Makes you wonder why they even built the thing. The white elephant almost sunk the ship!
Instant success is a curse and a gift. The curse is you think luck is skill. The gift is you know it can be done. Then it’s a race to turn luck into skill before you lose it all.
Covid sank many a business and we saw the damage with ATM as well.
Maybe covid wasnt ideal. But the issue is they built the sucker without any firm demand for it?!? They pretty much took a big gamble...
Instant success is a curse and a gift. The curse is you think luck is skill. The gift is you know it can be done. Then it’s a race to turn luck into skill before you lose it all.
The Company’s newest dairy facility is located at Pokeno, Waikato. In addition to being able to produce infant grade dairy products, the facility is also provisioned for the production of plant-based Advanced Nutrition and other adult based nutritional products. The Company’s other North Island assets include a blending and canning facility located at a leased location close to Auckland airport and a leased warehouse facility located in Wiri. Synlait North Island has a total of approximately 270 FTE employees across its three sites operating primarily in manufacturing and warehousing roles. North Island also utilises shared services from Dunsandel including lab testing.In November 2020, Synlait announced that it had entered into a manufacturing supply agreement with a global leader in Advanced Nutrition products. While the plant was largely complete at the time,an additional ~$100 million investment for additional processing and packaging customisation was required to satisfy the customer’s requirements for plant-based products.
Synlait has invested a total of approximately $450 million in the North Island since 2018 as part of its strategy to diversify customers, products and geography. While this expansion was at the time supported by strong commercial rationale based on expected growth in demand levels for Advanced Nutrition products (including potential a2MC demand), the Covid-19 disruptions and changing economic circumstances have subsequently resulted in a considerable change in outlook. Some performance issues and customer demand levels lagging well below expectations have meant that plant utilisation has been extremely low. Consequently, Synlait’s North Island assets have performed poorly and are expected to generate meaningful losses and negative cash flows over the medium term (estimated >$20m EBITDA loss contribution in FY24).
Divestment: Either sell the North Island assets on an as-is basis to potential buyers with an interest in Advanced Nutrition or shut down the plant and realise the value of land and buildings as well as plant and equipment on a salvage value basis.
− Mothball the plant: We understand that Synlait considered a scenario where the plant is mothballed and then potentially recommissioned as a nutritional ingredients plant upon securing a level of demand which would ensure a sufficient level of capacity utilisation. This alternative is no longer being pursued
Pretty clear this thing will get sold to below replacement value. a2 $900mm going to come in handy here
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