SML - Synlait Milk Ltd

[minimoke]

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[Nasi Goreng]

Silence is deafening but you wouldnt short it would you? I mean it’s one market announcement from a steep recovery / or further fall.

Has anyone considered what boardroom discussion may have been between A2 and SML prior to commencing works. It’s plausible A2 might have pressured SML to get things underway, and may have a stake in the game here that we don’t know about. A2 have a member on the board right? I bet that board member wasn’t banging a drum to slow down and wait. They own a decent chunk of SML and it be interesting what this means for their partnership going forward.

[Beagle]

Silence is deafening but you wouldnt short it would you? I mean it’s one market announcement from a steep recovery / or further fall.

Has anyone considered what boardroom discussion may have been between A2 and SML prior to commencing works. It’s plausible A2 might have pressured SML to get things underway, and may have a stake in the game here that we don’t know about. A2 have a member on the board right? I bet that board member wasn’t banging a drum to slow down and wait. They own a decent chunk of SML and it be interesting what this means for their partnership going forward.

We might find out a few years down the track if management see fit to bother to tell us plebs, the shareholders.

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[nzsharetrade]

Bright Dairy were one of the companies caught in the Melamine scandal (along with Yashili who are SML's neighbor at Pokeno). SML wont want to be considering a build in China - thy cant even organise a problem free one in NZ.

I can sure you the joke with Mr Ye will not happen in China. That joke can only happen in here. but they will have other problem....

[nzsharetrade]

it seems Mr Ye planned it very well. SML can take him on-board to solve the issue.......let's get over this.

the A2 SAMR just became priceless, hopefully they are smart enough to recover all losses from ATM in new talk.

[whatsup]

What were the two entry price of ATM into SML ?

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[whatsup]

8.2% was bought at $3.275 then another at 8.3% at $10.90

Say $7.00 average ?

[kiora]

Say $7.00 average ?

3 X as many brought at $3.275 cf at $10.90 ?

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[dreamcatcher]

Probably years away but latest Chinese formula announcement believe is positive for SML with Bright Dairy 69.97m holding

[BlackPeter]

Early May 2019:

Synlait's new Pokeno factory once completed will produce an extra 45,000 tonnes of infant-grade skim milk, whole milk and infant formula base powders. Total lactoferrin production volume in 2H19 will increase from 7 MT to c.20 MT Management expecting lactoferrin margins to expand in 2H19 as a result of favorable global pricing. Not to mention SML expects to obtain State Administration for Market Regulation (SAMR) registration for New Hope’s Akara and Bright Dairy’s Pure Canterbury brands by the end of 2019.

Happy camper as portfolio showing green suppose that's the difference about glass been 1/2 full or 1/2 empty.


am with you. we see how it goes.:D


Just own both stocks... and watch them both rise in time, if you believe in the A2 story.
I've held both since last year and have done alright.

Amazing what difference one month can make to a share: SML dropped 25% since early May ... and so far the analysts have not even realised there might be a problem. Lets see what happens to the share price if they start downgrading ...

I must admit - there was a time when I thought as well that SML is a pristine company run by outstanding management (actually I think I even stated something like that at some stage - but couldn't find my post).

I hope for holders that things can still be resolved with some financial transactions - but I don't think it will be easy to quickly repair the damage done to the reputation of Synlaits management and board. They clearly have been gambling with shareholders money and seem to have a quite lose understanding of what the requirement to keep the share informed actually means. Market was never informed about the risk to build a factory on land with covenants prohibiting this use.

PS: My apologies to the posters above for picking their posts ... just wanted to demonstrate how fickle the share market can be. For some other stock it could have been my posts as well ;);

[whatsup]

Early May 2019:






Amazing what difference one month can make to a share: SML dropped 25% since early May ... and so far the analysts have not even realised there might be a problem. Lets see what happens to the share price if they start downgrading ...

I must admit - there was a time when I thought as well that SML is a pristine company run by outstanding management (actually I think I even stated something like that at some stage - but couldn't find my post).

I hope for holders that things can still be resolved with some financial transactions - but I don't think it will be easy to quickly repair the damage done to the reputation of Synlaits management and board. They clearly have been gambling with shareholders money and seem to have a quite lose understanding of what the requirement to keep the share informed actually means. Market was never informed about the risk to build a factory on land with covenants prohibiting this use.

PS: My apologies to the posters above for picking their posts ... just wanted to demonstrate how fickle the share market can be. For some other stock it could have been my posts as well ;);

Would love to be a fly on the wall if and when negotiations start, imho SML are starting from a very very very weak position and would dearly to hear from management and the board on their position.

IMO this will finish up in court then the court of appeal so how long will that take 3-5 years ?

[nzsharetrade]

I still believe SML, it is just matter of time. nothing has changed in long term. I believe Mr Ye is screwing up SML but aiming ATM, I dont believe he is looking for money. Supreme court may make the right call but how long that is going to be. Bright Daily is not doing very well in China comparing with other local brand. lots of things could happen just take times.

[BlackPeter]

I still believe SML, it is just matter of time. nothing has changed in long term. I believe Mr Ye is screwing up SML but aiming ATM, I dont believe he is looking for money. Supreme court may make the right call but how long that is going to be. Bright Daily is not doing very well in China comparing with other local brand. lots of things could happen just take times.

True, just will take time (and money ;)). Problem is: time for them is money as well.

[nzsharetrade]

True, just will take time (and money ;)). Problem is: time for them is money as well.

Well, that is the explanation for the drop down. may not be bad for 50% increase if this does take 5 years in worse case.
Very interesting that Bright Daily mentioned the huge debt caused by SML early this year. I thought the debt is with SML. anyway, I am sure Bright Daily can not help SML in bad case based on their current financial situation .

[RTM]

I wonder if Fonterra will be the rescuer if more processing capacity is needed ?

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[nzsharetrade]

I dont think it will take that long at all. Appeal Court has already said ""In the present case, there is no difficulty with the enforcement of the covenants.". It was a pretty robust decision.

There isnt a lot of meat left in the argument to try and secure a victory on the covenant issue at Supreme court level - any way SML has already advised the market that they thing a "practical solution is attainable". That does not suggest further court action on the covenants.

The problem for SML is the enforcement of the covenants - and as I mentioned that has already been flagged at the Appeal Court level - thats a pretty high level view that there is no difficulty securing enforcement.

At worse maybe a couple of years - during which an injunction may apply. (it was SML's risk to continue building in the face of the original cease and desist demand - that they failed to advise the market of)

What do you mean ‘at worse maybe a couple of years’? if enforcement of covenant can not be changed and Mr Ye does not want to have a deal then SML needs to remove the factory? there is no point left going to supreme court?

[nzsharetrade]

I wonder if Fonterra will be the rescuer if more processing capacity is needed ?

Fonterra does not have the certification to export to China. it is no the issue with process power from my understanding.

[BlackPeter]

Fonterra does not have the certification to export to China. it is no the issue with process power from my understanding.

Correct - the necessary Chinese Import licence is owned by Synlait and not transferable, and this is limited to a physical factory - i.e. according to my understanding even Pokeno would have needed an amendment of this licence (if they would have wanted to make their Chinese IF there). However - they could probably direct all A1 milk to some of Fonterra's processing facilities and focus in Dunsandle on making their A2 IF formula for China.

[nzsharetrade]

Correct - the necessary Chinese Import licence is owned by Synlait and not transferable, and this is limited to a physical factory - i.e. according to my understanding even Pokeno would have needed an amendment of this licence (if they would have wanted to make their Chinese IF there). However - they could probably direct all A1 milk to some of Fonterra's processing facilities and focus in Dunsandle on making their A2 IF formula for China.

yes. that is right. forgot that part. it is not even just the company, the certification is for a physical factory.

[minimoke]

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[nzsharetrade]

The Appeal Court has said "In the present case, there is no difficulty with the enforcement of the covenants.". There is only one court left to say any different and that is the Supreme Court. There is always a point in going to the Supreme court – and that is to get a decision in SML’s favour. But the risk is it doesn’t go their way – in which case they are totally knackered. A position they already find themselves in.

Mr Ye is entitled to enjoy his land with neighbouring lt.

He planned so well.

[dreamcatcher]

Quote from a post on HC 10/05 by blackeyed

"Re read the decision
1 The Quarry doesn't own the land and the covenants don't go to the ownership they provide grazing and lifestyle farming rights for 28 hectares but they don't provide for title impact.
2 There is an issue of the value of these rights and some compensation will be payable, which is probably why the Quarry appealed they want monetary compensation and didn't get it when the rights were removed. The purchase price will get discounted by the value of the rights (re see purchase agreement) and the Quarry will agree to have them lifted. Impact on Synlait zilch"

End of month I believe Synlait have an Investor day planed, could provide more clarity until then without any knowledge of legal teams advice before or after the build it's all speculation Recent GS update Buy PT $11.60

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[RTM]

Fonterra does not have the certification to export to China. it is no the issue with process power from my understanding.

Thanks. So perhaps Fonterra could "help" with production that is not for China ? Not sure if that is enough to be significant ?

[sb9]

Write up in the media today...

https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/synlait-still-confident-on-plant

Key points to note:

“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.”

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.”

