What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The listed company, last week, released its sustainability report for 2023.
Highlights include getting recertified as a B corporation, the gold standard accreditation globally for sustainability.
Another key recertification success in 2023 was achieving the State Administration for Market Regulation (SAMR) re-registration, which secures Synlait's China market infant formula access through until September 2027.
On relationships with its farmer suppliers, Synlait says it established its Farmer Leadership Team, which provides the company with a direct conduit to its farmer base.
In 2023, the dairy company also became one of the founding shareholders in AgriZeroNZ, a technology and research partnership between Ministry for Primary Industries (MPI) and some of New Zealand's largest agribusinesses. Its aim is to give farmers the tools to reduce their own on-farm emissions, such as methane vaccines, alternative feed, and ruminant biotech, to help New Zealand meet agricultural emissions reduction targets.
Writing in the company's sustainability report, chief executive Grant Watson says it has been an extremely challenging year for the company.
"We delivered a poor financial result due to challenging global market conditions, including material reductions in customer demand, CO2 shortages, extreme weather events, the Covid-19 pandemic, inflationary impacts on our cost base, and costs associated with the launch and stabilisation of our enterprise resource planning (ERP) system.
"Despite these challenges, our team delivered several sustainability successes that I am proud to celebrate in this report."
Watson claims maintaining its B Corp status demonstrates to customers that the dairy processor is committed to considering the impact of decisions on workers, customers, farmers, suppliers, community and the environment.
"It is increasingly requested by Synlait's global customers and is a competitive differentiator in sales negotiations," Watson says.
He adds that the SAMR re-registration, is critical to its largest customer, the a2 Milk Company, and provides a strong foundation to their partnership.
Tough Times Ahead
Financial advisory firm Forsyth Barr is now forecasting a full-year net loss of $3.5 million for Synlait.
This is down from the company's previous forecast of $11.8 million profit for the troubled dairy processor.
Meanwhile, Synlait and a2MC remain in arbitration over the exclusivity of their infant formula manufacturing and supply deal.
