Recording a net loss after tax of $182.1 million ($60.4 million adjusted) and total group gross profit down 61 per cent to $56 million, Synlait announced a one-off 20c/kg MS (milk solids) payment to South Island dairy farmers to shore up its milk supply.
Synlait CEO, Grant Watson, said, “Synlait began FY24 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.”
Snapshot
- total group revenue: $1.74b, up 2%;
- EBITDA: ($4.2m);
- adjusted EBITDA: $45.2m;
- net loss after tax: ($182.1m);
- adjusted net loss after tax: ($60.4m);
- total group gross profit: $56m, down 61%;
- operating cash flow: ($47.2m), down 221%;
- net debt: $441.6m, up 33%; and
- capital expenditure: $30.5m, down 53%.
“Our future success depends on a strong, stable and competitive farmer base. Providing farmer suppliers with compelling reasons to remove cessation notices is a top priority, ensuring we have the secure milk supply to underpin our business recovery,” he said.
The company said a “significant majority” of farmer suppliers issued cessation notices before 31 May, giving them the option of signing with other processors.
It said, “Farmers have been clear in their expectations of Synlait to reduce its debt levels while paying a competitive milk price and strong advance rates.
Synlait chair, George Adams, said the company’s story over the past 12 months had been “unprecedented”, with the financial year best summarised by the word, “deleveraging”.
He said changes that had been implemented were driven by the need to reduce debt to a more manageable level.
“A two-step plan, underpinned by a substantial bank refinancing packaging, will see us achieve that tomorrow (1 October).
“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 onto the more important matters concerning running a growing and viable business,” Adams said.
Synlait reported a non-cash impairment charge of $114.6m against its assets, $25.2 million in supply chain and transaction costs, $17.1 million from the impact of improved product costing methodology, and $7 million in inventory losses due to ERP implementation.
In August, Synlait agreed to recapitalisation terms with its two largest shareholders, Bright Dairy and The a2 Milk Company, which pumped $217.8 million of new equity capital into the business. It also refinanced with its bank facilities.
The company had outlined its deleveraging plan in June, which saw Bright Dairy provide a $130 million shareholder loan.
It had also been given a reprieve in April, which gave it a two month extension to repay $130 million that was due on 28 march.
After reporting its results, Synlait Milk shares rose seven per cent.