[silverblizzard888]

Write up in the media today...

https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/synlait-still-confident-on-plant

Key points to note:

“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.”

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.”


"hopeful that we can get to a solution here"

Hope is not a strategy, but sums up that they don't have much control on the outcome of this situation

“We’re in discussion with all parties and still hopeful that we can get to a reasonable solution.”

He futher adds 'reasonable' along with another hopeful. Not sure theres much reasoning given their stance,



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.

“But it doesn’t mean we have to comply with it. It’s not an order from the court,” he explains.



Can we get the colour for hope next time the font colour changes?

[Beagle]

Wonder how much the share price would jump if clement did ?

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[dreamcatcher]

Yashili ...........Danone also in Pokeno

http://www.scoop.co.nz/stories/BU1906/S00043/danone-cleared-to-indirectly-hold-up-to-65-of-yashili-nz.htm

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[silverblizzard888]

Looks like to the Supreme Court it is!

https://www.nzx.com/announcements/335714

[Beagle]

In May 2019 the Court of Appeal overturned the High Court decision to remove historic covenants.
“This is really just the next step in the process as we continue to progress all our options,” says Synlait’s CEO, Leon Clement.
“We are also still in continued conversations with all parties and we remain confident of a positive outcome,” he says.
Synlait’s has reiterated that the plans for the Pokeno site haven’t changed.
“We will continue to work towards the existing project timetable including the build, commissioning and production,” says Mr Clement.

This is a very bold statement. I would be very surprised if the aggrieved parties did not seek an urgent injunction to stop development work and production from the site pending the Supreme court ruling. I think this statement would be like a red rag to a bull if I was one of the aggrieved parties.
I think if I was the CEO I would have just appealed and kept the bold statements of progressing things normally, unsaid.
More arrogance ?...you be the judge...

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[nzsharetrade]

hopefully Supreme Court is with SML and Mr Ye to pay for all loses.:D

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[Beagle]

Hugely big pink font - must be an important announcement to be taken seriously.

Now waiting for the counter injunction.

(Edit - obvious a practical solution was not achievable)

Yes quite right. The size of the pink font speaks VAST volumes about the company and its culture. Not at any price...

[Leftfield]

....Edit - somewhere in the documents (I'll try to reference it) there is a clause that says STL are liable for all costs in freeing up covenants. The loser of a case is usually liable for costs of both parties but that clause may trump that practice.

I also read this at some stage??? I recall reading that SML's purchase of Pokeno was conditional on the vendor removing the covenants and that if they didn't then the vendor was liable for all costs incurred by SML?

This would explain why SML has proceeded to build etc.

Anyway the Supreme Court will now decide (if the hearing is in Wellington I might attend as it could be interesting entertainment value!)

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[pg0220]

Now with the China has proposed a new plan regarding their IF market, wouldn't court be looking at an intention of Mr Ye acquiring the land, enjoy the covenants to prevent the competitor extending the manufacturing capacity, then later remove the covenants for himself for business? Also I think SML's movement might be right so that they can show that they are willing to escalate the matter and may be in a better position to settle the matter. I remember FPH and RMD in a patent dispute and how they counter sued each other - I know this is in a quite different perspective though.

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[nzsharetrade]

Now with the China has proposed a new plan regarding their IF market, wouldn't court be looking at an intention of Mr Ye acquiring the land, enjoy the covenants to prevent the competitor extending the manufacturing capacity, then later remove the covenants for himself for business? Also I think SML's movement might be right so that they can show that they are willing to escalate the matter and may be in a better position to settle the matter. I remember FPH and RMD in a patent dispute and how they counter sued each other - I know this is in a quite different perspective though.


I was hoping court can see this is not a normal case. there is a cost for anyone muck around dairy industry in NZ.

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[sb9]

Now with the China has proposed a new plan regarding their IF market, wouldn't court be looking at an intention of Mr Ye acquiring the land, enjoy the covenants to prevent the competitor extending the manufacturing capacity, then later remove the covenants for himself for business? Also I think SML's movement might be right so that they can show that they are willing to escalate the matter and may be in a better position to settle the matter.

From that angle, I think SML has got a good point to prove and have the decision turned in their favour.

[pg0220]

That is a very high risk tactic. What if NZIPL seek and are granted an injunction forcing SML to cease all work until the matter is resolved through the courts - which could be a year away.
I think SML has already talked to Mr Ye and tried to find a practical solution, then found that he is so stubborn that settling the matter may not be possible. In that case, SML bringing the case up to the Supreme court might be the last practical solution for them. Also unless Mr Ye has purchased the land and doesn't want to settle the matter for the other reason which in case SML will anyway need to abandon the factory, they may be able to come to the practical solution before the Supreme court decision.

It is risky, but SML doesn't seem to have many options available now.

[sb9]

I think SML has already talked to Mr Ye and tried to find a practical solution, then found that he is so stubborn that settling the matter may not be possible. In that case, SML bringing the case up to the Supreme court might be the last practical solution for them. Also unless Mr Ye has purchased the land and doesn't want to settle the matter for the other reason which in case SML will anyway need to abandon the factory, they may be able to come to the practical solution before the Supreme court decision.

It is risky, but SML doesn't seem to have many options available now.

Yep, get a feeling that's what made SML to turn to Supreme court after failed negotiations with Mr Ye to come to some sort practical solution. And now SML lawyers will have all those business cases along with macro economic issues to prove their point.

May be Winnie can help them (SML) out a bit :)

[BigBob]

That is a very high risk tactic. What if NZIPL seek and are granted an injunction forcing SML to cease all work until the matter is resolved through the courts - which could be a year away.

And what would be the cost of damages incurred by SML of such an injunction if NZIPL lose in the SC...?

[minimoke]

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[pg0220]

No reason for them to do so when an Appeal court decision has gone against them.
You are right. They should have settled the matter instead of bringing that to the high court.

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[pg0220]

Ye, who will only talk through a spokesman, is also behind a plan for a large agri-tourism development on his land, which borders Waikato River. The plan provided for a 250-room hotel and a showcase farm, and earthworks for the project were due to start next month, the spokesman said. He previously told the Herald that Ye's investment on the land could add up to $1 billion over time.

Just wondering, would this plan still fall under the definition of grazing, lifestyle farming and forestry?

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12238335

[Beagle]

Would there be damages? the covenant issue is one between NZIPL and STL. SML has proceed building knowing there are outstanding issues - so maybe the risk for that decision falls solely on their shoulders. And if not it might fall on STL's shoulders - but how deep are their pockets.

To a casual observer the GARGANTUAN SIZED PINK FONT and the text of the official NZX release would tend to indicate this super politically correct and inclusive company has heaps of options and is in a very strong position and will keep the development going on track and on time.

One can only speculate at size and colour of the font in the headline announcement that is probably forthcoming when they finally announce to the market they have exhausted all options and are abandoning the site. The consequent effect on the share price will be extremely ugly...mark my words.

[minimoke]

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[dreamcatcher]

Interesting to note the councils proposed district planning of the Ye/Synlait properties

"Further inquiries by the Herald showed Ye, also known as Qing Ye, made a submission to the Waikato District Council in October to rezone his 148ha properties residential. His land is currently farmed.

The council's proposed district plan wants to rezone Ye's land rural and the land Synlait has built on to heavy industrial."

[kiora]

Any similarities ? Does this man prefer legal avenues for dispute resolutions or what?

https://www.stuff.co.nz/business/113306875/conor-english-takes-legal-action-after-being-sidelined-from-queenstown-subdivision-deal?utm_source=ST&utm_medium=email&utm_campaign=ShareTrader+AM+Update+for+Saturday+8+ June+2019

[sb9]

Missed a window of trading opportunity when it went below $9 mark.

[minimoke]

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[sb9]

It was a 50:50 call. I dont understand how the market is supporting the SP with so much extremely high risk uncertainty hanging over the company. I suspect holders are dazzled and comforted by the pink font.

bit of a coin could've been made though in hindsight...never mind.

Still hold my original two lots from low $6 days, so all good.

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[petty]

Coming off a high of $16.35 they arent looking after you too well.

Still coin to be made from those willing to take the gamble

Are we still talking about synlait? I have them as a high of 13.53?

[Baa_Baa]

Coming off a high of $16.35 they arent looking after you too well.

Still coin to be made from those willing to take the gamble

High $13.53 up from low $1.98 Aug 2015. Terrific returns

[minimoke]

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[sb9]

High $13.53 up from low $1.98 Aug 2015. Terrific returns

That's correct, couldn't get in quite that low. However, content with where things are and once current hangover is done and dusted, things will look brighter.

[sb9]

Closed at $9.50 on ASX, should start trading $10 plus level tmrw on NZX.

[Baa_Baa]

That's correct, couldn't get in quite that low. However, content with where things are and once current hangover is done and dusted, things will look brighter.
Up $1.60 or so in a couple of weeks. Coincidence since the down ramping stopped?

[sb9]

Up $1.60 or so in a couple of weeks. Coincidence since the down ramping stopped?

Always thought there was nice lil trade opportunity presented itself when price went below $9 mark.

[minimoke]

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[BlackPeter]

Up $1.60 or so in a couple of weeks. Coincidence since the down ramping stopped?

What down ramping?

I only noticed some posters pointing out quite real risks and quite significant management problems related to this investment.

