Tuesday, 05 October 2021 11:55

Synlait's rocky road ahead to recovery

Written by  Sudesh Kissun
Canterbury milk processor Synlait has revealed its roadmap for a return to profitability. Canterbury milk processor Synlait has revealed its roadmap for a return to profitability.

Troubled Canterbury milk processor Synlait has unveiled a roadmap for its return to profitability.

However, the listed company's plan isn't entirely linked to key stakeholder and customer a2 Milk's rebound. While Synlait is rebuilding its nutritional business around The a2 Milk Company, it has also announced a new chief executive and a new organisational structure.

Synlait is also taking corrective actions to arrest losses from Talbot Forest Cheese and its liquid business.

A new multi-national customer for its Pokeno plant is expected to contribute "meaningfully" from financial year 2024.

Synlait reported a $28.5 million loss for FY2021, its first loss after nine years of profitability. Interim chief executive John Penno says the company has built a plan to return to "robust profitability".

"We have reviewed and remain confident in our strategy. However, execution clearly needs to improve," he says.

Synlait's woes began in December 2020 when a2 Milk suddenly reduced its demand for infant formula. It typically produces 45% to 50% of its infant base powder during the shoulder: inventories are held to produce fully finished consumer-packaged infant formula volumes as customer demand formalises in future months.

Penno says in the shoulder season of FY20, Synlait produced infant base powder inventories on a forward demand forecast that assumed ongoing growth of infant nutrition demand into FY21.

"We therefore came into FY21 with large volumes of nutritionals powders on hand - 40% of forward demand with the expectation that demand would grow."

However, a2 Milk suddenly reduced demand resulting in an eventual 35% decline of nutritionals sales volumes, and a 67% decline in nutritionals powders production.

Penno says whil a2 Milk's infant formula downturn caused Synlait to underperform, a reviw revealed other inefficiencies within the business that had been developing over a longer period of time.

"When the tide goes out the rocks start showing," he says.

More like this

Class action

The news has gone from bad to worse for a2 Milk - the company Synlait had hitched its wagon to.

Too much sizzle?

OPINION: A mate of yours truly asks if the financial pickle that milk company Synlait currently finds itself in is a case of the people supposed to be in charge of the company taking their eyes off the ball.

More pain

OPINION: The pain continues at listed Canterbury milk processor Synlait.

National

Industry reacts to UK FTA

Primary industries stakeholders  are welcoming the new Free Trade Agreement (FTA) with the United Kingdom announced today.

Historic FTA deal struck

Comprehensive, inclusive and high quality and providing fantastic opportunities for our exporters.

Tatua smashes $10 barrier

Waikato milk processor Tatua says keeping products moving to overseas customers during the pandemic was one of the highlights of…

Machinery & Products

Robo planter on the way

German farm machinery manufacturer Horsch says it is at an advanced stage of developing its aptly named Robo autonomous planter.

Keeping everyone safe

As tractors get larger and front linkage kits become more common, many have started fitting underrun or collision protection systems.

» The RNG Weather Report

» Latest Print Issues Online

The Hound

Flag it!

OPINION: Agriculture and Trade Minister Damien O'Connor tried to keep his latest overseas jaunt secret squirrel.

Oh dear!

OPINION: This old mutt suggests that farmers' growing discontent with Beef+Lamb NZ's performance is going to reach fever peak after…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter