easy money back in 2020. things a lot tighter now. surely will have to take less than what they paid.
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Graeme Hart snares 2023 biggest leasing deal: $100m Wiri warehouse to Synlait
https://www.nzherald.co.nz/business/...CXKVFCSO25VF4/
Need it for this new huge global customer
All falling into place
The next 12 months could look entirely different for SML if everything goes as planned. The key parts for SML's turnaround is the SAMR registration, timing of new Pokeno multi-national customer, management of debt levels, which are all closely linked together.
SAMR
Part of their main problem is the the SAMR re-registration putting a hold on how they manage their future which they expect to be completed this month as stated:
"The State Administration for Market Regulation (SAMR) re-registration process remains on track. The on-site audit process is complete and Synlait still expects to receive re-registration and commence production in Q4 FY23, subject to SAMR approval."
Timeline expected to be:
Q3 FY23 - Audit of facilities
Q4 FY23 - Re-registration and commencement of production
Q2 FY24 - Product back onto the market
Inventory levels
SML stocked extra inventory mainly for A2's sake due to the wait on SAMR re-registration by increasing finished goods held for the same period last year from $203m to $277m or if compared to the lower inventory period of $80m its a massive contrast, it should improve on SAMR re-registration and when they sell down their inventory to A2. The capital from that can be used to repay their debt.
"Inventory build for The a2 Milk Company resulted in higher closing inventory, up 45% (H1 23: 10,545 MT, H1 22: 7,259 MT)"
Debt
With the sale of Dairyworks (purchased 2020 $112m) and Talbot Forest Cheese (purchased 2019 for $38m) to pay down some debt that should put more confidence for the banks for refinancing. Sell down could generate up to $150m.
"The Directors are confident that the facilities, which expire on 1 October 2023, will be renewed in July 2023"
Pokeno
Part of a drain on capital is trying to set up their facilities in preparation to manage a new multi-national customer, which once they start delivering and getting those invoices out should help boost working capital and cover their expenses. Problem with fresh set ups is that they are always 'money burning furnaces' until it delivers.
"Demand coming from Synlait Pokeno's new multinational customer, once commercial production commences, will assist in delivering strong double-digit growth in Advanced Nutrition sales volumes in FY24."
Overall
The capital demands are intensive for SML right now from holding more inventory for A2 while they wait for SAMR re-registration to the cost of setting Pokeno up for their new customer. The working capital required has increased debt levels by at least $100m. Add that along with freeing up capital from sales of Dairyworks and Talbot Forest Cheese which could generate up to $150m, thats about $250m or more that could be available depending their burn rate at Pokeno. Once you subtract that from their current debt levels $518m the situation isn't actually that bad.
They should get SAMR re-registration in June and renew banking facilities in July, along with potential sales for Dairyworks and Talbot Forest Cheese arranged, once thats all done I think their future as a going concern should be solved.
Well summarized, sb888.
I expect the sale of Dairyworks and Talbot Forest Cheese to proceed smoothly as there will be many Asian based food companies (especially China, Japan & Singapore) interested in taking a slice of NZ's value end dairy industry.
Think Olam (already in NZ) with its S$55 billion revenues and S$19.3 billion capital as one potential bidder. Chances are however that Bright Foods or one of the China companies will end up buying them.
Note how the yield of SML's bonds have fallen rapidly?
I saw on the ATM thread this linked was posted https://www.cfe-samr.org.cn/sldt/sdx...0605_4921.html, suggesting approval for SAMR, which I guess we will be find out soon enough, thought I might post it here since its directly relevant to SML. Links in Chinese but you can always translate it.
Translations say:
June 5, 2023 Infant formula milk powder product formula registration approval document (decision) mailing details list
serial number product name reporting unit mailing date mailing address EMS tracking number 1 ZhichuŽ infant formula milk powder ( 0-6 months old, stage 1 ) Synlait Dairy Co. Ltd. 2023-6-5 Room 1608 , Rui'an Plaza, No. 333 Huaihai Middle Road, Huangpu District, Shanghai 1284203733038 2 ZhichuŽ Older Infant Formula Milk Powder ( 6-12 months old, stage 2 ) Synlait Dairy Co. Ltd. 2023-6-5 Room 1608 , Rui'an Plaza, No. 333 Huaihai Middle Road, Huangpu District, Shanghai 1284203733038 3 ZhichuŽ Toddler Formula Milk Powder ( 12-36 months old, stage 3 ) Synlait Dairy Co. Ltd. 2023-6-5 Room 1608 , Rui'an Plaza, No. 333 Huaihai Middle Road, Huangpu District, Shanghai 1284203733038
Serial number 3 ?
https://www.google.com/search?q=how+...hrome&ie=UTF-8
cool looks promising