Toddy]

What is to stop Bright simply increasing its position significantly through a CR, which A2 is going to have to participate in or lose its blocking stake, then Bright simply keeps this business afloat and switches its A2 infant formula to supply the likes of Neatle? I believe the average Chinese consumer ( or any consumer) has the intelligence to quickly work out that it’s say the same product made by the same supplier in a different tin? And as Nestle are a very powerful entity in their own right I can imagine their marketing and ability to put it into the market at an attractive price point is very real…
I am invested in both companies, but let’s be real, A2 effectively controls very little, that was proved with Covid, and what’s going on between these two is either a jack up so they can both increase their ownership at our expense or it’s a real relationship breakdown alongside a balance sheet that needs deleveraged, nothing which businessmen at this level should not be able to resolve,
Either way time for some professional from both sides, unless like I suspect it’s the first option…

Bikeguy

Is your investment recent?
If not, I'm trying to understand why shareholders have not exited this investment a long time ago and invested capital in a more transparent Company.

[Bikeguy]

Bikeguy

Is your investment recent?
If not, I'm trying to understand why shareholders have not exited this investment a long time ago and invested capital in a more transparent Company.

I wish Toddy, no I’m sitting at $2.25 break even point…simply did not see such a breakdown in this relationship, (if that’s what it is)
The financials would have been bumpy but with both of these companies working together it seemed a fair risk if one was willing to play the long game…
Now I’m in on both sides regardless lol

[billkiapi]

Good question Toddy, in my case investment is small and was out of interest really. Bright can't just wipe the debt so any CR will be hugely diluted to pay off some 500M of debt. The question is why Bright would do that- they are not a white knight here, they have been on the board during a massive loss of value driven by a stupid argument with their biggest customer. A2M are not fools, and they have cash. My bet is that A2M end up with Dunsandel, which is not what Synlait wants, but I don't see another way for banks to get their debt back. Then shareholders can class action the Synlait company and directors for the various profit downgrades when they must have known there was a problem in the A2M relationship much earlier than was announced.

[Toddy]

I'm not doubting there is a punt opportunity for those that come on board now.

If there was one thing that I have learnt over the years is that you need to be disciplined about implementing a 'stop loss' to your investment strategy.

Like riding Le Tour De France. It's not about fisnishing first in a stage but more about not losing time.

[Bikeguy]

I'm not doubting there is a punt opportunity for those that come on board now.

If there was one thing that I have learnt over the years is that you need to be disciplined about implementing a 'stop loss' to your investment strategy.

Like riding Le Tour De France. It's not about fisnishing first in a stage but more about not losing time.

Have to say well said, and I agree with you on all points made.

[Leemsip]

49c today on low volume.
Company desperately needs some good news.

Interesting to watch the slow motion Metroglass like death spiral of this once proud company

[billkiapi]

Looks like someone working hard to keep it above 0.50- every time it drops below that, there's a small trade to bring it back up. Hopefully the regulator is watching these trading patterns for suspicious pumping.

[Sideshow Bob]

Looks like someone working hard to keep it above 0.50- every time it drops below that, there's a small trade to bring it back up. Hopefully the regulator is watching these trading patterns for suspicious pumping.

Desperate times may call for desperate measures.......

[Sideshow Bob]

https://www.nzx.com/announcements/430307

The Board of Synlait Milk Limited (Synlait) announces that George Adams has been elected Chair and that Dr John Penno, the company’s Co-Founder and Board Appointed Director, has stepped down.

George Adams elected as Synlait Chair

George was appointed as an Independent Director of Synlait in March 2024 to fill a casual vacancy. George’s transition to the Chair role follows the previously signalled plan that Acting Chair Paul McGilvary would return to his position as an Independent Director once a permanent successor was found and elected. George was elected with the full support of the Board.

The Board thanks Paul for his service over the past six months and congratulates George on his new role.

George Adams commented: “It is a privilege to be Chair of Synlait. I look forward to helping oversee Synlait’s path back to profitability and support Grant and his executive team’s execution of the strategy to do so. I thank my fellow Directors, including Paul McGilvary, for their stewardship and counsel during the transition.”

George will formally stand for election as an Independent Director by Synlait shareholders at the company’s Annual Meeting in December 2024. George’s appointment as Chair is effective immediately.

Dr John Penno steps down as Board Appointed Director

Dr John Penno, Board Appointed Director, will step down from his role. John co-founded Synlait and was Managing Director and CEO for 12 years. In 2018, John became a Board Appointed Director, during which time he was temporarily appointed Acting CEO and then Chair. John’s resignation is effective immediately.

Dr John Penno commented: “I fully support George’s appointment as Chair and remain committed to Synlait’s future as a co-founder and shareholder.”

“Synlait has come a long way since we co-founded the company buying a farm in Te Pirita near Dunsandel almost 25 years ago. We now take world-class nutrition products to the world and have played a disruptive role in the growth of the New Zealand dairy industry. I am proud of what we have achieved. However, now is the right time for me to leave my leadership role with Synlait.”

Paul McGilvary commented: “John has lived and breathed Synlait for almost 25 years. He leaves a strong legacy, which has formed the basis of Synlait’s entrepreneurial nature and spirit to do milk differently for a healthier world. On behalf of the Board, our staff, our farmers, and all stakeholders I would like to publicly thank John for his commitment and enormous contribution to Synlait.”
The Board will commence a search to find a candidate to fill the vacancy of the Board Appointed Director role.

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 CFO of British Telecom Northern Ireland. George's governance highlights include being Chair of Bell Tea & Coffee, Chair of the New Zealand Food and Grocery Council and a Director of Hellers Group and Tegel Food.

