Tuesday, 05 October 2021 11:55

Synlait's rocky road ahead to recovery

Written by  Sudesh Kissun
Canterbury milk processor Synlait has revealed its roadmap for a return to profitability. Canterbury milk processor Synlait has revealed its roadmap for a return to profitability.

Troubled Canterbury milk processor Synlait has unveiled a roadmap for its return to profitability.

However, the listed company's plan isn't entirely linked to key stakeholder and customer a2 Milk's rebound. While Synlait is rebuilding its nutritional business around The a2 Milk Company, it has also announced a new chief executive and a new organisational structure.

Synlait is also taking corrective actions to arrest losses from Talbot Forest Cheese and its liquid business.

A new multi-national customer for its Pokeno plant is expected to contribute "meaningfully" from financial year 2024.

Synlait reported a $28.5 million loss for FY2021, its first loss after nine years of profitability. Interim chief executive John Penno says the company has built a plan to return to "robust profitability".

"We have reviewed and remain confident in our strategy. However, execution clearly needs to improve," he says.

Synlait's woes began in December 2020 when a2 Milk suddenly reduced its demand for infant formula. It typically produces 45% to 50% of its infant base powder during the shoulder: inventories are held to produce fully finished consumer-packaged infant formula volumes as customer demand formalises in future months.

Penno says in the shoulder season of FY20, Synlait produced infant base powder inventories on a forward demand forecast that assumed ongoing growth of infant nutrition demand into FY21.

"We therefore came into FY21 with large volumes of nutritionals powders on hand - 40% of forward demand with the expectation that demand would grow."

However, a2 Milk suddenly reduced demand resulting in an eventual 35% decline of nutritionals sales volumes, and a 67% decline in nutritionals powders production.

Penno says whil a2 Milk's infant formula downturn caused Synlait to underperform, a reviw revealed other inefficiencies within the business that had been developing over a longer period of time.

"When the tide goes out the rocks start showing," he says.

More like this

Synlait snag

OPINION: Canterbury milk processor Synlait's recovery seems to have hit another snag.

Synlait's back

OPINION: After years of financial turmoil, Canterbury milk processor Synlait is now back in business.

Wyeth to head Synlait

Former Westland Milk boss Richard Wyeth is taking over as chief executive of Canterbury milk processor Synlait from May 19.

Featured

Fencing excellence celebrated

The Fencing Contractors Association of New Zealand (FCANZ) celebrated the best of the best at the 2025 Fencing Industry Awards, providing the opportunity to honour both rising talent and industry stalwarts.

B+LNZ launches AI assistant for farmers

Beef + Lamb New Zealand has launched an AI-powered digital assistant to help farmers using the B+LNZ Knowledge Hub to create tailored answers and resources for their farming businesses.

National

Machinery & Products

Tech might take time

Agritech Unleashed – a one-day event held recently at Mystery Creek, near Hamilton – focused on technology as an ‘enabler’…

John Deere acquires GUSS Automation

John Deere has announced the full acquisition of GUSS Automation, LLC, a globally recognised leader in supervised high-value crop autonomy,…

Fencing excellence celebrated

The Fencing Contractors Association of New Zealand (FCANZ) celebrated the best of the best at the 2025 Fencing Industry Awards,…

» Latest Print Issues Online

The Hound

A step too far

OPINION: For years, the ironically named Dr Mike Joy has used his position at Victoria University to wage an activist-style…

Save us from SAFE

OPINION: A mate of yours truly has had an absolute gutsful of the activist group SAFE.

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter