Synlait reports $4.3m net loss, net debt up 21 per cent

Synlait Milk has reported its 2023 annual result. Photo / NZME

Synlait Milk says its annual net loss came to $4.3 million while its net debt jumped by 21 per cent to $413.5m.

The dairy company’s earnings before interest, tax, depreciation and amortisation (ebitda) came to $90.7m, down 31 per cent on the previous year’s.

The company had previously advised the market that it expected a result ranging from a net loss of $5m to a net profit of $5m, compared with last year’s $34m net profit.

Total group revenue was down 3 per cent at $1.60 billion and operating cashflow was down 83 per cent at $39m.

Last week, Synlait’s biggest customer a2 Milk said it had given notice that it sought to cancel the exclusive manufacturing and supply rights for Synlait in respect of stages one to three of a2 Milk’s current infant milk formula products sold in China, Australia and New Zealand.

In its result, Synlait said 2023 was “highly challenging”, with material reductions in customer demand, CO2 shortages, extreme weather, the Covid-19 pandemic, inflation, ongoing investments in new product workstreams, and the launch and stabilisation of the company’s new enterprise resource planning (ERP) system.

“Looking ahead to the 2024 financial year, Synlait could still face challenging China market dynamics, softening global conditions more generally, and continued inflationary pressures across its cost base, which could impact future customer demand and the company’s overall profitability,” it said.

Synlait did, however, expect its advanced nutrition volumes to continue to grow at the Pokeno site in 2024, and the company’s overall ebitda performance was also expected to improve in 2024 compared to 2023.

Commenting on a2 Milk’s moves, Synlait said it disputed the company’s right to cancel the exclusivity arrangements.

Synlait did not offer an earnings guidance for the year ahead.

“While Synlait is confident in its strategy to right-size its cost base to current activities and its near-term advanced nutrition and foodservice growth opportunities, the uncertainty of broader macroeconomic factors means the company will not provide guidance at this time,” the company said.

The company said it was committed to its refreshed strategy to create a more focused company and remained “largely on track” to meet its five-year full year 2028 strategic ambitions.

A2 Milk has a near 20 per cent stake in Synlait. China’s Bright Dairy has about 40 per cent.

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