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

[Newman]

Accelerated changes will happen from today.

[Sideshow Bob]

Accelerated changes will happen from today.

It needs too.....

[Newman]

With Dr John Penno's departure from the Board, there would be less resistance to selling assets at a discounted price and to capital raising at the terms of Bright Dairy and A2M. I guess Synlait would NOT go into receivership, but the value kept for small shareholders would be minimal.

Bright Dairy has released its 2023 financial data (https://www.brightdairy.com/Investors). Its net profit after tax but before writing down investment in Synlait was ￥967 M (ca. $225 M). After the write-down net profit was ￥523 M., I would guess Bright Dairy could inject $50-100M into Synlait via capital raising. Receivership would create too much uncertainty for Bright Dairy.

[billkiapi]

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

[Bikeguy]

The next step will be the CR, where Bright and A2 will gain greater % of Synlait, followed by the announcement of some asset sales, followed by these guys “ makeing up” followed by Synlait shares lifting sharply, and who gains the most? Bright and A2…
Just my thoughts,

[Lego_Man]

This is quite possibly a very bullish development (for the bonds at least) if it turns out that Penno was a major sticking point in the relationship between the firms.

[blackcap]

The next step will be the CR, where Bright and A2 will gain greater % of Synlait, followed by the announcement of some asset sales, followed by these guys “ makeing up” followed by Synlait shares lifting sharply, and who gains the most? Bright and A2…
Just my thoughts,

There is nothing to stop you participating. You could also gain the most.

[Bikeguy]

There is nothing to stop you participating. You could also gain the most.

Sadly am already a holder of both companies, so very much participating, through a snorkel underwater😅

[Bikeguy]

But yes you are right and will be taking any rights I am offered in the CR

[blackcap]

Sadly am already a holder of both companies, so very much participating, through a snorkel underwater��

My commiserations. I am also a participant recently in the 010's so I feel your pain.

[Tyrion]

Settlement conference between Life Health Foods NZ V Synlait Milk Ltd & Others in the Christchurch High Court yesterday.https://www.courtsofnz.govt.nz/assets/6-Going-to-Court/calendar/daily-lists/20240430-High-Court-daily-list.pdf Interesting considering today’s announcement.

[billkiapi]

Could be this? https://lifehealthfoods.co.nz/recall/

[silverblizzard888]

John Penno probably leaving because he doesn't want to play a part in gutting his prized legacy.

Meanwhile the new Chair "George is Chair of NZX-listed Bremworth Limited, Director of NZX-listed Arborgen", guy sure knows how to pick them. Pick the lowest margin and most underperforming businesses you can to be apart of the board.

[Sideshow Bob]

Right, I'm in for the ride......

Just bought a massive 10 shares.

I'm 1% down already. :t_up:

[Rawz]

Market cap not far off from going under $100m

I tell people in my job there is good debt and bad debt. SML have neither. They have toxic debt :(

[Newman]

John Penno probably leaving because he doesn't want to play a part in gutting his prized legacy.

Meanwhile the new Chair "George is Chair of NZX-listed Bremworth Limited, Director of NZX-listed Arborgen", guy sure knows how to pick them. Pick the lowest margin and most underperforming businesses you can to be apart of the board.

John Penno would have had his prized legacy if he had left Synlait years ago.

If share price reflects a company's success or otherwise, did Bremworth or Arborgen improve after George Adams became a director of the companies?

Panic sale of SML010 at 85%.

[Lego_Man]

John Penno would have had his prized legacy if he had left Synlait years ago.

If share price reflects a company's success or otherwise, did Bremworth or Arborgen improve after George Adams became a director of the companies?

Panic sale of SML010 at 85%.

Wonder if we're gonna crack the 100% in yield terms?

[silverblizzard888]

John Penno would have had his prized legacy if he had left Synlait years ago.

If share price reflects a company's success or otherwise, did Bremworth or Arborgen improve after George Adams became a director of the companies?

Panic sale of SML010 at 85%.

Arborgen Appointed 19 August 2019 - Share price August 2019 was 18 cents today its 15.8 cents
Bremworth 1 June 2018 - Share price in June 2018 was 60 cents, today its 43.5 cents

So overall no the share price has not improved since he joint their boards. Thats not to mention that Bremworth share price also benefited off their insurance lottery or else they would be much lower.

[winner69]

Wonder if we're gonna crack the 100% in yield terms?

Annualising the return makes it look really cool eh

But paying $64 to get $100 in 8 months and a couple of interest payments is pretty rewarding eh.

[Newman]

Annualising the return makes it look really cool eh

But paying $64 to get $100 in 8 months and a couple of interest payments is pretty rewarding eh.

There is no guarantee that Synlait will pay interest in June, September, and December.

[mshierlaw]

There is no guarantee that Synlait will pay interest in June, September, and December.

Under what circumstances can they withhold interest payments. Then perish the thought ..... can they default on repayment of the bond?

[Lego_Man]

Under what circumstances can they withhold interest payments. Then perish the thought ..... can they default on repayment of the bond?

They can't without interest without defaulting. They can default but that means receivership. No debt holder is going to accept restructuring when they know there's the tangible assets to pay them off if everything is liquidated.

[mshierlaw]

They can't without interest without defaulting. They can default but that means receivership. No debt holder is going to accept restructuring when they know there's the tangible assets to pay them off if everything is liquidated.

Many thanks you for your help, clarifies the situation.

[Toddy]

They can't without interest without defaulting. They can default but that means receivership. No debt holder is going to accept restructuring when they know there's the tangible assets to pay them off if everything is liquidated.

