Synlait Milk has been granted a new lease on life, so why is chief executive Grant Watson leaving?
After two years and nine months in the role, Watson announced his resignation soon after a comprehensive restructuring and a strategic reset for the dairy processor and infant formula maker.
The boardwill now start a global recruitment process, and Synlait’s Dairyworks chief executive Tim Carter has been appointed acting CEO.
“Grant’s tenure has been incredibly busy – notably resetting Synlait’s strategy to reduce our customer and market concentration risk, commercialising plant-based production at Pōkeno and our foodservice business in Canterbury, extending our reach into Southeast Asia, maintaining our China market access, and building an outstanding executive team,” chairman George Adams said.
Synlait has been through a series of measures aimed at shoring up its balance sheet, the last one – a share placement – resulting in China’s Bright Dairy gaining a majority interest in the company.
Watson had been at Taupō-based dairy company Miraka for less than a year when he received a call from Synlait’s chairman at the time, John Penno.
“John Penno – who I had not met before – asked me if I would be interested in coming into Synalit and resetting it,” he told the Herald.
Watson was appointed in January 2022.
“We have now reset the business, and so from my perspective, the reset is done and that should show in the year ahead.”
Looking back, Watson says winning State Administration for Market Regulation (SAMR) re-registration for the company’s Chinese label infant formula in mid-2023 was a major milestone.
Similarly this year’s big equity and debt restructuring, a focus on special creams in the foodservice business, getting a new customer on board at Pōkeno, and installing a new leadership team were all highly significant.
The restructuring involved raising $350m of fresh equity and debt at a time when the company’s market capitalisation was just $70m.
“If you look over what has happened over the last two and three-quarter years, there have been some huge undertakings,” he said.
“It has been a very comprehensive reset – there is no question about it.”
Watson says it’s been a long haul since January 2022.
“It [resigning] was a big decision to make, but it feels like the right time and we have a lot to be proud of.
“I’m really looking forward to decompressing and having some family time.”
Synlait's plant at Pōkeno.
“The foundations are a bit stronger and we have a great leadership team in place, but boy, oh boy, it’s been a really challenging time.”
Sudden timing
On the sudden timing of the announcement: “Let’s just say that I have given it a lot of thought in more recent times.”
“I think for me, we were heading into the summer and I’m really looking forward to spending some time with my family.
“It’s been two and three-quarter years, and it’s been 80 hours a week.
“That’s not sustainable, and so I leave the company happy that it’s in really good shape, but I am looking forward to having some downtime before I think about what’s next.”
Last year, at the Ebit level, Pōkeno cost the business around $47m.
Watson says the company has gone a long way towards getting costs out of Pōkeno, and another multi-national customer had been attracted to the site.
“I think in five to 10 years’ time, you would think that the utilisation would be up to 75%, and that’s to make a really healthy return on capital.”
Around 30% would be break-even for the plant.
After staring insolvency in the face, Watson says Synlait now has a second lease on life.
“The business has been given a second chance – it deserves it and it’s got it, and I think it’s really well-positioned.”
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
