Wednesday, 21 April 2021 06:55

Synlait hits troubled waters

Written by  Sudesh Kissun
Synlait chief executive Leon Clement will leave the troubled company at the end of April. Synlait chief executive Leon Clement will leave the troubled company at the end of April.

Dairy industry darling Synlait has hit troubled waters lately and its latest captain is baling out.

Last week, Synlait announced that chief exectuive Leon Clement, a former Fonterra executive, will leave at the end of this month. He only joined Synlait in September 2018.

Investment adviser Grant Davies says Synlait's shareholders will hope that the appointment of former boss John Penno as interim chief executive will steady the ship.

He says Penno, a co-founder and former chief executive of the troubled Canterbury milk processor, will be expected to rebuild momentum after a line of issues plaguing the listed company.

Davies, of investment advisory firm Hamilton Hindin Greene, says unfortunately for Clement the last three years have been difficult for Synlait.

"Synlait's reliance on a2 Milk Company, which is facing issues of its own, did not make an easy road," Davies told Rural News.

"They hedged themselves to a successful horse at the time."

In 2016, Synlait announced a five-year exclusive supply rights deal with a2 Milk for infant formula: the deal was extended to 2023 with Synlait boosting production capacity to supply an increased volume of products.

However, the onset of Covid-19 and resulting travel bans decimated a2's Daigou channel sales - where products are bought in Australia and New Zealand by resellers, who then ship them into China to sell to customers there.

Earlier this year, Synlait announced earnings downgrades on the back of consumer-packaged infant formula volumes forecast to be 35% lower than last year.

The milk processor's share price has taken a beating, down from over $10/share two years ago to $3.43 last week. However, Davies says, despite its woes, Synlait remains a company with good quality assets.

"It also has good quality products and reasonably supportive bankers and John Penno is back to steady the ship."

Davies says shareholders, including China's Bright Dairy (39%) and a2 Milk (19.8%) would have been disappointed with the poor run in recent years.

But they were due to issues outside the country's control.

"They have no control over a2 Milk and what happens around Covid," he says.

Davies gave credit to Clement for some achievements at Synlait, including getting the Pokeno plant, south of Auckland, up and running.

"To his credit he got that across the line," he says.

In a NZX release, company chairman Graeme Milne said the board accepted Clement's resignation "with regret".

Milne says Clement had overseen major achievements at the milk processor.

"It also recognises the substantial impact that Covid-19 has had on Synlait and the difficult challenge this would present to any management team.

"Leon has been an authentic and transformational leader. He has successfully repositioned Synlait's purpose, ambition, and strategy to make us a more diversified and sustainable company."

The NZX release listed Clement's achievements which included refreshing the company strategy, achieving a record $1 billion in revenue in 2019 and purchasing Dairyworks to extend Synlait's consumer foods strategy.

Clement says it has been a privilege to lead Synlait.

"It has been an intensive period of change and growth and I am proud of our achievements. Synlait has an amazing team that is making a positive and sustainable impact in the areas we operate."

More like this

More pain

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

Synlait braces for heavy loss

Listed Canterbury milk processor Synlait is heading towards its first financial loss ever, but is telling its farmer suppliers not to worry.

More trouble for Synlait

Embattled Canterbury milk processor Synlait has taken another hit, with key customer and shareholder a2 Milk issuing its fourth earnings downgrade.

Quitters?

OPINION: This old mutt wonders what it is about tall, balding, ex-Fonterra executives and their (non) ability to handle life once they leave the safety of the big dairy co-op.

National

Guy standing for Ravensdown

Former Agriculture Minister and Horowhenua dairy farmer Nathan Guy is standing for election to the Ravensdown board of directors.

Machinery & Products

Helps tame the wind!

Amazone's recently released WindControl System automatically monitors and adjusts the spreading pattern to compensate for the effect of the wind…

First Claas patent hits a century

While Claas has registered more than 3,000 patents during its 108-year history, the company is currently celebrating the 100th anniversary…

JD invests in robotics

Global giant Deere and Co has acquired Silicon Valley start-up company Bear Flag Robotics, which specialises in autonomous driving technologies…

» The RNG Weather Report

» Latest Print Issues Online

The Hound

Too many hits?

OPINION: Well-known professional protestor, John Minto has run off at the mouth without checking his facts.

Good question!

A mate of the Hound's thinks it was more than a bit dodgy when DairyNZ chair Jim van der Poel…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter