Synlait Milk warns of $77m to $82m half-year loss after Dunsandel issues

Synlait's plant near Dunsandel, Canterbury. Photo / NZME

Synlait Milk says it is heading towards a first half net loss of $77 million to $82 million because of what it said were “manufacturing challenges” at its Dunsandel plant and lower returns from its commodities portfolio.

The company, which has struggled to perform in recent years, said its strategy was being reset to put it on a “pathway to success”.

Synlait said that while manufacturing challenges experienced at Dunsandel have now been largely resolved, it continued to face related cost and operational impacts.

“The need to rebuild inventory across product segments required significant adjustments to Synlait’s manufacturing plans this dairy season, relative to a normal year.

“To enable these adjustments, additional raw milk sales were made during the half year 2026 which weighed heavily on margins and operating costs.”

In addition, Synlait had taken a conservative approach and not recognised further deferred tax assets arising from unused tax losses beyond those recorded at July 31, 2025.

By late morning, the company’s shares had dropped by 7.5c or nearly 12% to 56c on the back of the announcement.

The milk processor said it expects its underlying earnings before interest, tax, depreciation and amortisation (ebitda) to be break-even to $5m for the half, with a “reported” ebitda loss of $28m to $33m.

Synlait noted in its last financial statements that an insurance claim had been accepted relating to the losses Synlait incurred as a result of the manufacturing challenges at Dunsandel.

“While the claim is expected to recover a portion of these losses, the final amount and timing of reimbursement remain subject to further assessment and settlement processes.”

Synlait said it was actively engaging with its banking syndicate while working towards the completion of the North Island asset sale on April 1.

Chief executive Richard Wyeth said: “We are very disappointed with the six-month result and the impact it has had on the pace of our financial turnaround.

“However, we have made progress with real momentum in our operations, a renewed Canterbury-based executive leadership team and the North Island sale set to fundamentally strengthen Synlait.

“Our strategy is being reset, and we are confident it will provide a pathway to return Synlait to success, although this will take at least 12 months,” he said.

The company sold its state-of-the-art factory at Pōkeno to Chicago-based Abbott for $307m last year as part of efforts to restore its balance sheet.

Synlait had earlier gone through a major recapitalisation, which resulted in China’s Bright Dairy’s ownership going from 39% to 65.25%.

Infant formula marketer A2 Milk has a near 20% stake.

Synlait’s annual net loss for the July 31, 2024, year fell to $39.82m from $182.11m a year earlier.

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

• Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter – your essential weekly round-up of all the business news you need.