Synlait is 'Burning Cash, Not Creating Value'
OPINION: Synlait's latest half-year result reveals a serious problem at the heart of the business: its core operations are no longer bringing in enough revenue to cover the cost of production.
Global dairy giant Lactalis has taken over Fonterra’s consumer and related business in New Zealand, Australia and around the world from March 31 in a $4.2 billion deal.
Abbott, a global healthcare company, took ownership of Synlait’s North Island assets that includes a processing plant at Pokeno, south of Auckland. The $300 million deal will help Synlait reduce its debt and improve its financial performance.
For Lactalis, the acquisition of Mainland Group boosts its presence around the world - from 42 to 58 production sites in 20 countries. The Lactalis workforce grows from 14,000 to over 18,000 employees and portfolio from 30 to 54 brands.
The company says Mainland Group, which includes iconic brands like Mainland, Anchor and Wester Star butter, strengthens its position in Australia and New Zealand, and accelerates growth across South and Southeast Asia, and the Middle East, the company says.
“The two portfolios coming together are highly complementary: Mainland Dairy contributes consumer-favourite cheeses, butters, ambient dairy and nutritional powders, while Lactalis brings its local expertise in yogurt and drinking milk,” says Emmanuel Besnier, chairman of Lactalis.
" This acquisition reflects our deep belief in the future of dairy. Integrating Mainland Dairy strengthens our presence in Oceania, Asia, and the Middle East, where demand for healthy, tasty, and affordable dairy products continues to rise.
“We are pleased to welcome highly skilled teams and look forward to developing high-quality products close to the communities we serve.”
Fonterra chairman Peter McBride says the completion of the sale is a significant milestone which sets the co-op up for the future.
“With the divestment complete, Fonterra can return capital to its owners and focus on growing further
through its core business as a New Zealand farmer-owned global B2B dairy provider,” says McBride.
Fonterra shareholders and unit holders will get $3.2 billion in capital return from the sale on April 14.
For Synlait the sale of its North Island assets is an important turning point.
Synlait chief executive Richard Wyeth says it will strengthen and simplify the business while giving them the space to drive recovery forward with a focus on where Synlait was founded, in Canterbury.
The assets bought by Abbott include the Pōkeno manufacturing facility, the associated inventory, and the company’s leasehold Auckland sites - assets held at the blending and canning facility on Richard Pearse Drive and the leased warehouse facility on Jerry Green Stree).
Of the proceeds, $200 million will be used to repay Synlait’s bank facilities- reducing it down to $200m.
But while funds from the sale will reduce debt, Synlait acknowledges it has further work to do.
The company, majority-owned by China’s Bright Dairy, last week reported a half-year net loss of $80.6 million.
Synlait also has a $130 million shareholder loan from Bright Dairy on its books. The loan matures in July.