It's good that someone has read the small print. Because sometimes hidden in there are options on default of exchanging debt for equity.

[Goob]

From an ex-farmer in Waikato:

"Talked to Fonterra area rep today. Reckons might be about 220 Waikato suppliers to Synlait, thinks 70 have put in notice to stop supply."

Ghee it's hard to see any value in Pokeno if that's the reality. But at least there's a two year cessation period (according to this article (https://www.thepost.co.nz/business/350231907/synlait-may-sell-auckland-and-pokeno-plants-help-repay-300-million-debt)) which might give them enough time to recapitalise and win back some of those farmers.

But I wonder how that looks to potential buyers. Even if they buy it and financially secure Pokeno, some of those 70 farmers might just've had enough and will go to the safer Fonterra option even under a new owner. Lots of uncertainty

[Bikeguy]

Lots of uncertainty with this one, I see a little more volume today…I guess if they announced any asset sales prior to CR would see a decent return on investment…
Wouldn’t fit with my feeling that they don’t want us to participate in a CR though…

[Balance]

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-opinion/milking-it/takeover-bid

Takeover bid?
Written by Milking It

OPINION: Canterbury milk processor Synlait is showing no sign of bouncing back from its financial doldrums.

The listed company’s share price has dropped to 50c/share, valuing the company at only around $100 million. The share price has been travelling south despite the company working hard to sell off under-utilised assets and reduce debt.

Milking It reckons all this means a takeover bid could be around the corner. Watch out for Bright Dairy of China; it already owns 39% of Synlait and could easily fork out a couple hundred million to buy the company outright.

The Chinese know how to run successful dairy companies in NZ; just look at Westland Milk, which reported a record revenue of over $1b last financial year.

[Bikeguy]

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-opinion/milking-it/takeover-bid

Takeover bid?
Written by Milking It

OPINION: Canterbury milk processor Synlait is showing no sign of bouncing back from its financial doldrums.

The listed company’s share price has dropped to 50c/share, valuing the company at only around $100 million. The share price has been travelling south despite the company working hard to sell off under-utilised assets and reduce debt.

Milking It reckons all this means a takeover bid could be around the corner. Watch out for Bright Dairy of China; it already owns 39% of Synlait and could easily fork out a couple hundred million to buy the company outright.

The Chinese know how to run successful dairy companies in NZ; just look at Westland Milk, which reported a record revenue of over $1b last financial year.

My feeling is this is the outcome that Bright really want and have engineered…maybe like has been pointed out I am giving them to much credit however these guys are not short term players nor like you point out above are they ignorant in the industry they are heavily in…they are across the NZ dairy industry involved in multiple JV, just can’t see them letting Synlait go,
A2 have a blocking stake ? How does Bright stack up with foreign ownership laws if it makes an outright ownership bid?

[Newman]

How does Bright stack up with foreign ownership laws if it makes an outright ownership bid?
If Bright Dairy really wants to control Synlait, it has many options. For example, it could lend $200m to Synlait at an interest rate of 10%+. Can Synlait borrow from other parties to pay $130m back to banks by July 15 and pay $180m bonds in December? The answer is obviously NO. Selling assets in a hurry is not a good idea at all.

[Bikeguy]

If Bright Dairy really wants to control Synlait, it has many options. For example, it could lend $200m to Synlait at an interest rate of 10%+. Can Synlait borrow from other parties to pay $130m back to banks by July 15 and pay $180m bonds in December? The answer is obviously NO. Selling assets in a hurry is not a good idea at all.

Do you believe this will be the likely or best option for Bright in the current circumstances if their intention is to actually takeover Synlait?

[Newman]

Do you believe this will be the likely or best option for Bright in the current circumstances if their intention is to actually takeover Synlait?

In the long term, actions with the least resistance would be the best.

[Bikeguy]

Can Bright even make a takeover over for Synlait? They would need OIO approval and A2 agreement in the case of a straight takeover offer to get to 90% of the available shares
They would still need the OIO for a scheme of agreement attempt, 75%…?

[billkiapi]

Agreed, it's not as easy as Bright deciding to buy- and there's the bonds to think about. With 560M of debt, and a dispute with A2M as 50% of the revenue, it'd be a big ask to pay more than that to take it over. More likely is a massively diluted cap raise (but then there's the dispute to think of with A2M). Other possibility is the only saleable asset is Duansandel and A2M the only real buyer with the cash to pay for it.

[silverblizzard888]

The more likely case than a takeover would be Bright buying the North Island assets.

[ruaboy]

The more likely case than a takeover would be Bright buying the North Island assets.

Why not just sell the North Island assets to Open Country who are expanding their supplier network each year and with a higher payout than Fonterra should be able to fill the factory quickly .They seem to run a very tight ship ,if anyone can may a go of it Open Country would be my bet. Sylait is then left with the South Island a capital raise and problem solved

[Sideshow Bob]

Why not just sell the North Island assets to Open Country who are expanding their supplier network each year and with a higher payout than Fonterra should be able to fill the factory quickly .They seem to run a very tight ship ,if anyone can may a go of it Open Country would be my bet. Sylait is then left with the South Island a capital raise and problem solved

You'd think Open Country (aka Talleys) would run absolute rings around these guys!!

