Synlait sweetens milk supply deal
Canterbury milk processor Synlait is confident of retaining its farmer supplier base following a turnaround in its financial performance.
This is despite a Court of Appeal ruling reinstating restrictive covenants on the land it’s built on.
The covenants effectively restrict the factory site to farming or forestry. They were lifted by the High Court in December but reinstated by the Court of Appeal last month.
Clement says Synlait is still working towards Option A - opening the $250 million plant on time in October. It is already largely complete.
“We are speaking to all parties involved and hopeful that we can get to a solution here,” he told Rural News. “The overturning of the ruling was a surprise to us and to others.”
The Canterbury company announced in February 2018 that it had conditionally bought the 28ha site for its second nutritional powder plant.
The land was subject to covenants limiting its use to grazing, lifestyle farming or forestry. However, Synlait was confident these were no longer relevant because the land had been rezoned industrial and other industrial plants had been built in the area, including another dairy powder plant.
The High Court agreed, removing the covenants in November 2018. The title was transferred to Synlait only after that ruling although work was already underway.
However, the Court of Appeal has now effectively reinstated the covenants in a ruling delivered on May 9 in favour of the beneficiary of the covenants, the adjacent land owner New Zealand Industrial Park Ltd.
Asked why Synlait had started building the plant when an appeal was still possible, Clement says Synlait had always acted in line with legal advice “and that was supported by the High Court finding which was pretty unequivocal”.
“So we were surprised the Court of Appeal overturned it,” he says. “We were also acting in line with the industrial zoning for the area, which is consistent with neighbouring land and the other area around it including an infant nutrition factory.”
Clements says the company’s confidence was supported by the High Court ruling and that’s why it continued to build.
In the latest development, Synlait has now acknowledged receiving a “cease and desist” letter from NZIP but is treating the letter as a request and has continued the build. Clement says the NZ Stock Exchange was advised of the letter because it was important to keep the market up to date.
“But it doesn’t mean we have to comply with it. It’s not an order from the court,” he explains.
“We are considering our options, but it’s important to note that we’re committed to Pokeno and to our investors, shareholders and farm suppliers.
“We’re in discussion with all parties and still hopeful that we can get to a reasonable solution.”
In anticipation of the opening, Synlait has signed up local farmers to start supplying milk from June 1, and collection is not expected to be affected by the legal hurdles. Arrangements were already in place to handle that milk before the scheduled opening in spring.
“We’re committed to Pokeno and to the supply relationships we have built there. We will be acting accordingly to make sure we can commit to those.”
