File photo. Photo: Eiliv Aceron for Unsplash
Dairy company Synlait has made a $96 million first half loss as it looks to turnaround the business with a review of its North Island assets.
The speciality milk producer put itself in a trading half last week as a $130-million debt repayment came due, but it said that payment was now due 15 July, and it had also managed to secure $30m in short-term funding to the end of June, along with amendments to its banking arrangements.
Its net debt rose 8 percent to $559m.
Key numbers for the six months ended January 2023 compared to a year ago:
- Net loss $96.2m vs net profit $4.8m
- Revenue $652.9m vs $632.3m
- Financing costs $24.5m vs $14.8m
- Underlying net loss $70.4 vs profit $16.1m
- Forecast base milk price for 2023/24 $8.09 per kilo of milk solids
- Full year forecast profit $45m-$60m
"The delivery of our half-year results brings together several reset initiatives, with the announcement of an amendment to our banking facilities, and a strategic review of the North Island assets," Synlait chief executive Grant Watson said.
He said Synlait's major shareholder Bright Dairy with a 39 percent stake, was supportive of the company's plan to improve its balance sheet.
"Bright Dairy's support, coupled with the banking syndicate's support, offers Synlait additional stability and confirms that our largest shareholder and banking syndicate remains very supportive."
However, a number of material uncertainties remained.
"Given that Synlait's share price is trading at a significant discount to its net tangible asset value, the board believes that asset realisation should be progressed to produce maximum value for our shareholders," the company said it its market report.
The company's share price was down about 60 percent over the past year, and trading down nearly 15 percent at 64 cents this morning following the lifting of its trading halt.
It was also yet to negotiate a sale of its Dairyworks business, and was considering the sale of other assets.
"Synlait will undertake a strategic review of its world-class North Island assets, including its manufacturing facility in Pōkeno and its blending and canning facility in Auckland," it said.
As well it was in arbitration with major customer, A2 Milk, after it cancelled Synlait's exclusive supply agreement last September and was claiming an undisclosed amount of related costs.
However, Synlait had already been diversifying its product range and customer base to reduce its reliance on its biggest customer A2 Milk, for whom it makes infant formula.
"It has been a challenging half-year for Synlait as we continue to reset the company to better achieve our strategic objectives, while working to significantly reduce our elevated levels of debt," Watson said.
He said the company was focused on its advanced nutrition and foodservice business and well positioned ahead of emerging customer demand trends.
However, the full year result was expected to be significantly down on the year earlier, with a softening in demand, a squeeze on margins, adverse foreign exchange and product mix, and increased operating expenses, as well as future impairments related to Synlait and Dairyworks.