[silverblizzard888]

Why not just sell the North Island assets to Open Country who are expanding their supplier network each year and with a higher payout than Fonterra should be able to fill the factory quickly .They seem to run a very tight ship ,if anyone can may a go of it Open Country would be my bet. Sylait is then left with the South Island a capital raise and problem solved

I assume like all selling processes, they will offer it to everyone and take the highest price. Seems like a waste of time that they are spending a few months on a strategic asset review to come to the conclusion they need to sell their assets as if it was a surprise to them, and will likely be spending another 6 months in a tendering process, likely needing another extension from the banks, but just in the nick of time to have money to repay their bonds (only if the sale is successful). They are working on such a short timeline and likely have to sell at fire sale prices.

[mike2020]

OCD have never come close to matching Fonterras payout. They do pay quarterly and it can be hard to compare but its often miles behind on an annual basis. How they achieved market share was a combination of regulations around monopolies and Fonterra farmers cashing in their shares which were worth much more 15 years ago. Long story big picture.

[Balance]

My feeling is this is the outcome that Bright really want and have engineered…maybe like has been pointed out I am giving them to much credit however these guys are not short term players nor like you point out above are they ignorant in the industry they are heavily in…they are across the NZ dairy industry involved in multiple JV, just can’t see them letting Synlait go,
A2 have a blocking stake ? How does Bright stack up with foreign ownership laws if it makes an outright ownership bid?

Westland Dairy as a reference point for how the Chinese operate:

Most of us can remember wondering (and then, laughing) at the Chinese company Yili paying $3.41 per share (vs independent valuation of $0.88 to $1.38) for the loss making Westland and taking over Westland's heavy debt burden of $342m.

Well, turned out Yili knew exactly what they were doing - turnover has increased by 52% to $1.065b from the $698m in 2019 when Yili took over the company. More importantly, Yili has turned Westland losses to profits - $38.9m in 2022 and $55.9m in 2023.

So a Chinese company with unequalled access to overseas markets (especially China) and deep pockets bought a NZ dairy company which was in financial distress and under its management and ownership, turned it into a highly profitable growth dairy company.

Sounds familiar?

[mike2020]

Yes and they had the strength to manipulate the market to achieve the outcome they wanted. Its often said the Chinese take a 100 year view versus our money in your pocket today approach. Adding on their desire for food security and open your eyes to how short sighted and naive we are.

[Rawz]

The Westland purchase by this other Chinese company doesn't look like a fantastic investment based on EV/Earnings multiple even using last years profit.

Bright has lost a truck load of money with SML and need to pour more in for their food security.

NZ farmers and the many hundreds of employees on big pay packets at SML are the big winners here. Chinese investment decisions look very poor to me.

[Bikeguy]

Westland Dairy as a reference point for how the Chinese operate:

Most of us can remember wondering (and then, laughing) at the Chinese company Yili paying $3.41 per share (vs independent valuation of $0.88 to $1.38) for the loss making Westland and taking over Westland's heavy debt burden of $342m.

Well, turned out Yili knew exactly what they were doing - turnover has increased by 52% to $1.065b from the $698m in 2019 when Yili took over the company. More importantly, Yili has turned Westland losses to profits - $38.9m in 2022 and $55.9m in 2023.

So a Chinese company with unequalled access to overseas markets (especially China) and deep pockets bought a NZ dairy company which was in financial distress and under its management and ownership, turned it into a highly profitable growth dairy company.

Sounds familiar?

Some very good points made, thank you.

At the end of the day Bright are involved in NZ dairy, they completely control access to the market in China ( let’s face it SAMR is a control function, for both quality and access)
just cannot see them walking away from this business, and on top of that while A2 are working on options they really don’t have a commercially viable one currently nor will they in the time frame this is all going to happen, so in all honesty they also cannot let this tank…
Only my thoughts,

[Bikeguy]

Yes and they had the strength to manipulate the market to achieve the outcome they wanted. It’s often said the Chinese take a 100 year view versus our money in your pocket today approach. Adding on their desire for food security and open your eyes to how short sighted and naive we are.

Agree with your thinking …

[ruaboy]

OCD have never come close to matching Fonterras payout. They do pay quarterly and it can be hard to compare but its often miles behind on an annual basis. How they achieved market share was a combination of regulations around monopolies and Fonterra farmers cashing in their shares which were worth much more 15 years ago. Long story big picture.

Glad you said that as fonterra say the same thing so I asked them how open countries payment of matching Fonterra’s payment plus 10cents is a lesser payment.To date I have had no reply am very interested to find out how fonterra plus 10 is less than Fonterra’s payout.look forward to finding out

[Balance]

The Westland purchase by this other Chinese company doesn't look like a fantastic investment based on EV/Earnings multiple even using last years profit.

Bright has lost a truck load of money with SML and need to pour more in for their food security.

NZ farmers and the many hundreds of employees on big pay packets at SML are the big winners here. Chinese investment decisions look very poor to me.

A few points to note :

1. It is almost impossible for an outsider to know what kind of real profits are made by NZ companies owned by multi-nationals due to transfer pricing. Just have to look at how little Google and Apple subsidiaries make in NZ and particularly difficult with manufacturing companies. I worked for a NZ company owned by overseas interests and the NZ company hardly ever made much accounting profit (due to HQ imposed costs) but we all got our bonuses based upon pre-HQ costs!

2. Yili's actual investment in Westland amounted to $242.5m as the debt of $345.5m was retained in Westland (presumably with Yili's guarantee). So the profit of $55.9m in 2023 was after interest costs.

As for Bright, it has lost money based upon book value but the game could just be starting for them. The big losers could turn out to be ATM and the 40% minority shareholders.

Anyway, interesting times ahead.

