Synlait Milk chief executive Leon Clement's sudden and unexpected departure after two-and-a-half years in the job comes at a difficult time for the dairy processor.
The company, 39 per cent-owned by China's Bright Dairy and 20 per cent by its biggest customer, a2 Milk, last month reported a 76 per cent slump in first-half earnings to $6.4m, driven by Covid-19 disruption.
Synlait said it expected to be "broadly break-even" in the full year, a marked deterioration from the previous guidance, which was for the net profit to be half that of the previous year's $75.2m.
Chair Graeme Milne said at the time that it had been a challenging first half, "and we continue to find ourselves in a period of significant uncertainty and volatility as Synlait faces into several headwinds".
Covid-19 came at a time when the company was nearing the end of an extensive capex programme, which has included building a new $260m infant formula plant at Pokeno, at the end of Auckland's southern motorway.
Synlait, as a2 Milk's sole supplier of infant formula, has been hit by a2 Milk's problems in the unofficial "daigou" trade into China, which has been curtailed by Covid-19 travel restrictions.
The pandemic came at a time when both companies were taking steps to become less reliant on each other.
Synlait embarked on a huge capital expenditure programme and diversified into consumer foods with the purchase of Dairyworks in 2019 for $112m.
At the same time a2 Milk has bought Mataura Valley Milk, which it plans to use for infant formula manufacture.
A2 Milk is also sourcing a1 beta-free milk free from Fonterra.
Synlait's share price has long been in the doldrums, trading at $13.40 at the time of Clement's appointment to closing at $3.43 today.
Clement's departure came as a big surprise to the market.
"You always raise your eyebrows when it's been a company that is underperforming," Mark Lister, head of private wealth research at Craigs Investment Partners said.
"Two-and-a-half years is a short tenure for a chief executive," he said.
"While there have been some achievements that have been made through that period of Leon Clement's leadership, when you look back at the company's performance and the share price, it probably makes for less impressive reading," he said.
"Having said that, he has had lots of challenges to deal with - the pandemic and the issues around a2 Milk," he said.
"He is leaving at a difficult time for the company."
The Herald understands Clement's move was entirely his own decision.
"If you step back and look at the timeline of his time at Synlait since September 2018, the company has been through a few business decisions," Harbour Asset Management senior research analyst Oyvinn Rimer said.
"They have spent a lot on capex to build new processing plants."
A high fixed-costs business like Synlait was always going to find it difficult when demand from its biggest and most profitable business - supplying infant formula to a2 Milk - slumped.
"It's been a double whammy recently with them having empty plants and with their best business struggling as well," he said.
Co-founder and former chief executive John Penno will become interim CEO while a replacement is sought.
Rimer said Penno was "the best possible" caretaker in the short term.
Synlait said that it was "with regret" that the board had accepted Clement's resignation.
"The board wishes to record its thanks and recognition of the major achievements he has overseen," it said.
"It also recognises the substantial impact that Covid-19 has had on Synlait and the difficult challenge this would present to any management team."
Milne said Clement had been "an authentic and transformational leader".
In the statement, Clement, a former high ranking executive at Fonterra, said: "It has been an intensive period of change and growth and I am proud of our achievements.
"Synlait has an amazing team that is making a positive and sustainable impact in the areas we operate."
In today's statement, Synlait listed Clement's achievements as having delivered a record net profit of $82.2m, the issue of $180m of bonds to the NZX market, and last year's successful $200m equity raising.