Two Major NZ Dairy Deals Completed
Two major acquisitions in the New Zealand dairy sector were completed this week.
CEO Richard Wyeth said the numbers were “frustratingly disappointing”.
“They are the result of a period where Synlait faced multiple headwinds and had little choice as to how to deal with them. They reflect a severe lack of optionality, not effort, and they do not define the company’s future – although recovery will take time.”
The results show and EBITDA loss of $34.7 million, with underlying EBITDA of $4.1 million, a reported net loss after tax of $80.6 million and an underlying net loss after tax of $27.3 million.
Net debt rose 88% to $472.1 million – an increase of 88%. Forecast base milk price for the 2025/26 season is $9.50/ kgMS with additional premium payments taking the total forecast average milk payment to $9.90/kgMS.
The company says manufacturing challenges at its Dunsandel plant resulted in a need to rebuild customer inventory. Changes to its manufacturing plan resulted in it having surplus milk, some of which could not be sold and therefore had to be processed into relatively low-value whole milk powder (WMP). Then, to “deliver the perfect storm”, the price of WMP decreased sharply at the end of the 2025 calendar year resulting in significant losses in Synlait’s Ingredients portfolio.
Wyeth told Dairy News that the company had “got behind” in its advanced nutrition production.
“The reality is when you’re making advanced nutrition and you don’t execute that well, you make a lot of stock food.
“So that’s ultimately the challenge of this business model. The rewards are very high when you do it well, but they’re very poor when you don’t.
“The nature of any manufacturing is you never, hand on heart, go: ‘We’re going to have 100 percent foolproof manufacturing’. But we have improved our quality out of sight.”
Wyeth said the key to recovery is operational stability and quality.
“What I’ve done is tried to bring the focus back onto those core areas of the business and uh, as if we execute well, over the next four to five months, then that’ll give us the ability to get into 2027, in more of a steady state.
“What I’d say over the last 12 to 18 months, the business has been incredibly reactionary, and we’ve had very little commercial fixability or optionality, and at the end of the day, that’s led to these results being the way they are.”
Farmers Happy To Stay
Richard Wyeth said that the result does not reflect Synlait’s future. This week it will receive $307 million from the sale of its North Island assets – its Pokeno plant and associated facilities, which it is selling to the Abbott group – which would go a long way to removing debt.
The result is a far cry from the same period last year, when Synlait had come through a challenging period when many suppliers had issued notices to quit but were then rescinding them on the back of an improved performance, partly due to increased investment from partners A2 and Bright Dairy.
However, Wyeth said there were now no current cease notices. Supplying farmers understood why the results are the way they are, and the company would be paying a very competitive milk solids price.
Prominent Canterbury dairy farmer Willy Leferink, who was one of the farmers who lodged a cease notice last year then withdrew it, is now happy to stay with Synlait.
He said there had been some serious manufacturing issues but they had been recognised and sorted out.
“It’s quite an art, to bring that quality product, the whole time.” Meanwhile, the company has released a roadmap to recovery, dubbed as ‘Stabilise, Simplify and Scale’.
It would:
- Deliver operational stability that meets customer expectations, strengthens financial resilience and builds greater optionality
- Align priorities, sharpen capability, and grow high-margin products from existing assets to lift profitability
- Expand markets, channels and customer relationships and execute future growth opportunities.
Chair George Adams said that behind the roadmap sat a real determination to ensure the coming 12 to 24 months would be seen as a period where Synlait under promised and over delivered.
