Wednesday, 12 June 2024 12:55

Editorial: Time running out for Synlait

Written by  Staff Reporters
In April, Synlait reported a $96 million half-year loss. In April, Synlait reported a $96 million half-year loss.

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.

More like this

Editorial: Keeping ahead of the curve

"Te toto o te tangata he kai, te oranga o te tangata, he whenua, he oneone." While food provides the blood in our veins, our health is drawn from the lands and soils.

Editorial: Keep FTAs coming

OPINION: The dairy industry will  be a major beneficiary of a new free trade deal between NZ and the Gulf Co-operation Council (GCC).

Featured

Govt limits forestry conversions

Farmers have welcomed the Government’s move designed to limit farm to forestry conversions entering the Emissions Trading Scheme (ETS).

Beef genetics survey

New Zealand's primary sector is being called on to help shape the future of the country's industry by sharing views and insights about the availability and use of genetic tools.

Consider a career in hort

OPINION: As the fourth generation of my family working in horticulture, I’m proud to be continuing the legacy and honoured to do so carrying the current title of the Young Grower of the Year 2024.

National

Net zero pilot farm success

A net zero pilot dairy farm, set up in Taranaki two years ago to help reduce on-farm emissions, is showing…

Machinery & Products

Claas offers new cylinder option

Renowned as market leaders in the self-propelled forage harvester sector, Claas has used its experience of chopping a wide range…

Safer feeding for dairy cows

Cows ingesting metal objects in conserved feed is typically going to end in tears, quite often with a trip to…

BA Pumps expand

Cambridge based BA Pumps & Sprayers, specialists in New Zealand-made spraying equipment, has acquired Tokoroa Engineering’s product range, including the…

» Latest Print Issues Online

Milking It

Carbon tax

OPINION: A group of University of Auckland academics claim a carbon tax is the most effective way for New Zealand…

Farmer fury

OPINION: The new Labour Government in the UK is facing the wrath of farmers. Last week thousands of farmers and…

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter