Synlait delays first-half result, keeps market guessing

Synlait has delayed the release of its first-half result.

Debt-laden Synlait Milk has delayed the release of its first-half result by a few days but has left the market guessing as to why.

The company was to have announced its result for the six months to January 31 on March 25, but has shifted it out to April 2, just days after a big debt repayment falls due.

NZX rules stipulate that companies have 60 calendar days after the end of their reporting period to disclose their results.

Synlait, which counts infant formula marketer a2 Milk as its biggest customer, has a $130 million debt repayment due on March 28.

The company also has $180m in NZX-listed bonds on issue.

The bonds, which mature on December 17 this year, were last quoted at a yield of 35.75 per cent.

Synlait has had its profitable Dairyworks business up for sale to pay down its debt, but there has so far been no news of progress on that front.

If it came to a capital raise, Synlait’s main shareholders a2 Milk, with just under 20 per cent, and China’s Bright Dairy (39 per cent) are both well-placed to take part.

“Given the shareholding structure, I think it’s terribly difficult to come up with a good solution that benefits everyone,” Oyvinn Rimer, senior research analyst at Harbour Asset Management, said.

“I’m guessing that the shift in the reporting dates probably means that they are working on something, whether it’s an asset sale or an equity raise, a mix of both, or something else. I don’t know,” Rimer said.

Early in February, Synlait said it expected its net loss for the six months to be in a $17-$21m range.

In its statement, Synlait said its half-year result had mainly been impacted by increased financing and operational costs, ingredient margin reductions and infant formula margin reductions.

“The board and management are actively working on the need to deleverage Synlait’s balance sheet as a priority,” the company said.

Synlait completed a refinancing in September last year with a banking syndicate comprising ANZ, Bank of China, China Construction Bank, HSBC, and Rabobank.

Harbour Asset’s Rimer said Synlait “sorely needed” to sell Dairyworks at an acceptable price and start delivering profitable outcomes again.

“An equity raise is quite a high possibility, but it’s tricky,” Rimer said.

“There are so many different options.

“None of them are very profitable for the bigger shareholders, and the minority shareholders.”

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.