[whatsup]

A few points to note :

1. It is almost impossible for an outsider to know what kind of real profits are made by NZ companies owned by multi-nationals due to transfer pricing. Just have to look at how little Google and Apple subsidiaries make in NZ and particularly difficult with manufacturing companies. I worked for a NZ company owned by overseas interests and the NZ company hardly ever made much accounting profit (due to HQ imposed costs) but we all got our bonuses based upon pre-HQ costs!

2. Yili's actual investment in Westland amounted to $242.5m as the debt of $345.5m was retained in Westland (presumably with Yili's guarantee). So the profit of $55.9m in 2023 was after interest costs.

As for Bright, it has lost money based upon book value but the game could just be starting for them. The big losers could turn out to be ATM and the 40% minority shareholders.

Anyway, interesting times ahead.

Sad but SOOOOOOOO true, overseas head quartered companies play N Z inc for suckers .

[Balance]

Sad but SOOOOOOOO true, overseas head quartered companies play N Z inc for suckers .

"Apple Sales NZ reported a net profit of $31.3 million in the 12 months ended June 30 on revenue of $1.21 billion."

Beggars belief that Apple NZ only made 2.9% on its NZ revenues!

NZ should impose punitive taxes on Apple for evading NZ tax.

In contrast, the EU last year imposed a 13 billion euro tax on Apple for using Ireland to circumvent EU taxes.

And just in this morning :

"Facebook NZ has reported its profit jumped by a third for the 12 months to December 31, 2023 - albeit in the context of reported revenue that was again dwarfed by payments to a sister company in lower-tax Ireland.

The firm is part of the Mark Zuckerberg-founded Meta, which also owns Instagram and WhatsApp, among other properties.

Facebook NZ booked total comprehensive income after tax of $3.1m, up from $2.8m in 2022.

Revenue edged up to $9.1m from the previous year’s $8.7m.

Payments to Meta Platforms Ireland for purchases of services rose 5 per cent to $157.4m from $149m in 2022."

[bulltrap]

The big losers could turn out to be ATM and the 40% minority shareholders.


And yet A2 continues to rally - on high PE and in a bearish market. I'd be considering shorting them, if I knew how.

Downside risks: loss of supply, loss of market access, cost of buying or bailing out SML. Upside potential: ???

[DavidB]

I don't own shares in Synlait so I don't follow them at all and haven't for years. So I was profoundly shocked when I became aware that their shareprice was 46.5c! The last I remember of them was before the pandemic when the shares were over $9! That is a staggering loss of capital for investors on the order of 95% or so. With a few exceptions, like the terrible (as in it should never have been listed) biotech Genesis Research and Development Corp and a few others, I haven't seen anything like this since the bad old days following the 1987 sharemarket crash when all the Corps went belly up and investors lost all the money they had borrowed from the bank. The dreaded permanent loss of capital, but, still owing the Bank! Judge Corp, Chase Corp, Renoulf Corp, Equticorp, et al. Corpse, rather than Corps, would be the more accurate description of them and that was even before the market collapsed. So I feel for any investors in Synlait who find themselves in this position, and there will be plenty of them too.

The question for me is how did this happen when New Zealand is supposed to be the Saudi Arabia of milk, and milk is our largest export earner? And can those lessons be applied to other NZX-listed companies in order to avoid investing in them?

[billkiapi]

Westland Dairy as a reference point for how the Chinese operate:

Most of us can remember wondering (and then, laughing) at the Chinese company Yili paying $3.41 per share (vs independent valuation of $0.88 to $1.38) for the loss making Westland and taking over Westland's heavy debt burden of $342m.

Well, turned out Yili knew exactly what they were doing - turnover has increased by 52% to $1.065b from the $698m in 2019 when Yili took over the company. More importantly, Yili has turned Westland losses to profits - $38.9m in 2022 and $55.9m in 2023.

So a Chinese company with unequalled access to overseas markets (especially China) and deep pockets bought a NZ dairy company which was in financial distress and under its management and ownership, turned it into a highly profitable growth dairy company.

Sounds familiar?


Things very different in today's environment- the China domestic industry has grown up, has become very capable and much safer. CCP driving a nationalistic buy local campaign. Chinese companies were paying over the odds to buy expertise and process for reasons of food security. That ship has largely sailed with almost no stainless steel investment in NZ anymore, and places like Happy Valley, Bodco, DNL etc all facing huge capacity and no demand issues. What was true for Westland, and to an extent Synlait when Mitsui wanted out- that was good for Bright. Is more investment in NZ good for Bright? time will tell. Maybe not.

[Bikeguy]

Things very different in today's environment- the China domestic industry has grown up, has become very capable and much safer. CCP driving a nationalistic buy local campaign. Chinese companies were paying over the odds to buy expertise and process for reasons of food security. That ship has largely sailed with almost no stainless steel investment in NZ anymore, and places like Happy Valley, Bodco, DNL etc all facing huge capacity and no demand issues. What was true for Westland, and to an extent Synlait when Mitsui wanted out- that was good for Bright. Is more investment in NZ good for Bright? time will tell. Maybe not.

These are fair points,

[Balance]

Things very different in today's environment- the China domestic industry has grown up, has become very capable and much safer. CCP driving a nationalistic buy local campaign. Chinese companies were paying over the odds to buy expertise and process for reasons of food security. That ship has largely sailed with almost no stainless steel investment in NZ anymore, and places like Happy Valley, Bodco, DNL etc all facing huge capacity and no demand issues. What was true for Westland, and to an extent Synlait when Mitsui wanted out- that was good for Bright. Is more investment in NZ good for Bright? time will tell. Maybe not.

Yili via Westland is continuing to invest in new manufacturing plants - unlike Synlait, Westland has been restructured and focus on increasing supply of products in strong demand.