What is wrong with that?

I guess we all will find out over time whether the risks eventuate or not - this is the nature of risks.

[Baa_Baa]

What down ramping?

I only noticed some posters pointing out quite real risks and quite significant management problems related to this investment.

What is wrong with that?

I guess we all will find out over time whether the risks eventuate or not - this is the nature of risks.

I don't consider pointing out risks as down ramping, quite the contrary. If you've read my thread which got almost no traction at all, perhaps because people don't like talking about risk (what could possibly go wrong, what is the likelihood and what is the consequence), I advocated good risk analysis and management and almost shared a methodology for that but no one seemed interested at the time.

Besides, the SML situation would not be managed as a risk per se, the risk of litigation over the covenants has emerged and it would now be managed by the business as an Issue. The approach would shift towards scenario impacts and their severity.

Down ramping imho is about repetitive ad nauseum negative statements typically laced with hyperbole intended, or with potential, to create uncertainty or a sense of risk that exceeds or plays up a worst case scenario rather than the actual circumstance or acknowledging or even considering the injured parties remedies (as opposed in this case to the liable party), possibly for or as openly stated for selfish reasons to acquire a share at a lower price.

[dreamcatcher]

GS.........IMF volumes for May-19 continue to be supportive for A2M $16.50 and SML $11.60 both stocks are Buy-Rated

[sb9]

GS.........IMF volumes for May-19 continue to be supportive for A2M $16.50 and SML $11.60 both stocks are Buy-Rated

Bugger, was looking for another day like y’day and was hoping for it to get below $9 mark so that I could get small top up. Instead things took different turn today, never mind.

[dreamcatcher]

SML now producing infant formula from its manufacturing factory in Auckland ...............

[Baa_Baa]

SML now producing infant formula from its manufacturing factory in Auckland ...............

Source? TIA

[dreamcatcher]

Source? TIA

GS.............

[Baa_Baa]

GS.............

Do you have a link, or is this what you read from a poster on HC who also mentioned GS today?

[sb9]

Back within striking distance of hitting $10. Could well be that those institutional investors who went for company presentation on Friday are very happy with what they heard and saw.

[limmy]

Back within striking distance of hitting $10. Could well be that those institutional investors who went for company presentation on Friday are very happy with what they heard and saw.
Hopefully some assurances on the new Pokeno facility ?

[dreamcatcher]

Back within striking distance of hitting $10. Could well be that those institutional investors who went for company presentation on Friday are very happy with what they heard and saw.

And you could be right and this part of presentation of interest for me .........

" The company noted that it remained confident that SAMR registrations of the Akara and Pure Canterbury brands would be approved in CY19; it noted that both were completely fine from a technical perspective, and now were waiting for a physical audit."

[nzsharetrade]

Has Mr. Ye Qing agreed whatever they are doing with Pokeno facility?

[sb9]

Couple of decent special crossings pre-market...



4
2
9:01:11 am
993
122,442
$1,215,849
L3


5
1
9:01:09 am
993
57,761
$573,566
L3

[dreamcatcher]

Has Mr. Ye Qing agreed whatever they are doing with Pokeno facility?

From Investor Presentation

POKENO UPDATE
• In February 2018 Synlait announced the conditional purchase of 28 hectares of land in Pokeno to
establish its second nutritional powder manufacturing site.
• In November 2018 the High Court removed covenants over the land which would hinder Synlait’s
development of the land. Synlait then took ownership of the land.
• In May 2019 the Court of Appeal overturned the High Court decision to remove historic covenants.
• In June 2019 Synlait filed for leave to appeal to the Supreme Court as part of the ongoing legal
process to keep our options open.
• It is important to recognise:
- These covenants are privately held to protect quarrying interests on the land adjacent to our site.
- Our development is completely consistent with the industrial zoning for the site and the surrounding area,
which includes other industrial developments and infant nutrition facilities.
• We are in continued conversations with all parties and we remain confident of a positive outcome.
• Plans for the Pokeno site haven’t changed and we continue to work towards the existing project
timetable including the build, commissioning and production.

[JimmyTrade]

Water commissioning is well underway for the new Infant Formula Dryer in Pokeno, will be ready for product commissioning and commercial production in the coming months.

I'm curious on the influence the cost on carbon emissions will have on the dairy sector with the majority of the emissions coming from the farm as opposed to the manufacturing facility. At $25 per tonne of carbon this cost is significant. Synlaits weighing on value added products will make them much less exposed than heavily commodity dairy manufacturing facilities like Fonterra, however.

I can't see the commissioning and commercial production at the Pokeno dryer being stopped.

[sb9]

Water commissioning is well underway for the new Infant Formula Dryer in Pokeno, will be ready for product commissioning and commercial production in the coming months.

I'm curious on the influence the cost on carbon emissions will have on the dairy sector with the majority of the emissions coming from the farm as opposed to the manufacturing facility. At $25 per tonne of carbon this cost is significant. Synlaits weighing on value added products will make them much less exposed than heavily commodity dairy manufacturing facilities like Fonterra, however.

I can't see the commissioning and commercial production at the Pokeno dryer being stopped.

Thanks Jimmy for the insight and welcome to the forum.

I also feel same way that commissioning and production at Pokeno is too far into action from being stopped now.

Anyway, sp now back to $10 mark, happy days.

[ratkin]

Anyway, sp now back to $10 mark, happy days.

Support or resistance that is the question.

[sb9]

Support or resistance that is the question.

it was resistance for a while which may become support.

[Marilyn Munroe]

I beleave the market has missunderstimated the danger to Synlait arising from the covenants issue.

Some think a permitted use from the Council trumps a covenant, it doesn't.

Land covenants are a long established mechanism allowing sellers of property to place restrictions on land use negotiated at time of sale and are transmittable if the land is on-sold. The type of covenant most people would know of is when a subdivision developer places a build-by deadline or a construction quality standard on section purchasers.

The Supreme Court is a precedent setting body so any decision in favour of Synlait would then be the law which applies to all covenants throughout the Dominion. Would the Supreme Court be willing to overturn long established law simply to accommodate Synlait?

The Land Transfer Act was updated in 2017. Some defect in this legislation may give Synlait wriggle room.

It is not beyond the bounds of reason for the Supreme Court to decline to hear the appeal or decide against Synlait and Synlait is unable to come to an agreement with the covenantor(Mr Ye Quing) The covenantor may then apply to a court to halt construction or even bulldoze the plant and return it to farm land.

There is another off the wall possibility. Mr Ye may be a citizen of the Peoples Republic and a major shareholder hails from there. The Marxist Government in Beijing may convene a Revolutionary Tribunal to sort it out.

Boop boop de do
Marilyn

[whatsup]

I beleave the market has missunderstimated the danger to Synlait arising from the covenants issue.

Some think a permitted use from the Council trumps a covenant, it doesn't.

Land covenants are a long established mechanism allowing sellers of property to place restrictions on land use negotiated at time of sale and are transmittable if the land is on-sold. The type of covenant most people would know of is when a subdivision developer places a build-by deadline or a construction quality standard on section purchasers.

The Supreme Court is a precedent setting body so any decision in favour of Synlait would then be the law which applies to all covenants throughout the Dominion. Would the Supreme Court be willing to overturn long established law simply to accommodate Synlait?

The Land Transfer Act was updated in 2017. Some defect in this legislation may give Synlait wriggle room.

It is not beyond the bounds of reason for the Supreme Court to decline to hear the appeal or decide against Synlait and Synlait is unable to come to an agreement with the covenantor(Mr Ye Quing) The covenantor may then apply to a court to halt construction or even bulldoze the plant and return it to farm land.

There is another off the wall possibility. Mr Ye may be a citizen of the Peoples Republic and a major shareholder hails from there. The Marxist Government in Beijing may convene a Revolutionary Tribunal to sort it out.

Boop boop de do
Marilyn

AGREE, I wouldn't touch SML until this is sorted, only a fool would IMHO !!!

[Beagle]

I beleave the market has missunderstimated the danger to Synlait arising from the covenants issue.

Some think a permitted use from the Council trumps a covenant, it doesn't.

Land covenants are a long established mechanism allowing sellers of property to place restrictions on land use negotiated at time of sale and are transmittable if the land is on-sold. The type of covenant most people would know of is when a subdivision developer places a build-by deadline or a construction quality standard on section purchasers.

The Supreme Court is a precedent setting body so any decision in favour of Synlait would then be the law which applies to all covenants throughout the Dominion. Would the Supreme Court be willing to overturn long established law simply to accommodate Synlait?

The Land Transfer Act was updated in 2017. Some defect in this legislation may give Synlait wriggle room.

It is not beyond the bounds of reason for the Supreme Court to decline to hear the appeal or decide against Synlait and Synlait is unable to come to an agreement with the covenantor(Mr Ye Quing) The covenantor may then apply to a court to halt construction or even bulldoze the plant and return it to farm land.

There is another off the wall possibility. Mr Ye may be a citizen of the Peoples Republic and a major shareholder hails from there. The Marxist Government in Beijing may convene a Revolutionary Tribunal to sort it out.

