A significant loss for its latest financial year didn’t come as a surprise as Kiwi dairy group Synlait prepares for life after what was nearly a death experience a couple of months ago.
If it hadn’t been for support from shareholders—especially China Bright, its largest stakeholder, and A2M, its former partner turned adversary—Synlait would have gone under due to excessive debt and insufficient cash.
However, support emerged, the split between Synlait and A2 was settled, and an attempt by a small group of shareholders to scuttle a much-needed capital raising was quashed. Now, the company can see daylight.
First, the financial damage: the company posted a net loss of NZ$182.1 million (AU$167.24 million) for the year ending July 31, 2024, up from NZ$4.3 million a year ago.
This substantial loss included an impairment charge of NZ$114.6 million against long-term assets.
Group revenue for the year increased by 2% to NZ$1.64 billion.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) reflected a loss of NZ$4.1 million, while adjusted EBITDA showed a profit of NZ$45.2 million.
In July, Synlait withdrew its guidance, which had estimated adjusted EBITDA at the lower end of the NZ$45 million to NZ$60 million range.
A surprising move was the announcement of a one-off payment of 20 NZ cents per kilogram of milk solids to South Island farmers who continue to supply milk to the company over 2024-25. North Island farmers will receive an extra payment of 5 NZ cents per kilogram.
Synlait justified this increase as necessary to retain milk supply over the next year as it works to normalize its operations.
In what can be seen as an understatement, Synlait chair George Adams stated in Monday’s announcement that “FY24 had 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 more important matters concerning running a growing and viable business.”
He added that the July financial year could best be summarized 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."
“A two-step plan, underpinned by a substantial bank refinancing package, will enable us to achieve that tomorrow—Tuesday, October 1,” he pointed out.