Synlait embarked on an ambitious debt funded expansion into manufacturing products without ascertaining proper demand - eg. $70m into Plant based nutritional products. Guess they thought they could come up with another A2 winner?

[Balance]

I don't own shares in Synlait so I don't follow them at all and haven't for years. So I was profoundly shocked when I became aware that their shareprice was 46.5c! The last I remember of them was before the pandemic when the shares were over $9! That is a staggering loss of capital for investors on the order of 95% or so. With a few exceptions, like the terrible (as in it should never have been listed) biotech Genesis Research and Development Corp and a few others, I haven't seen anything like this since the bad old days following the 1987 sharemarket crash when all the Corps went belly up and investors lost all the money they had borrowed from the bank. The dreaded permanent loss of capital, but, still owing the Bank! Judge Corp, Chase Corp, Renoulf Corp, Equticorp, et al. Corpse, rather than Corps, would be the more accurate description of them and that was even before the market collapsed. So I feel for any investors in Synlait who find themselves in this position, and there will be plenty of them too.

The question for me is how did this happen when New Zealand is supposed to be the Saudi Arabia of milk, and milk is our largest export earner? And can those lessons be applied to other NZX-listed companies in order to avoid investing in them?

https://www.stuff.co.nz/business/350232971/what-went-wrong-synlait

Dairy company Synlait was at one point the best performing stock on the NZX.

But this week the company, which describes itself a “game changer” in the industry, reported a $96 million first-half loss and plans to offload under-performing assets in an effort to turn its fortunes around.

Shares in the former dairy industry darling, which once traded at more than $13, slumped to just 67 cents after the result was revealed on Tuesday.

Trouble has been brewing at the company for years.

[JimmyTrade]

Yili via Westland is continuing to invest in new manufacturing plants - unlike Synlait, Westland has been restructured and focus on increasing supply of products in strong demand.

Synlait embarked on an ambitious debt funded expansion into manufacturing products without ascertaining proper demand - eg. $70m into Plant based nutritional products. Guess they thought they could come up with another A2 winner?

This plant based nutritional has still to play out, the next 6-12 months will be telling on the demand the new customer has. It will prove some diversification to the customer base something Synlait is struggling with. I agree that Synlait does have quite the appetite for risk without the luxury of the working capital to support this.

Strategic acquiring of Dairyworks to diversify market reach and product portfolio only attempt to sell-off a couple years later is just an example of the mismanagement of this business not to mention the investment into liquid products 5 years ago which hasn't delivered anything in terms of meaningful volume (a couple tonnes of UHT cream but not enough scale to be profitable).

The three big clouds: customer diversification, debit levels and inventory management.

[Jaa]

Things very different in today's environment- the China domestic industry has grown up, has become very capable and much safer. CCP driving a nationalistic buy local campaign. Chinese companies were paying over the odds to buy expertise and process for reasons of food security. That ship has largely sailed with almost no stainless steel investment in NZ anymore, and places like Happy Valley, Bodco, DNL etc all facing huge capacity and no demand issues. What was true for Westland, and to an extent Synlait when Mitsui wanted out- that was good for Bright. Is more investment in NZ good for Bright? time will tell. Maybe not.

The other market change is through incompetence the CCP has made it so unattractive to have children in China that the birth rate has collapsed so there has been a big drop in demand from China for NZ milk powder.

[hesiod]

From what I can tell of the footprint OC are building another dryer at Horotiu. They have a shiny new (substantial) warehouse right across the road in the PoA inland port.

[billkiapi]

Pretty sure that I saw Fonterra reducing stainless in the Waikato… some examples of investment but more examples of retrenchment I think

[kiora]

"Fonterra confirms Waikato plant closures, hopes to redeploy staff
Benn Bathgate
Benn Bathgate

April 12, 2024
Share
FC6C067251754256B75935EB32578EBA
The Fonterra Dairy Factory in Waitoa, which is set to see 41 roles ‘impacted’ due to changes revealed by the dairy giant.
CHRISTEL YARDLEY / WAIKATO TIMES

Dairy giant Fonterra has confirmed plans to close a number of plants at two of its Waikato sites, a move the company said would see 41 jobs “impacted”.

Fonterra’s director of NZ manufacturing, Alan Van Der Nagel, told the Waikato Times that like all good businesses, they are “always looking to optimise our operations”.

“Waitoa PDC (specialty powders) and the site’s coal centre, along with dryer one and two at Te Rapa, have served us well,” he said.

“But they are ageing assets and are no longer efficient to operate. For these reasons, we have let our teams know of plans to close these plants. Our Waitoa and Te Rapa manufacturing sites will continue to operate."

https://www.waikatotimes.co.nz/nz-news/350243041/fonterra-confirms-waikato-plant-closures-hopes-redeploy-staff

"OCD’s new Horotiu plant is next to Affco’s meat processing plant and headquarters."

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-general-news/ocd-plant-opening-a-big-milestone

More competition

"Olam Food Ingredients (ofi), the company behind a multi-million dollar milk processing plant in Tokoroa, has moved into its second phase of investment and is looking for farmers to supply milk for “specialised and sustainable protein” ingredients."

https://www.stuff.co.nz/business/300819049/new-tokoroa-milk-plant-owners-offers-high-returns-for-local-farmers

[Balance]

"Fonterra confirms Waikato plant closures, hopes to redeploy staff
Benn Bathgate
Benn Bathgate

April 12, 2024
Share
FC6C067251754256B75935EB32578EBA
The Fonterra Dairy Factory in Waitoa, which is set to see 41 roles ‘impacted’ due to changes revealed by the dairy giant.
CHRISTEL YARDLEY / WAIKATO TIMES

Dairy giant Fonterra has confirmed plans to close a number of plants at two of its Waikato sites, a move the company said would see 41 jobs “impacted”.

