Synlait chair George Adams said the story over the past 12 months had been unprecedented, with the financial year best summarised by one word – “deleveraging”.
“The board’s decisions, and the changes implemented as a result, were driven by the need to reduce Synlait’s debt to more manageable levels,” he said.
“A two-step plan, underpinned by a substantial bank refinancing package, will see us achieve that tomorrow – Tuesday, October 1”
The 2024 comprised a long list of urgent challenges for Synlait.
“We can now confidently draw a line under several of the difficulties faced and move on to the more important matters concerning running a growing and viable business,” he said.
Chief executive Grant Watson said Synlait began 2024 with too much production capacity, unsustainably high levels of debt, significantly higher interest rates, and sharply declining demand for infant formula at a macro level.
“Although those challenges are evident in the year’s result, we begin 2025 with new momentum and a stronger financial foundation.”
Synlait, in the face of a farmer revolt, said it would offer a $0.20c / kg of milksolids to its South Island suppliers to retain their milk. North Island suppliers would get 5c/kg.
“While Synlait has historically enjoyed a trusted relationship with its farmer suppliers, the company acknowledges it now needs to work hard to regain confidence,” the company said.
A “significant majority” of farmer suppliers issued cessation notices before May 31.
“Farmers have been clear in their expectations of Synlait to reduce its debt levels while paying a competitive milk price and strong advance rates,” the company said.
Synlait had taken several steps to deliver a much-needed balance sheet reset and reduced debt to more manageable levels.
The restructuring has included a $130m shareholder loan from its majority shareholder Bright Dairy and the issue of about $217.8m of new equity capital.
The company said it was focused on accelerating volume growth in Synlait’s advanced nutrition and foodservice businesses and optimising operational performance.
“Synlait’s ability to achieve a successful refinance of its banking facilities one year from now will require a marked improvement in trading performance and retained milk supply [through a reduction in farmer supplier cessations],” it said.
“The board and management are committed to further resetting Synlait and are focused on continuing to deliver the next steps of the company’s business recovery plan.”
The company did not provide a guidance for 2025.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
