Synlait’s financial turnaround halts supplier exodus
A marked turnaround in the financial performance of Canterbury milk company Synlait has halted a threatening exodus of farmer suppliers.
OPINION: A $130 million loan from major shareholder Bright Dairy will only keep the lights on at Synlait for so long.
The listed company urgently needs to sell off its under-utilised assets in the North Island, notably a $260m processing plant at Pokeno, to meet banking covenants and reduce debt.
Synlait’s share price dropped to around 38c/share last week, valuing the company at only $85 million. This means there will be little appetite from shareholders – including a2 Milk Company which holds a 20% stake in the company – to take part in a capital raise.
Now Synlait faces a new problem: many of its farmer suppliers want to walk away. They have issued cessation notices. A silver lining is that farmers need to give Synlait two years notice. While this buys the milk processor time to steady the ship, some think it could be too little, too late for Synlait.
The company says the cessation to supply notices from a “significant majority” were not a surprise given its current performance.
“Farmer suppliers have signalled they want to see Synlait’s balance sheet deleveraged so advanced rates can be lifted further, and submitting a cessation notice provides an option, rather than a clear intention to sign with other processors,” it says.
The next few months will be crucial for Synlait. The short-term outlook isn’t looking great. In April, Synlait reported a $96 million half-year loss. Last week it signalled full-year earnings will be at the lower end of its $45m-$60m range, before expected one-off charges.
Synlait has been hit by high costs, falling sales, the need to repay debt and a row with its major customer A2 Milk, as well as being unable to sell its consumer dairy products business Dairyworks, which it has valued at $120m. The board and management remain confident of steering the company through the current storm.
However, things look to get worse before it will get better for Synlait.
Rural retailer Farmlands has launched a new casual clothing range available across 42 stores nationwide and through its online store.
Federated Farmers says the health and safety changes announced this week by the Government represent the start of overdue reforms.
The Government is calling on rural New Zealanders to share their views on proposed regulations designed to improve the management of farm plastic waste.
For many urban New Zealanders, stepping into Pāmu’s Pinta dairy farm near Taupo last month was the first time they had had the chance to experience farm life up close.
After tasting 240 New Zealand made cheeses, judges have bestowed medals upon 199 of the entries.
Bay of Plenty’s top share farmers Andre and Natalie Meier are no strangers to the New Zealand Dairy Industry Awards winning circle.
OPINION: Is it the beginning of the end for Greenpeace?
OPINION: The good times felt across the dairy sector weren't lost at last week's Beef + Lamb NZ annual meeting.