Synlait Milk's new chief executive Leon Clement is quick to dispel any intrigue surrounding his departure from a high-ranking role at Fonterra in May.

For Clement, who had been with the co-op for nearly 17 years, it was simply a matter of being headhunted to replace Synlait's long-standing chief executive and co-founder, John Penno.

"I think that sometimes at senior levels there is lots of opportunity for speculation, but yeah, I had a great ride and I enjoyed my time at Fonterra," Clement tells the Herald.

Clement cut his teeth with Deloitte Consulting - mostly in change management, strategy and operations for district health boards in the Auckland region.

Advertisement

His first job with Fonterra was at Tip Top, and he remained in Fonterra's consumer and foodservice business throughout his tenure.

Clement's first overseas assignment for Fonterra was in Vietnam, and then came Sri Lanka.

"It was fun. They are great markets. And they were very different markets."

In fast-paced Asian economies, market feedback was always quick.

"So you could try something and you would know pretty quickly if it would work or whether you made a mistake, so I think the learning process was much faster."

Interviewed at Synlait's new canning facility in Mangere, Clement's comments are still peppered with "we" when he refers to his former employer.

"We had rapid growth and good success. The business grew and the people grew around me, so I got a real kick out of that kind of experience.

"It was not always in a straight line – it was tough – my first week in Vietnam they shut down the currency market so I was not able to get any dong out of the country."

Fonterra hit a bump in 2013 when it withdrew milk powder from Sri Lanka under orders from the local authorities, for showing traces of the toxic agricultural chemical dicyandiamide (DCD), although it disputed the accuracy of the testing. In the aftermath of the DCD issue, Fonterra had to "re-earn" its licence to operate again as a business there.

After a successful career at Fonterra, culminating as managing director of Fonterra Brands in New Zealand, Clement says he reached a point where he felt it was time to go.

"There were new opportunities on the horizon and I didn't feel that I was able to lead as effectively as I had been able to in the past, and that it was time for me to make a call and move on."

Clement doesn't disagree with the suggestion that the co-op, with its new chairman and an interim chief executive, is in a state of flux.

"I have been around long enough to see that businesses do go through these sorts of cycles and there is this kind of cleanse and purge process that happens with change."

Clement says Fonterra and the entire industry is facing a period of change as the industry's blueprint legislation, the Dairy Industry Restructuring Act, comes under review.

"Fonterra is going through change and, environmentally, there is a call for change as to how we do things and how we have done things.

"Synlait really wants to lean into that and be seen to lead that, but again it's a wider issue for industry."

Canterbury-based Synlait - like its close ally a2 Milk - has had a stellar run on the sharemarket.

At yesterday's closing level of $13, the stock has almost tripled in value in just one year.

That kind of share price performance comes with high expectations for the company's future profitability - a point not lost on Clement, who took up the reins last month.

The company is due to report its annual result on September 19 and the consensus of market forecasts is for revenue to reach $900 million, up from the previous year's actual number of $759m, and for earnings before interest and tax to hit $109m (from $65.8m). Synlait's forecast for infant formula sales in the year - 35,000 tonnes - will also be closely watched.

"I know that we have to deliver and that we have high expectations from shareholders, but from what I have seen so far, we have the support of the board and support of the shareholders, who want us to succeed, and the business is in good shape," Clement says.

"We have a healthy balance sheet. We have shown good commitment to invest in the right areas and to get away from some of the concentration risk that we have, and so strategically I think that we are well set up for continuing the story."

The issue for Synlait and a2 Milk has been what one analyst calls their "co-dependency". Clement agrees it's an apt desription.

"They need us and we need them. And to an extent, that has occurred because both organisations have been successful with each other and both organisations have in a transparent and open way, worked together to de-link that co-dependency."

Until the announcement of a2 Milk's joint venture with Fonterra in February, Synlait had been a2 Milk's sole supplier in New Zealand.

For Synlait's part, the company has done its bit to diversify away from a2 Milk by entering a partnership with Foodstuffs South Island to tap the fresh milk market, involving a $125m liquid dairy packaging plant at Dunsandel in Canterbury, now under construction.

Synlait will become Foodstuffs South Island's exclusive supplier of its private label fresh milk and cream under the supply agreement, and Clement expects more deals of that kind.

Despite the receivership of construction firm Ebert early last month, he says the Dunsandel project is running on schedule and the drying facility at Pokeno is gaining momentum.

Tetra Pak, Synlait's only contracted partner for the projects, has confirmed both will be delivered as originally planned.

Clement sees a2 Milk's move to double its stake in Synlait, to 16 per cent, as a vote of confidence.

"If you look at their balance sheet, it's as healthy as ours, so they have to decide what they want to do with that."

A2 is faced with the same strategic question - how to deepen the relationship while at the same time becoming less reliant on the other company.

Synlait is taking a two pronged approach. One part of that is extending and deepening the supply arrangement with a2 Milk and developing innovative products for them.

The second prong is dealing with dependency risks, and to that end Clement expects to see more arrangements along the lines of the Foodstuffs deal.

In the big picture, he scoffs at the suggestion that the industry is still too wedded to the bulk commodities trade and isn't doing enough to add value.

"At times I found that assertion that Fonterra is just another bulk commodities producer - that sound bite - has continued to pervade the public and the media perspective, and it's quite misleading.

"I think that New Zealand as a whole has made a huge transformation in moving our bucket of milk up the value chain.

"It's probably because I have worked in that side of the business and I have seen the growth that has come though and the scale that actually sits there."

As for Fonterra, which has faced attacks from several quarters over its earnings record and corporate governance, there are no parting shots.

"I had a great career with Fonterra - close to 17 years with the business. It was not like working for one organisation through that period.

"It was a real adventure. I got exposure to different kinds of businesses, different markets, and different investors.

"And I got some amazing support coaching and leadership from people in the industry during that time.

"I feel grateful for the opportunities that it gave me. I have shown my loyalty through the tenure I had with them, but they also backed me," he says.

"I think it's very important for our industry, our country and even for Synlait, that Fonterra continues to be successful."

Leon Clement

Job: Chief executive, Synlait Milk.
Age: 43.
Education: Engineering degree, University of Auckland; masters from Canterbury.
Family: Married to Jacqueline Clement, two young sons.
Hobbies: Boating, music, reading, cookery.
Last book read: The Square and the Tower by Niall Ferguson
Last Film seen: The Vanishing of Sidney Hall
Last holiday: The Dodecanese Islands in Greece