Boop boop de do
Marilyn

http://www.sharechat.co.nz/article/72a6c719/supreme-court-to-hold-oral-hearing-on-synlait-s-pokeno-appeal.html?utm_medium=email&utm_campaign=Supreme%20Court%20to%20hold%20oral%20 hearing%20on%20Synlaits%20Pokeno%20appeal&utm_content=Supreme%20Court%20to%20hold%20oral%20h earing%20on%20Synlaits%20Pokeno%20appeal+CID_a1d98 95e73ebcedd29f7f88fa7594d83&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle72a6c719suprem e-court-to-hold-oral-hearing-on-synlait-s-pokeno-appealhtml

Supreme court agrees to hear oral arguments before deciding whether a formal appeal will be allowed. Interesting development. No date set so this drags on and on and on...
I hope SML have superb legal counsel capable of mustering an exceptionally good oral argument otherwise...

[RTM]

Thanks. Going to be fascinating as an ex-holder to see how this plays out.


Here's a good summary
https://tompkinswake.co.nz/insights/knowledge/quarry-covenants-affecting-synlaits-new-pokeno-dairy-factory/

Not good that it turns out the factory shouldn't be there.
If they lose it could cost them a lot of money or demilish the factory and try suing the vendor of the land.

[winner69]

Back to SML

Nobody seems keen to either buy or sell SML shares today

[couta1]

Back to SML

Nobody seems keen to either buy or sell SML shares today No one wants to talk about SML, your not taking the hint mate.

[Chanchay]

No one wants to talk about SML, your not taking the hint mate.

The only thing people want to know about synlait is what's happening at pokeno. And that is thing the company has zero interest in talking about

[Balance]

The only thing people want to know about synlait is what's happening at pokeno. And that is thing the company has zero interest in talking about

Sensitive negotiations taking place behind the scenes - they would be foolish to be like Trump and tweet about it!

SML made a mistake imo when deciding on Pokeno - should have invited Tanui or another Maori party to participate. Then, there would have been absolutely no problem.

[Vince]

Quite a few 'off topic' posts.

I'll be moving them to another private area.

https://www.sharetrader.co.nz/forumdisplay.php?34-St-Whinge

It's called the whinge area, - PM me if you want access to that area.

Vince

[Chanchay]

Quite a few 'off topic' posts.

I'll be moving them to another private area.

https://www.sharetrader.co.nz/forumdisplay.php?34-St-Whinge

It's called the whinge area, - PM me if you want access to that area.

Vince

Yes chairman Vince. Thank you for protecting us from such off-topic whinging. I would hate to have to make decisions for my self.

You're ever loyal comrade chanchay

[mondograss]

Yes chairman Vince. Thank you for protecting us from such off-topic whinging. I would hate to have to make decisions for my self.

You're ever loyal comrade chanchay

Well I for one was getting pretty sick of it all. I come for the share commentary not the bitching and whining.

[percy]

Well I for one was getting pretty sick of it all. I come for the share commentary not the bitching and whining.

So did the people who found they could no longer log in,for no reason.
Thankfully Vince is/has sorted things for them.

[Marilyn Munroe]

Legal commentary on the Synlait - covenants issue;

https://tompkinswake.co.nz/insights/knowledge/quarry-covenants-affecting-synlaits-new-pokeno-dairy-factory/

Edit: Oops link already posted by dobby41.

Boop boop de do
Marilyn

[couta1]

Well I for one was getting pretty sick of it all. I come for the share commentary not the bitching and whining. Well add to the commentary then instead of bitching and whining.

[mondograss]

Well add to the commentary then instead of bitching and whining.

Touchy much? I’ve contributed on topic to this and other threads and rarely bother chiming in on the childish bullsh*t that goes on. Perhaps take a look in the mirror to see who’s perpetually causing the off topic angst.

[sb9]

Just checked the calendar to see when FY report is due and its on 12th, same day as Fonterra report is due as well. Wonder who will eclipse who on that day?

[sb9]

SM1 (ASX) has been added to ASX 300 in the latest index rebalance on ASX.

[dreamcatcher]

SM1 (ASX) has been added to ASX 300 in the latest index rebalance on ASX.

Company also mentioned SAMR registrations of the Akara and Pure Canterbury brands would be approved in CY19 leaving just the Pokeno decision to go their way ..........

[pg0220]

Company also mentioned SAMR registrations of the Akara and Pure Canterbury brands would be approved in CY19 leaving just the Pokeno decision to go their way ..........
Decisions for SAMR registrations are completely out of their hands, especially when China has publicly announced that they want local brands to have more market shares. SAMR registrations should be considered a bonus, but not to be relied on...

[dreamcatcher]

Decisions for SAMR registrations are completely out of their hands, especially when China has publicly announced that they want local brands to have more market shares. SAMR registrations should be considered a bonus, but not to be relied on...

Completely true.......... on the Wish List

[sb9]

Decisions for SAMR registrations are completely out of their hands, especially when China has publicly announced that they want local brands to have more market shares. SAMR registrations should be considered a bonus, but not to be relied on...

That's correct. At the conf call following FH results they did mention that SH results will be much better than FH.

Waiting to see next week what they can deliver.

PS - sneaked in a small parcel around low $9 mark few days back.

[RTM]

That's correct. At the conf call following FH results they did mention that SH results will be much better than FH.

Waiting to see next week what they can deliver.

PS - sneaked in a small parcel around low $9 mark few days back.

You’re braver than me SB. The land covenant thing scares the hell out of me.
Going to court is like flipping a coin....maybe even worse...40:60 chance of success ?
And making a deal seems like it will be pretty expensive. If it’s even possible.
(Maybe they could get DT to help with the negotiation ?)
Good luck.

[RupertBear]

You’re braver than me SB. The land covenant thing scares the hell out of me.
Going to court is like flipping a coin....maybe even worse...40:60 chance of success ?
And making a deal seems like it will be pretty expensive. If it’s even possible.
(Maybe they could get DT to help with the negotiation ?)
Good luck.

Yep I agree with you RTM, too much uncertainty for me as well so I bailed recently @ $9.65 and bought a few more ATM @ $14.50. Feeling better having done that :) good luck to holders.

[sb9]

You’re braver than me SB. The land covenant thing scares the hell out of me.
Going to court is like flipping a coin....maybe even worse...40:60 chance of success ?
And making a deal seems like it will be pretty expensive. If it’s even possible.
(Maybe they could get DT to help with the negotiation ?)
Good luck.

Thanks, its just a small play i"m making on FY results. Let's see how that pans out.

[Beagle]

The way I see it is the odds on Synlait getting a successful outcome from the Supreme court are slim.
For a start the Supreme court is only taking oral submissions on points of law from both parties as to whether an appeal will even be allowed and if we ascribe a 50/50 chance to a them even allowing an appeal and then a 50/50 chance to the appeal being successful if its even allowed in the first place clearly on a sequential basis the odds on two 50 / 50 outcomes both being positive is only 1 in 4 or 25%. The CEO's optimism that he's still talking to parties also appears unfounded as they've said the same thing for a very long time now and if those talks had of been productive they wouldn't be heading to the Supreme court at all.
I see a LOT of risk with Synlait at this point.

[Filthy]

http://www.scoop.co.nz/stories/BU1909/S00210/morgans-picks-18-lift-in-synlait-profit-on-growing-sales.htm

[sb9]

http://www.scoop.co.nz/stories/BU1909/S00210/morgans-picks-18-lift-in-synlait-profit-on-growing-sales.htm

Thanks for the link.

A well balanced article outlining both positives and risks at this point in time.

[sb9]

Behind today's NBR online paywall..

Synlait held talks over Pokeno plant's future

[BlackPeter]

Behind today's NBR online paywall..

Synlait held talks over Pokeno plant's future

Any new information in this article? - or do they just regurgitate what's already known?

[Beagle]

Behind today's NBR online paywall..

Synlait held talks over Pokeno plant's future

"But a solution to its $300m problem is still unclear"
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/339758/306172.pdf
The issue I have with the integrity of management, (and something they "very conveniently" leave out of their background commentary in this announcement) so I will highlight it in the customary Synlait way), SYLAIT STARTED BUILDING THE FACILITY IN FULL KNOWLEDGE THAT THE WHOLE MATTER WAS UNDER APPEAL BY THE AGRREVIED PARTY In my view this amounts to GROSS RECKLESSNESS

In my view the gross recklessness of Synlait's board and management is what created this problem. The mind boggles on how you could trust them to look after shareholders interests properly going forward. Its almost as bad as some of the decisions Fonterror's board have made and that's REALLY saying something !

They can report almost any profit they like later this week as far as I am concerned its almost irrelevant when there's a $300m+ problem hanging over shareholders heads.

[sb9]

Any new information in this article? - or do they just regurgitate what's already known?

Sorry not subscriber to NBR so have no idea on the content except for few lines saying solution is still unclear.

[Lola]

"But a solution to its $300m problem is still unclear"
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/339758/306172.pdf
The issue I have with the integrity of management, (and something they "very conveniently" leave out of their background commentary in this announcement) so I will highlight it in the customary Synlait way), SYLAIT STARTED BUILDING THE FACILITY IN FULL KNOWLEDGE THAT THE WHOLE MATTER WAS UNDER APPEAL BY THE AGRREVIED PARTY In my view this amounts to GROSS RECKLESSNESSS

In my view the gross recklessness of Synlait's board and management is what created this problem. The mind boggles on how you could trust them to look after shareholders interests properly going forward. Its almost as bad as some of the decisions Fonterror's board have made and that's REALLY saying something !

