South Island dairy company Synlait Milk has posted its forecast loss as it was hit by disruptions for its major customer, but predicted a return to "robust" profitability this year.
Synlait chief executive John Penno Photo: Supplied
Key financial highlights
(compared to previous financial year)
- Net loss $28.5m vs profit $74.3m
- Revenue $1.37bn vs $1.30bn
- Full year payout $7.82 vs $7.30
- Forecast 2022 payout $8.00/kilo of milk solids
Synlait's loss was at the top end of its forecast range of $20m-$30m as it bore the cost of sharp fall in orders for infant formula from its major customer A2 Milk.
"After nine years of profitability, it is very disappointing to post the company's largest ever loss. Covid-19 hit Synlait late and hit the company hard," it said in a statement.
It described the Covid disruption and problems with the key China market, which affected itself and A2 Milk, as a bull-whip effect - a distortion from one end of a supply chain to the other which can cause inefficiencies, excessive stock build up, and mistaken production.
Synlait chief executive John Penno said it had failed to deliver on its advantages and strengths, which it was now fixing.
"We have begun to execute a plan to rebuild: We have reviewed and remain confident in our strategy. However, execution clearly needs to improve."
He said the company was changing its structure to meet its strategy, was planning governance changes, had reset its banking arrangements, freeing up cash from its inventory, and improved its capital management.
"We have built a plan to return to robust profitability."
The company unveiled a new chief executive, Grant Watson, who has spent barely six months as the head of the Taupō-based Miraka Milk and was formerly a senior executive at Fonterra.
Penno has been filling the chief executive since the abrupt departure of Leon Clement in April.
The company did not give any more detail on the planned axing of up to 150 jobs, announced in early September, which Synlait said were necessary as it looked to align the workforce to a set of new objectives, with an annual saving of $10m-$12m.
However, it said it expected a major improvement in performance in the coming year.
"Synlait's performance will build into 2023 as its new multinational customer at Synlait Pokeno ramps up, and its liquids and consumer foods businesses continue to grow."
The company said this year's result would include a one-off gain of about $17m from the sale and leaseback of the land and building at Synlait Auckland.