Fonterra’s director of NZ manufacturing, Alan Van Der Nagel, told the Waikato Times that like all good businesses, they are “always looking to optimise our operations”.

“Waitoa PDC (specialty powders) and the site’s coal centre, along with dryer one and two at Te Rapa, have served us well,” he said.

“But they are ageing assets and are no longer efficient to operate. For these reasons, we have let our teams know of plans to close these plants. Our Waitoa and Te Rapa manufacturing sites will continue to operate."

https://www.waikatotimes.co.nz/nz-news/350243041/fonterra-confirms-waikato-plant-closures-hopes-redeploy-staff

"OCD’s new Horotiu plant is next to Affco’s meat processing plant and headquarters."

https://www.ruralnewsgroup.co.nz/dairy-news/dairy-general-news/ocd-plant-opening-a-big-milestone

More competition

"Olam Food Ingredients (ofi), the company behind a multi-million dollar milk processing plant in Tokoroa, has moved into its second phase of investment and is looking for farmers to supply milk for “specialised and sustainable protein” ingredients."

https://www.stuff.co.nz/business/300819049/new-tokoroa-milk-plant-owners-offers-high-returns-for-local-farmers

Got to move with the times and the above are indicative of aged inefficient plants being put to ‘pasture’ and new efficient plants being brought onstream.

Interesting thing is that it has taken overseas interests to provide real competition to Fonterra (being OCD, Olam, Westland and Synlait). Otherwise, NZ farmers would still be at the complete mercy of the incompetent dated management of Fonterra of old.

So do farmers want to continue to support new entrants or risk being held hostage to Fonterra as they were in the last?

[whatsup]

I see in todays Business News that a large dairy system which owes the BNZ $36 mil has had receivers appointed, is the the sign of things to come, can someone add further details ?

[kiora]

I am hearing even the biggest ones with 50 % equity being contacted weekly by their banks while being gouged 8.5% interest
"Rising costs, falling revenue

The 2022/23 dairy season was a bad combination of rising costs and falling revenue. DairyNZ estimates that dairy operating expenses in 2022/23 amounted to $8.16 per kgMS, up sharply from $7.23 in 2021/22. The start of the war in Ukraine in early 2022 led to a sharp rise in the cost of diesel and fertiliser, and rampant inflation bumped up the cost of nearly everything else. Fonterra’s payout to farmers for 2022/23 was estimated to be $8.20, down from a record level of $9.30 in 2021/22. These shifts take the average farm from a solid profit in 2021/22 to barely breaking even in 2022/23. Across the dairy farming industry, this amounted to a drop in revenue of $2.0b.

Heading into the 2023/24 season, Fonterra dropped its forecast payout further, to $7, then $6.75, driven primarily by weaker demand from China. The latest drop amounts to a $2.7b fall in revenue for dairy farmers, on top of the $2.0b drop in the previous season. DairyNZ forecasts that costs will ease slightly, taking the break-even point down to $7.51 for the 2023/24 season – an improvement, but still higher than revenue. The reduction in break-even is in part driven by farmers deferring expenditure to match the lower payout."
https://www.infometrics.co.nz/article/2023-08-rising-costs-falling-revenue-tough-season-for-dairy-farmers

[kiora]

I see in todays Business News that a large dairy system which owes the BNZ $36 mil has had receivers appointed, is the the sign of things to come, can someone add further details ?

Been around since 2018 but I suspect a lot longer than that
https://app.companiesoffice.govt.nz/companies/app/ui/pages/companies/6924517/shareholdings

[whatsup]

I am hearing even the biggest ones with 50 % equity being contacted weekly by their banks while being gouged 8.5% interest
"Rising costs, falling revenue

The 2022/23 dairy season was a bad combination of rising costs and falling revenue. DairyNZ estimates that dairy operating expenses in 2022/23 amounted to $8.16 per kgMS, up sharply from $7.23 in 2021/22. The start of the war in Ukraine in early 2022 led to a sharp rise in the cost of diesel and fertiliser, and rampant inflation bumped up the cost of nearly everything else. Fonterra’s payout to farmers for 2022/23 was estimated to be $8.20, down from a record level of $9.30 in 2021/22. These shifts take the average farm from a solid profit in 2021/22 to barely breaking even in 2022/23. Across the dairy farming industry, this amounted to a drop in revenue of $2.0b.

Heading into the 2023/24 season, Fonterra dropped its forecast payout further, to $7, then $6.75, driven primarily by weaker demand from China. The latest drop amounts to a $2.7b fall in revenue for dairy farmers, on top of the $2.0b drop in the previous season. DairyNZ forecasts that costs will ease slightly, taking the break-even point down to $7.51 for the 2023/24 season – an improvement, but still higher than revenue. The reduction in break-even is in part driven by farmers deferring expenditure to match the lower payout."
https://www.infometrics.co.nz/article/2023-08-rising-costs-falling-revenue-tough-season-for-dairy-farmers

Dont forget to add the dividends from the dairy company.

[Ggcc]

All I can see is Bright Dairy will end up with a business Partner and takeover this dog. ATM might be the runner up and it will be with conditions that work for both parties.

[Bikeguy]

Milk, in any form whether its infant formula or solid etc is always going to be needed, she’s tough times balancing the books all round at the moment ( farmer or processor) however the market has its stellar years too
All industry's have peaks and troughs, this is simply one of the low periods.