They can report almost any profit they like later this week as far as I am concerned its almost irrelevant when there's a $300m+ problem hanging over shareholders heads.

This has been bubbling along for sometime. Real bully boy behaviour from Sylait. Something in milk that gives out an overdose of entitlement. A fine of about $300 million plus a 10% share of future annual profits may be nearly appropriate.

[Leftfield]

Today's results (https://www.nzx.com/announcements/340764) (read here....pretty impressive 10% increase in Net profit) provide an update on Pokeno....

"We acknowledge this issue has created uncertainty for shareholders and milk suppliers but are committed to ensuring a reasonable outcome is reached. Synlait has made a reasonable settlement offer and we are working towards one of two outcomes which we believe are in the best interests of all, a reasonable settlement offer, or a court outcome. (Hearing set for Supreme Court 21 Oct 19)

We are comfortable that our legal exposure is not substantial. Synlait determined, and the auditors agreed, that no provision is required under the accounting standards in its financial statements."

[petty]

I think the market was expecting stronger than 10% growth. I see a drop after opening.

[sb9]

Today's results (https://www.nzx.com/announcements/340764) (read here....pretty impressive 10% increase in Net profit) provide an update on Pokeno....

"We acknowledge this issue has created uncertainty for shareholders and milk suppliers but are committed to ensuring a reasonable outcome is reached. Synlait has made a reasonable settlement offer and we are working towards one of two outcomes which we believe are in the best interests of all, a reasonable settlement offer, or a court outcome. (Hearing set for Supreme Court 21 Oct 19)

We are comfortable that our legal exposure is not substantial. Synlait determined, and the auditors agreed, that no provision is required under the accounting standards in its financial statements."

Pretty solid results imo. Along with their partner A2M, they too have achieved $1bln revenue and more to come. Will listen to their conf call at 10am to get more insight.

[BlackPeter]

I think the market was expecting stronger than 10% growth. I see a drop after opening.

True - EPS (45.8 cents) is 6% below analyst consensus (48.9 cents) - not flash. Add to that the ongoing threats due to the badly handled covenant issues in Pokeno and the downtrend is likely to continue ...

[mondograss]

Just because they've made a reasonable offer, doesn't mean the covenant holder has to accept it. Given all that's gone on I expect he's holding out for an obscenely unreasonable offer.

[sb9]

Wow, that Lactoferrin gross profit is a ripper on page 29 of presentation.

Gross profit/mt is $646,099 for FY19 compared to $285,757 in FY18. Sales volume is marginal though at 21 (mt) in FY19 compared to 16 (mt) in FY18.

So that category contributed $13.3m to overall gross profit in FY19 compared to a mere $4.4m in FY18.

Just imagine if they could double that volume at similar margin level this year.

[BlackPeter]

Wow, that Lactoferrin gross profit is a ripper on page 29 of presentation.

Gross profit/mt is $646,099 for FY19 compared to $285,757 in FY18. Sales volume is marginal though at 21 (mt) in FY19 compared to 16 (mt) in FY18.

So that category contributed $13.3m to overall gross profit in FY19 compared to a mere $4.4m in FY18.

Just imagine if they could double that volume at similar margin level this year.

Just imagine the margin is cut by half? Lactoferrin had in the past quite erratic price jumps (in both directions). Nice if they can make money with it as long as the sun is shining, but no guarantees they will in the future - it is a quite speculative product.

[sb9]

Conf call is being hosted by CEO and CFO from their brand new office in Shangai, where they had their board meeting too y'day.

[sb9]

Just imagine the margin is cut by half? Lactoferrin had in the past quite erratic price jumps (in both directions). Nice if they can make money with it as long as the sun is shining, but no guarantees they will in the future - it is a quite speculative product.

They've doubled that facility this year, guess they would've done their homework on movement in margins.

[BlackPeter]

They've doubled that facility this year, guess they would've done their homework on movement in margins.

Very hard to predict. Remember when they first started the Lactoferrin business (presumably doing their homework and hopefully better than in Pokeno) and the year after finishing the facility the margins have been in the cellar?

Its like trying to predict next years weather ...

[RTM]

Just because they've made a reasonable offer, doesn't mean the covenant holder has to accept it. Given all that's gone on I expect he's holding out for an obscenely unreasonable offer.

No….they don't have to accept it. And I guess that's where the courts come in to make a judgement.
I guess SYNLAIT have far better legal advice than all of us, plus knowledge of how the negotiations are going to date ....so I imagine that is why they are so sure of their ground.
Nevertheless....pleased I bailed at $10.00.

[BlackPeter]

No….they don't have to accept it. And I guess that's where the courts come in to make a judgement.
I guess SYNLAIT have far better legal advice than all of us, plus knowledge of how the negotiations are going to date ....so I imagine that is why they are so sure of their ground.
Nevertheless....pleased I bailed at $10.00.

Hmm - lets face it - if they would have had and listened to good legal advice than they never would have built the factory without resolving this issue beforehand. They would have been in a much much better negotiating position then and could have walked away easily without risking to set several $100 millions into the sand.

I can't comment on their legal advise, but if they listen it is not good and if it is good they don't seem to listen.

[Beagle]

Today's results (https://www.nzx.com/announcements/340764) (read here....pretty impressive 10% increase in Net profit) provide an update on Pokeno....

"We acknowledge this issue has created uncertainty for shareholders and milk suppliers but are committed to ensuring a reasonable outcome is reached. Synlait has made a reasonable settlement offer and we are working towards one of two outcomes which we believe are in the best interests of all, a reasonable settlement offer, or a court outcome. (Hearing set for Supreme Court 21 Oct 19)

We are comfortable that our legal exposure is not substantial. Synlait determined, and the auditors agreed, that no provision is required under the accounting standards in its financial statements."

So the accountants with no formal legal training are now QC lawyers...Hmmmm.
10% profit growth is very weak given ATM's volume growth and well below analyst consensus average.
I agree with others above that the aggrieved party is going to hang out for an obscenely unreasonable amount of compensation and that Synlait's own arrogance of taking a gung-ho approach of building this facility in full knowledge that the matter was going to be vigorously appealed amounts to gross recklessness and will probably result in the company shooting itself in the foot, possibly both feet.

None of this matters of course because no doubt shareholders are far more impressed that this company continues with great pride to take great strides with its inclusiveness policy and carbon reduction program.

[BlackPeter]

Just looking into the balance sheet. Liabilities to total assets up again to 57.1%. They better hope the Pokeno settlement will be really cheap and interest rates stay low.

On the other hand - high debts (i.e. low equity) are good for the ROE factor, but still - while 16.7% is a not too bad return, didn't they mention they try to achieve 20%? Lets hope that they don't try to do that by further increasing the debt ...

[Beagle]

Yeap...all recent expansion has been done on massively expanding bank debt and a what could possibly go wrong approach has been taken.
They're really in a very weak position if the worst happens and they have to relocate that Pokeno facility.
But no worries...just hit shareholders up for a massive rights issue, why shouldn't shareholders trust them completely with more capital are their "exemplary" track record of "careful" risk management.

I think ATM might end up owning this at considerably below the current share price if things go badly wrong.

[Leftfield]

........I think ATM might end up owning this at considerably below the current share price if things go badly wrong.

Crikey next thing we know ATM will be asked to buy out both SML and Fonterra! ;)

(FWIW - I prefer ATM's 'capital light' approach.)

[BlackPeter]

I was wondering why they say that they don't expect a substantial settlement for Pokeno "We are comfortable that our legal exposure is not substantial" and dived into the financial notes. Took me a while to find the relevant passage (on page 104 ... ) and surprise - they say they don't really know:



21 CONTINGENCIES
The Group is currently involved in a dispute regarding restrictive covenants attached to land it purchased in Pokeno. In February 2018, the Group announced the conditional purchase of 28 hectares of land in Pokeno to establish its second nutritional powder manufacturing site. The land was subject to restrictive covenants limiting the development of the land that the vendor was required to remove. The vendor applied to the High Court to have the restrictive covenants removed. In November 2018, the High Court removed the restrictive covenants. The High Court also declined to award compensation to the covenant holder on the basis that they would not suffer any loss due to the extinguishment of the covenants as they were of little practical value. The Group took legal title to the land following the High Court’s decision. The covenant holder appealed to the Court of Appeal which in May 2019 overturned the High Court’s decision.

In June 2019, the Group filed an application for leave to appeal to the Supreme Court to have the Court of Appeal’s decision overturned. In August 2019, the Supreme Court advised that there will be an oral hearing prior to a decision on whether the Group will be granted leave to appeal. The oral hearing is set for 21 October 2019.
There are a range of possible outcomes for the Group including a negotiated settlement between the parties. Given the range of possible outcomes the Group is not able to reliably estimate any potential liability.
No other significant contingent liabilities are outstanding at balance date (2018: $nil).


Given that they are not able to estimate any potential liability - it could be a big number as well - couldn't it?

[winner69]

Just looking into the balance sheet. Liabilities to total assets up again to 57.1%. They better hope the Pokeno settlement will be really cheap and interest rates stay low.

