Watershed vote pulls Synlait back from the brink
In a “watershed vote”, Synlait shareholders have approved a recapitalisation plan that hands over control of the listed milk processor to China conglomerate Bright Dairy.
However, a2C has delivered a strong result for the 2023 financial year – on the back of success in the China infant formula market. It recorded double digit growth in revenue and earnings for the year ending June 30, 2023. Revenue jumped 10.1% to $1.6 billion.
China and ‘Other Asia’ segments sales rose 38%. Infant milk formula (IMF) sales were up 8.4% with China label sales up 27.8%. EBITDA was up 11.8% to $219.3 million and net profit rose 26% to $145m.
Mataura Valley Milk (MVM) sales were up 9.2%, however the processor reported an EBITDA loss of $26.5 million, compared to a reported loss of $18.8 million in FY22. The MVM plant, which started processing milk in August 2018, was built by the China Animal Husbandry Group: a2MC bought a 75% stake in the company in July 2021 with CAHG retaining 25% share.
In its annual results last week, a2C noted that MVM’s net sales for the last financial year reached $114m. It recorded an EBITDA loss of $26.5m, about $4m higher than the previous year.
The company says MVM’s slightly higher EBITDA loss was due to the timing of sales in a volatile commodity and foreign exchange environment; reduced demand from third-party customers in China; increased investment in capability; significant product development trials; and investment to support future nutritional powder production.
“Accelerating MVM’s path to profitability by FY26 or earlier is a key strategic priority for the company,” says a2C.
a2C managing director David Bortolussi says MVM has also commenced an on-farm methane inhibitor feasibility study, via a research agreement with Lincoln University.
Bortolussi says MVM is also developing a sustainable packaging roadmap.
Commenting on a2C’s annual results, Bortolussi says he’s proud of what the team has achieved this year.
“Growing sales by 10% while the core China IMF market declined by 14% is a remarkable achievement.
“Our China label IMF sales exceeded English-label sales for the first time, and our total IMF sales were over $1.1 billion, making us a top-3 share gainer in the market overall.”
Bortolussi says the Daigou market in English-label IMF declined sharply again this year by almost 40% and a2C has pivoted to more controlled channels.
