Dairy company Synlait Milk [SML] is all about the future - starting literally from tomorrow - as it reports an after-tax loss of $182.1 million in the year ended July.
"Deleveraging" is the word for the company, which has undergone all kinds of strife in order to now finalise refinancing and recapitalisation.
In its announcement to NZX Synlait reiterated that subsequent to the end of the financial year it had taken steps to deliver a "much-needed balance sheet reset for Synlait" and reduce debt to more manageable levels.
Shareholders had voted to approve a $130 million shareholder loan from major shareholder Bright Dairy and the issuance of approximately $217.8 million of new equity capital.
In an effort to keep South Island farmer suppliers onboard, Synlait's offering a special one-off payment of 20c per kilogram of milk solids.
Synlait Chair George Adams said the Synlait story over the past 12 months has been unprecedented, "with the financial year best summarised by one word – deleveraging".
"The Board’s decisions, and the changes implemented as a result, were driven by the need to reduce Synlait’s debt to more manageable levels. A two-step plan, underpinned by a substantial bank refinancing package, will see us achieve that tomorrow – Tuesday 1 October 2024."
The financial year past had a long list of urgent challenges for Synlait, Adams said.
"We can now confidently draw a line under several of the difficulties faced and move onto the more important matters concerning running a growing and viable business."
As the company enters FY25, the board and management are focused on accelerating volume growth in Synlait’s Advanced Nutrition and Foodservice businesses and optimising operational performance, the company said.
"Synlait's ability to achieve a successful refinance of its banking facilities one year from now will require a marked improvement in trading performance and retained milk supply (through a reduction in farmer supplier cessations), the company said.
"The Board and Management are committed to further resetting Synlait and are focused on continuing to deliver the next steps of the company’s business recovery plan. Given that this is Synlait’s immediate priority, the board and management will not provide an FY25 guidance statement at this time."
"Although those challenges are evident in the year’s result, we begin FY25 with new momentum and a stronger financial foundation. "Our future success depends on a strong, stable and competitive farmer base. Providing farmer suppliers with compelling reasons to remove cessation notices is a top priority, ensuring we have the secure milk supply to underpin our business recovery.
"We have announced additional payments for our farmer suppliers to recognise how critical their milk supply is to Synlait’s future. We hope these combined actions will accelerate cease notice withdrawals."
As mentioned above, the company is offering a one-off 20c per kilogram of milk solids to its South Island farmer suppliers.
It says while Synlait has historically enjoyed a trusted relationship with its farmer suppliers, the company acknowledges it "now needs to work hard to regain confidence".
The company said "a significant majority" of farmer suppliers issued cessation notices ahead of the end of the milk production season on May 31, 2024.
"Submitting a cessation notice provides an option, rather than a clear intention, to sign with other processors. Farmers have been clear in their expectations of Synlait to reduce its debt levels while paying a competitive milk price and strong advance rates," Synlait said.
See the Synlait Milk profile here.
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