On the other hand - high debts (i.e. low equity) are good for the ROE factor, but still - while 16.7% is a not too bad return, didn't they mention they try to achieve 20%? Lets hope that they don't try to do that by further increasing the debt ...

Only doing what Adrian Orr wants companies to do ....borrow more to get the economy moving faster ...debt has never been so cheap he says.

[RTM]

I was wondering why they say that they don't expect a substantial settlement for Pokeno "We are comfortable that our legal exposure is not substantial" and dived into the financial notes. Took me a while to find the relevant passage (on page 104 ... ) and surprise - they say they don't really know:



Given that they are not able to estimate any potential liability - it could be a big number as well - couldn't it?

Do they use the same auditors as Font-error ?

[Beagle]

I was wondering why they say that they don't expect a substantial settlement for Pokeno "We are comfortable that our legal exposure is not substantial" and dived into the financial notes. Took me a while to find the relevant passage (on page 104 ... ) and surprise - they say they don't really know:

Given that they are not able to estimate any potential liability - it could be a big number as well - couldn't it?

Some speculation if they had to completely rebuild elsewhere they could be up for north of $300m. Add in possible breech of contract to suppliers and customers and who knows ?
Speculation on another forum when it existed was a possible worst case scenario of up to $500m all up. Shall I leave it to you to recalculate their gearing ratio if they had to borrow another $500m ?, (assuming they could find any bank prepared to lend it to them ?). I'd expect others to be fully cognisant of how stretched their balance sheet is. What does a good boxer do when they have someone on the ropes ? Go in for the knockout punch ! Business can be ugly eh...not everyone play's nice, not that you'd think Synlait management or the board are even aware of this :ohmy: Board and management asleep at the wheel just like another milk processor ?

[dobby41]

Some speculation if they had to completely rebuild elsewhere they could be up for north of $300m.

If they had to build elsewhere they'd also have to remove what they have already built and return the site to its old state. More expense.

[JimmyTrade]

Recently increased the size of there lactoferrin processing plant, coupled with increased demand in lactoferrin. Believe lactoferrin was a contributing factor to beingmate issues with infant formula.

I can see more dairy processors trying to get into this field while the demand is hot, can see price coming down significantly (fine balance of supply and demand for this protein).

[BlackPeter]

Do they use the same auditors as Font-error ?

Excellent question. SML do use Deloitte, and Fonterra got audited last year by pwc (I assume this year as well, but we shall see).

However - here is something frightening ... Deloitte (i.e. SML's auditor) used to audit as well the famous and well loved CBL Insurance. As we all know - they didn't discover for years that CBL was bankrupt while they attested them the correctness of their financial statements without reservation.

I am sure this will give SML shareholders the warm fuzzies that they can trust the judgement of these auditors.

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/340764/307437.pdf

No progress on other product registrations and no idea on timeframe either...oh dear... First page - cloudy / misty seems appropriate.
No guidance on product volume to ATM. Trust us, we know what we're doing lol

[whatsup]

Only doing what Adrian Orr wants companies to do ....borrow more to get the economy moving faster ...debt has never been so cheap he says.

That is what Fonterra modelled their business plan on and look where they are today !!

[Redmack]

I might be wrong, my recollection is that Synlait had received a court decision on the covenant. It appeared to be safe to start site works etc. at that time. Is it reasonable to receive a court decision and not to proceed with developing a facility because you are waiting for a possible appeal? How long would you wait? I suspect that the covenant holder’s appeal would never have eventuated until Synlait commenced works. I don’t think Synlait are as silly as everyone thinks. They have an opponent who had the luxury of waiting for Synlait to act before appealing. If I was such an opponent, I would wait for Synlait to commit to the development before appealing a decision. I certainly would not have given any indication of what I was planning either. It certainily raises questions on the court's reasoning.

[dobby41]

That is what Fonterra modelled their business plan on and look where they are today !!

Fonterra didn't have a lot of choices - their shareholders (the farmers) don't want to stump up with capital (they'd rather leave the capital on the farm).

[pg0220]

10% increase in profit, high gearing, lower margin on ATM contract which is the biggest source of income, uncertainty on the new factory, etc.....
20x PE ratio is still looking expensive.... glad that I am not holding this anymore!

[BlackPeter]

I might be wrong, my recollection is that Synlait had received a court decision on the covenant. It appeared to be safe to start site works etc. at that time. Is it reasonable to receive a court decision and not to proceed with developing a facility because you are waiting for a possible appeal? How long would you wait? I suspect that the covenant holder’s appeal would never have eventuated until Synlait commenced works. I don’t think Synlait are as silly as everyone thinks. They have an opponent who had the luxury of waiting for Synlait to act before appealing. If I was such an opponent, I would wait for Synlait to commit to the development before appealing a decision. I certainly would not have given any indication of what I was planning either. It certainily raises questions on the court's reasoning.

My understanding is that there is a quite limited time frame (something like 4 weeks) to appeal a court decision. This means SML knew pretty well that there is an appeal and they just assumed that they will win (which they didn't).

[Redmack]

I might be wrong, my recollection is that Synlait had received a court decision on the covenant. It appeared to be safe to start site works etc. at that time. Is it reasonable to receive a court decision and not to proceed with developing a facility because you are waiting for a possible appeal? How long would you wait? I suspect that the covenant holder’s appeal would never have eventuated until Synlait commenced works. I don’t think Synlait are as silly as everyone thinks. They have an opponent who had the luxury of waiting for Synlait to act before appealing. If I was such an opponent, I would wait for Synlait to commit to the development before appealing a decision. I certainly would not have given any indication of what I was planning either. It certainily raises questions on the court's reasoning.

[Redmack]

Depressingly lack of risk management, when the opponent has significant resources and everything to gain, in that case.

[Beagle]

Yeah they embarked and started building a $260m project entirely bank debt funded in the full knowledge that the matter was under appeal and I believe from memory they had what amounted to a cease and desist letter from the other party. Arrogance, gross recklessness or both ?
I think it ranks right up there with some of Fon-terror's "best" decisions. Almost makes you wonder if processing milk gives off strange mind numbing fumes lol

http://www.sharechat.co.nz/article/e86e8ea0/synlait-to-commission-pokeno-plant-despite-legal-problems.html?utm_medium=email&utm_campaign=Synlait%20to%20commission%20Pokeno%20 plant%20despite%20legal%20problems&utm_content=Synlait%20to%20commission%20Pokeno%20p lant%20despite%20legal%20problems+CID_b7e3ed414299 07e1d96f2036d5e78cfd&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlee86e8ea0synlai t-to-commission-pokeno-plant-despite-legal-problemshtml

He doesn't know when to "zip it". I think if I was the aggrieved party that would read like "I dare you to file an injunction" and I would...

[Sideshow Bob]

No progress on other product registrations and no idea on timeframe either...oh dear... First page - cloudy / misty seems appropriate.
No guidance on product volume to ATM. Trust us, we know what we're doing lol

On the registrations, I don't think they can give any formal timelines. From my experience, any such registrations/listings etc are usually at the complete whim of the Chinese authorities, and often in relation to if/when they need the product. For instance, beef/lamb markets are on fire into China at the moment - and this week 25 Brazilian plants have been added to the list approved to export to China with immediate effect.

You'd think a company 39% owned by a Chinese State-Owned Enterprise would be able to get something through faster - seems not to make any difference. Same goes for a meat company 50% owned by the same parent company.

[BlackPeter]

Oops - just noticed they just crashed through the MA 400 (which is not a good thing ;)); SP 80 cents down since opening. Market appears to be disappointed ...

[Beagle]

On the registrations, I don't think they can give any formal timelines. From my experience, any such registrations/listings etc are usually at the complete whim of the Chinese authorities, and often in relation to if/when they need the product. For instance, beef/lamb markets are on fire into China at the moment - and this week 25 Brazilian plants have been added to the list approved to export to China with immediate effect.

You'd think a company 39% owned by a Chinese State-Owned Enterprise would be able to get something through faster - seems not to make any difference. Same goes for a meat company 50% owned by the same parent company.

Go figure...

[LAC]

Just read the results, not really seeing anything exciting to be honest. Lots of plans for the future but SP is still quite dear for what you currently getting and the risks in getting it wrong. Debt is def getting on the high side. Better options elsewhere with safer track record imo.

[ratkin]

Deleted...

[RTM]

Excellent question. SML do use Deloitte, and Fonterra got audited last year by pwc (I assume this year as well, but we shall see).

However - here is something frightening ... Deloitte (i.e. SML's auditor) used to audit as well the famous and well loved CBL Insurance. As we all know - they didn't discover for years that CBL was bankrupt while they attested them the correctness of their financial statements without reservation.

I am sure this will give SML shareholders the warm fuzzies that they can trust the judgement of these auditors.

Well....I was sort of joking....but that is really quite concerning.
Auditors are mostly bean counters...right ?

[Beagle]

Well....I was sort of joking....but that is really quite concerning.
Auditors are mostly bean counters...right ? Yes. I have done a bit of auditing and really hated it but I feel there's an important distinction to make here so will opine on it.
"We are comfortable that our legal exposure is not substantial. Synlait determined, and the auditors agreed, that no provision is required under the accounting standards in its financial statements."