[mike2020]

Im in the milk not from cows camp. You can't get beer from a cow but you can brew it.

[Ggcc]

Im in the milk not from cows camp. You can't get beer from a cow but you can brew it.
It might grow in consumption over the years, but it will take years longer than people think. Italy has stopped the sale of fake meat (and won't be the last country) and will probably do the same with fake milk.

[Balance]

Milk, in any form whether its infant formula or solid etc is always going to be needed, she’s tough times balancing the books all round at the moment ( farmer or processor) however the market has its stellar years too
All industry's have peaks and troughs, this is simply one of the low periods.

All the more reason why NZ simply has to move up the value chain. In the extreme, sell chocolates rather than milkfat.

[Bikeguy]

All the more reason why NZ simply has to move up the value chain. In the extreme, sell chocolates rather than milkfat.

Yes, absolutely agree, don’t sell the raw products, value add…

[kiora]

I am hearing even the biggest ones with 50 % equity being contacted weekly by their banks while being gouged 8.5% interest
"Rising costs, falling revenue

The 2022/23 dairy season was a bad combination of rising costs and falling revenue. DairyNZ estimates that dairy operating expenses in 2022/23 amounted to $8.16 per kgMS, up sharply from $7.23 in 2021/22. The start of the war in Ukraine in early 2022 led to a sharp rise in the cost of diesel and fertiliser, and rampant inflation bumped up the cost of nearly everything else. Fonterra’s payout to farmers for 2022/23 was estimated to be $8.20, down from a record level of $9.30 in 2021/22. These shifts take the average farm from a solid profit in 2021/22 to barely breaking even in 2022/23. Across the dairy farming industry, this amounted to a drop in revenue of $2.0b.

Heading into the 2023/24 season, Fonterra dropped its forecast payout further, to $7, then $6.75, driven primarily by weaker demand from China. The latest drop amounts to a $2.7b fall in revenue for dairy farmers, on top of the $2.0b drop in the previous season. DairyNZ forecasts that costs will ease slightly, taking the break-even point down to $7.51 for the 2023/24 season – an improvement, but still higher than revenue. The reduction in break-even is in part driven by farmers deferring expenditure to match the lower payout."
https://www.infometrics.co.nz/article/2023-08-rising-costs-falling-revenue-tough-season-for-dairy-farmers

"Global dairy price recovery forecast to be slower than expected - Rabobank"
https://www.nzherald.co.nz/the-country/news/global-dairy-price-recovery-forecast-to-be-slower-than-expected-rabobank/RAR36GLB3FFAJEA7HG7HRUMUAU/

"A large-scale dairy farming business once worth more than $125 million but placed in receivership last month owes its bank $36.5m, a court judgment reveals.


https://www.nzherald.co.nz/business/dairy-farm-receivership-bnz-owed-365m-from-waitonui-limited-partnership/UGD6RFCSXRB65DWHULGYN7QNEM/

[Newman]

The dairy industry needs a strategic A2 policy
https://www.interest.co.nz/rural-news/127749/keith-woodford-reveals-rather-remarkable-transition-underway-where-a2-beta-casein


"To understand the opportunity that New Zealand now faces, the first point is to recognise that a2Milk has trademarks but no blocking patents. Accordingly, there must be renewal and exit clauses within the current licence that lead to an exit strategy with due notice. It would be remarkable if that were not the case".

[billkiapi]

For SML, the trouble started when they bit the hand that fed them. Diversification was the right choice for SML, they executed it very badly and then doubled down with a fight or fights with A2M without the contractual backing. When this all comes out, I reckon we are in for a messy story of ego and vanity for SML to even think they could bluster their way through this

[billkiapi]

With founder gone, prepare for a cap raise is my best guess. With Fonterra exiting consumer, timing ain't great for selling Dairyworks and North Island assets

[Balance]

With founder gone, prepare for a cap raise is my best guess. With Fonterra exiting consumer, timing ain't great for selling Dairyworks and North Island assets

"If people seriously think that SML is going to sell Dairyworks and the NI assets, they obviously do not have the foggiest idea of what's happening behind the scenes."

Yesterday, what my farmer contact in the Waikato who supplies milksolids to SML said when we were discussing the state of the dairy industry.

[Bikeguy]

"If people seriously think that SML is going to sell Dairyworks and the NI assets, they obviously do not have the foggiest idea of what's happening behind the scenes."

Yesterday, what my farmer contact in the Waikato who supplies milksolids to SML said when we were discussing the state of the dairy industry.

Hi Balance, I am genuinely interested in what you are saying, any chance you could share your thoughts on where this is all going? Appreciated👍

[whatsup]

So why wouldnt Graham Hart buy SML along with the Fonterra consumer brands , wrap them together and float the enterprise on the NZX, ASX and what ever other exchange would suit. !!

[Simsee]

So why wouldnt Graham Hart buy SML along with the Fonterra consumer brands , wrap them together and float the enterprise on the NZX, ASX and what ever other exchange would suit. !!
I think you may find Mr Hart may struggle to get investors on board based on previous outcomes

[whatsup]

I think you may find Mr Hart may struggle to get investors on board based on previous outcomes

With his deep pockets he could afford to buy the lot, knock them into shape wait a couple of years , float, take his seed money out and still be left with 40% inside 3 or 4 years.

[RupertBear]

Hi Balance, I am genuinely interested in what you are saying, any chance you could share your thoughts on where this is all going? Appreciated

As a holder :(:rolleyes: I would be genuinely interested to hear Balances thoughts as well :)