There are two separate sentences here.
1. Dealing with the first one, that is an entirely subjective assessment on management's part and there is no objective way to measure their exposure at this point. They have been wrong before.
2. Because there is no objective way to measure any possible loss there is no way to provision for it nor is any required under generally accepted accounting standards BUT and this is important, this should be misinterpreted in any way whatsoever to read that the auditors agree their exposure is not substantial. Its simply that it cannot be readily and objectively quantified so no provisioning is required.
It probably doesn't create fundamental going concern uncertainty either so they will probably have got a clean audit report, (sorry haven't had time to read it yet).
A clean audit report does not mean that as a result of a possible future worst case scenario, (relocating the factory plus all consequential contractual compensation to customers and suppliers as well as site make-good costs), their balance sheet won't come under real pressure in the future, especially with their current gearing level.
A rights issue in due course wouldn't surprise me in the slightest, in fact I'd be surprised if one didn't happen.
Its quite possible that many years of profits, (total profits for the last 6 years amount to $262.8m, about the same cost as this single facility's construction cost) could be extinguished by write-off's associated with the Pokeno expansion, AKA... they could well end up doing a Fonterror.

I think the most disappointing aspect of all this is that the decision to commence construction in 2018 was made in full knowledge that an aggrieved party was taking appeal action to protect their rights. That decision would have undoubtedly be made at a board level and when the former CEO Penno was in charge so its not gross recklessness or arrogance you can pin on one person such as the new CEO (huge pink font and all). As a result of this I have very serious reservations about the governance of this company.

The accountability at board level will be interesting to see if this apparent mess turns into a huge cluster ****.

[winner69]

Market didn’t like the report ....down 10%

Outlook not that flash and Pokeno doubts still there

[Beagle]

Fair value in my opinion is a historical PE of 20 given the slower growth rate which suggests $9.18, (less whatever the cost is to fix the Pokeno fiasco).
There's 179 million shares on issue so a worst case scenario at Pokeno of say $400m would destroy $2.23 of value from there, (net value about $7) along with the reputation of the board and management. Pokeno needs to be resolved and accountability for the mess created at board level actioned before I'd consider investing again.

[dreamcatcher]

Fair value in my opinion is a historical PE of 20 given the slower growth rate which suggests $9.18, (less whatever the cost is to fix the Pokeno fiasco).
There's 179 million shares on issue so a worst case scenario at Pokeno of say $400m would destroy $2.23 of value from there, (net value about $7) along with the reputation of the board and management. Pokeno needs to be resolved and accountability for the mess created at board level actioned before I'd consider investing again.

My investing goal of 2-5 yrs has served me well to date (for me)nothings changed.

Positives are $2.23 increase in value if Synlait wins and what value would the the two brands waiting on SAMR approval be worth once approved........... Interestingly GS latest Buy rated TP $11.60

"the company feels “comfortable” it can commission given a court would look at the potential loss or benefit to both sides and he noted there isn’t any significant development on the neighbouring land.

He said Synlait has made a “reasonable offer that we think reflects the other party’s best-case outcome if they were to win in court or we run it through the courts.”


"In late January 2015, Synlait acquired a 25 percent shareholding in New Hope Nutritionals for $2.2 million, which owns and distributes the Akara and e-Akara infant formula brands in China.
“The Akara formulation registration has been accepted subject to a site audit and we continue to work through the registration process for e-Akara,” it said."


http://www.sharechat.co.nz/article/c1093759/synlait-profit-rises-10-pokeno-legal-exposure-not-substantial.html


http://www.sharechat.co.nz/article/e86e8ea0/synlait-to-commission-pokeno-plant-despite-legal-problems.html

[Leftfield]

IMO SML are hoping for a 'reasonable' settlement and it is likely that if they can't negotiate a 'reasonable' settlement then they will ask the courts to decide what is "reasonable."

Here's their recent statement again...."We acknowledge this issue has created uncertainty for shareholders and milk suppliers but are committed to ensuring a reasonable outcome is reached. Synlait has made a reasonable settlement offer and we are working towards one of two outcomes which we believe are in the best interests of all, a reasonable settlement offer, or a court outcome. (Hearing set for Supreme Court 21 Oct 19)

What is 'reasonable' is the question.

(Disc - don't hold )

[sb9]

My investing goal of 2-5 yrs has served me well to date (for me)nothings changed.

Positives are $2.23 increase in value if Synlait wins and what value would the the two brands waiting on SAMR approval be worth once approved........... Interestingly GS latest Buy rated TP $11.60

"the company feels “comfortable” it can commission given a court would look at the potential loss or benefit to both sides and he noted there isn’t any significant development on the neighbouring land.

He said Synlait has made a “reasonable offer that we think reflects the other party’s best-case outcome if they were to win in court or we run it through the courts.”


"In late January 2015, Synlait acquired a 25 percent shareholding in New Hope Nutritionals for $2.2 million, which owns and distributes the Akara and e-Akara infant formula brands in China.
“The Akara formulation registration has been accepted subject to a site audit and we continue to work through the registration process for e-Akara,” it said."


http://www.sharechat.co.nz/article/c1093759/synlait-profit-rises-10-pokeno-legal-exposure-not-substantial.html


http://www.sharechat.co.nz/article/e86e8ea0/synlait-to-commission-pokeno-plant-despite-legal-problems.html

Very aptly put, couldn't agree more.

[Beagle]

IMO SML are hoping for a 'reasonable' settlement and it is likely that if they can't negotiate a 'reasonable' settlement then they will ask the courts to decide what is "reasonable."

Here's their recent statement again...."We acknowledge this issue has created uncertainty for shareholders and milk suppliers but are committed to ensuring a reasonable outcome is reached. Synlait has made a reasonable settlement offer and we are working towards one of two outcomes which we believe are in the best interests of all, a reasonable settlement offer, or a court outcome. (Hearing set for Supreme Court 21 Oct 19)

What is 'reasonable' is the question.

(Disc - don't hold )

Indeed. They may think its reasonable but there's always two points of view. Interesting that Synlait management put the resolution of this as an either its a reasonable settlement or we go to court.
Obviously the Supreme court is only hearing oral submissions on whether a formal appeal of the high court's decision will be allowed so a formal appeal at the Supreme court is certainly not a fait accompli. Even if the Supreme court allow a formal appeal there is no guarantee Synlait will win.
The possibly of the aggrieved party seeking an injunction to prevent commissioning should not be dismissed as a commercial risk either.
All along Synlait management have taken a sanguine approach to assuming this can be resolved in a reasonable amicable way and are simply hoping the other party plays fair and reasonable. What if they don't ?

[RTM]

Indeed. They may think its reasonable but there's always two points of view. Interesting that Synlait management put the resolution of this as an either its a reasonable settlement or we go to court.
Obviously the Supreme court is only hearing oral submissions on whether a formal appeal of the high court's decision will be allowed so a formal appeal at the Supreme court is certainly not a fait accompli. Even if the Supreme court allow a formal appeal there is no guarantee Synlait will win.
The possibly of the aggrieved party seeking an injunction to prevent commissioning should not be dismissed as a commercial risk either.
All along Synlait management have taken a sanguine approach to assuming this can be resolved in a reasonable amicable way and are simply hoping the other party plays fair and reasonable. What if they don't ?

I am out so am watching on with interest from the sidelines.
However....I can not believe that Synlait will have acted as irresponsibly/arrogantly as some on here think. Surely not. It's not as tho its built in the middle of a housing area. Surely someone at some stage will ask the question "Does the covenant still make sense in 2019 onwards ?" And if the answer is no, a reasonable amount of money will change hands and life will go on.

[Beagle]

I am out so am watching on with interest from the sidelines.
However....I can not believe that Synlait will have acted as irresponsibly/arrogantly as some on here think. Surely not. It's not as tho its built in the middle of a housing area. Surely someone at some stage will ask the question "Does the covenant still make sense in 2019 onwards ?" And if the answer is no, a reasonable amount of money will change hands and life will go on.

I've been out for a while too and keep watching thinking at some point this will be a buy again. Yes its an industrial area and Synlait management would like to think common sense will prevail but covenant rights are deeply enshrined in law. Fascinating process to watch from the sidelines.

[BlackPeter]

All along Synlait management have taken a sanguine approach to assuming this can be resolved in a reasonable amicable way and are simply hoping the other party plays fair and reasonable. What if they don't ?

I guess without having heard the other side we don't really know whether they have genuine issues and negotiating in good faith.

However - I read some months ago that they have plans for subdividing adjacent land in Pokeno to create lifestyle blocks as well as setting up a adventure tourism business.

Not sure it was this article, but seems to describe the same business plan:
https://www.stuff.co.nz/business/better-business/106518496/massive-agritourism-development-plans-to-bring-kiwi-farm-ferry-rides-accommodation-to-north-waikato

Ah yes - and here is a link referring to the housing development:

https://www.nzherald.co.nz/business/news/article.cfm


Its contested new factory at Pokeno may have got in the way of a neighbour's plans for a 1000-section housing development.

Last month's Court of Appeal judgment has thrown Synlait's plans to start processing at Pokeno imminently into confusion by upholding restrictive covenants on the land.

The court's ruling that the restrictive convenants stay noted that neighbouring land owner Karl Ye, who sought the court ruling, wants his land rezoned residential for a big subdivision.

Further inquiries by the Herald showed Ye, also known as Qing Ye, made a submission to the Waikato District Council in October to rezone his 148ha properties residential. His land is currently farmed.

The council's proposed district plan wants to rezone Ye's land rural and the land Synlait has built on to heavy industrial.

Two 200-year covenants on the Synlait land restrict its use to grazing, lifestyle farming and forestry.

Ye owns the benefits of the covenants, which have only run for 20 years.


Anyway - both plans (tourism business as well as lifestyle blocks) would be quite incompatible with an adjacent big and ugly dairy factory.

Given that the character of the land was protected by covenants the developers could well rely on the area remaining its rural character. It was Synlait which choose to infringe on these covenants and basically try to steal many million dollars from the people who planned these developments in good faith. Why should the beneficiary of the covenants now agree to a cheap settlement to make the party violating the covenants richer?

It actually might be Synlait who is acting unreasonable here ...

[Beagle]

Yes I have read the same press releases BP. Synlait really need to settle this at whatever the aggrieved party will accept and I am not sure the board realise this.
If they don't settle and the Supreme court knocks them back on oral submissions on their right to appeal on 21 October, (can only appeal on matters of law), or knocks them back in the appeal process itself and then the neighbour's get an inunction stopping them operating the plant, Synlait are then in real trouble and incredibly vulnerable.
The aggrieved party will be fully cognisant that Synlait gearing is very high and they are vulnerable and quite literally they are in a very good position to "milk" Synlait.
I don't think this goes away cheaply...or anything even remotely close to cheaply.

[RTM]

​
Yes I have read the same press releases BP. Synlait really need to settle this at whatever the aggrieved party will accept and I am not sure the board realise this.
If they don't settle and the Supreme court knocks them back on oral submissions on their right to appeal on 21 October, (can only appeal on matters of law), or knocks them back in the appeal process itself and then the neighbour's get an inunction stopping them operating the plant, Synlait are then in real trouble and incredibly vulnerable.
The aggrieved party will be fully cognisant that Synlait gearing is very high and they are vulnerable and quite literally they are in a very good position to "milk" Synlait.
I don't think this goes away cheaply...or anything even remotely close to cheaply.

Those lovely pink teats will be very chafed and red by the end of that process.

[Beagle]

​

Those lovely pink teats will be very chafed and red by the end of that process.

:lol: :lol: Top of the class for you Sir, definitely the best post of the week !!!!!

[peat]

​

Those lovely pink teats will be very chafed and red by the end of that process.

Im certainly glad I don't have to envision that image as a shareholder.

[Beagle]

Can't help thinking one of the major shareholders is supporting the SP at this level.

[BlackPeter]

Can't help thinking one of the major shareholders is supporting the SP at this level.

You mean to make the coming capital rise to pay for the Pokeno penalty a bit less diluting? Maybe still hoping for 1 for 3 at $6?

[RupertBear]

Craigs have maintained their BUY recommendation :eek2:

[sb9]

Market took a week or so understand the numbers and outlook and seem to like what they crunched.

[Beagle]

Nice man on the radio this afternoon (as one of the lead news articles, can you believe it), said Synlait had moved to pay all staff who take maternity leave full pay topping up the Govt allowance so they receive full pay for 22 weeks. Hope that includes both parents and shareholders will be absolutely trilled if both parents who work for Synlait and are members of the LGTBQP community adopt a baby or have one through surrogate parents. That would be great and so progressive. What's 44 weeks pay between friends eh. Can't believe there wasn't a separate stock exchange release announcing this major new enhancement to shareholders prospects in the usual HUGE pink font today.

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/341423/308215.pdf

Perfect timing for the aggrieved party to seek an injunction, assuming they want this to stay fully adversarial...

[JimmyTrade]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/341423/308215.pdf

Perfect timing for the aggrieved party to seek an injunction, assuming they want this to stay fully adversarial...

Good to see some of the engineers made the photograph..

Its been a challenging commissioning.

[Beagle]

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12270326

[peat]

there is a huge amount of downside for SML
the way I read that is they might be told to deconstruct. If the convenant defines the limited functions and the covenant is valid?
How ironic that a Chinese person is calling for right of law in NZ.

[Beagle]

Yes, massive potential downside in a worst case scenario and the company is so highly geared its extremely unlikely they could build elsewhere within their existing financial capabilities so the prospect of a capital raise is very real. Will anyone at board or management level fall on their sword and be accountable if this all turns to custard ? or are shareholders simply asked to accept a write-off that could potentially exceed their total profits over the last 6 years and accept that the board and management have exercised prudent risk management and they simply got "unlucky" I think its the latter and if so then this is uninvest-able as governance is appalling. D Day is coming and I think Synlait are making a very good job of mimicking a possum in the headlights and simply hoping for the best.
Hope is a great business plan right ?

[Beagle]

https://www.stuff.co.nz/business/farming/116207409/synlait-rival-warns-of-risk-to-infant-formula-from-proposed-quarry
Looks very unlikely to be settled before this goes to oral submissions to the Supreme Court on whether an appeal is allowed on 21 October.
Synlait shareholders will be hoping their companies QC is an extremely good orator and can make a truly compelling oral argument.

If the Supreme court decide not to hear an appeal or if Synlait lose in due course after the Supreme Court allows one then the next move will surely be an injunction against Synlait operating their facility and then Synlait are so incredibly vulnerable they are at the complete mercy of their neighbour.
I would think they could then be effectively legally greenmailed into making a massive settlement or have to shift elsewhere.

What will then be interesting (if this all turns to custard) is if a single executive falls on their sword either at board or management level...I doubt it.

Fascinating case and I think Synlait are really in trouble here. Possible implications for ATM with getting enough product too.
Disc Don't own any SML or ATM at present.

[Baa_Baa]

Disc Don't own any SML or ATM at present.

You own both ATM and SML through your KFL holdings, unless you've sold KFL? ATM is 14% of KFL portfolio holding and A2 Milk holds 17.39% of Synlait through JBWere Nominees.

It does looks troublesome for SML but I think your doomsday scenario is less likely to eventuate than a settlement decided on by the court, seeing as how Synlait disclosed they have made a "reasonable" offer and ergo it is not accepted. Also interesting is what recourse SML have against being a buyer in good faith that turned out that the covenants were not dealt with.

[Ggcc]

https://www.stuff.co.nz/business/farming/116207409/synlait-rival-warns-of-risk-to-infant-formula-from-proposed-quarry
Looks very unlikely to be settled before this goes to oral submissions to the Supreme Court on whether an appeal is allowed on 21 October.
Synlait shareholders will be hoping their companies QC is an extremely good orator and can make a truly compelling oral argument.

If the Supreme court decide not to hear an appeal or if Synlait lose in due course after the Supreme Court allows one then the next move will surely be an injunction against Synlait operating their facility and then Synlait are so incredibly vulnerable they are at the complete mercy of their neighbour.
I would think they could then be effectively legally greenmailed into making a massive settlement or have to shift elsewhere.

What will then be interesting (if this all turns to custard) is if a single executive falls on their sword either at board or management level...I doubt it.

Fascinating case and I think Synlait are really in trouble here. Possible implications for ATM with getting enough product too.
Disc Don't own any SML or ATM at present.
Great post. However I feel that ATM IF might not be hit as hard for getting enough product. SML can focus purely on IF labelled in their Chinese export packets. I am sure that if they cannot supply the quota ATM needs, the supply of IF in English packaging sold by the Daigou, might be able to be supplied by somebody else like Fonterra. Of course that would take planning and not
Just done overnight. I do stress this is only my thought and not fact This would only be considered if SML can’t produce enough product for ATM. SML have the contract for export to China and no one else can supply unless SML breach their contract obligations.

[BlackPeter]

Great post. However I feel that ATM IF might not be hit as hard for getting enough product. SML can focus purely on IF labelled in their Chinese export packets. I am sure that if they cannot supply the quota ATM needs, the supply of IF in English packaging sold by the Daigou, might be able to be supplied by somebody else like Fonterra. Of course that would take planning and not
Just done overnight. I do stress this is only my thought and not fact This would only be considered if SML can’t produce enough product for ATM. SML have the contract for export to China and no one else can supply unless SML breach their contract obligations.

Couple of corrections / clarifications ...

1) SML, not ATM do own the IP for their infant formulas. Fonterra or any other manufacturer would only be allowed to produce these products if Synlait agrees (presumably against a licence fee or similar).

2) IF exported into China (not sure, though about Daigou channel) needs a Chinese import licence, which is specific for one manufacturer and one factory. This has nothing to do with any contract Synlait might have with ATM, but it is a Chinese regulatory requirement. Synlait's Dunsandel factory does have this licence to export their A2 formula to China. Anybody else producing the same formula (even Pokeno) would need to apply for a new Chinese licence - not easy.

Meaning: Synlait could still deliver all its A2 formula to China, even if Pokeno is shut down (given that only Dunsandel holds to the best of my knowledge the Chinese import licence), however - they clearly would have problems supplying all their other products and markets ...

[Ggcc]

Couple of corrections / clarifications ...

1) SML, not ATM do own the IP for their infant formulas. Fonterra or any other manufacturer would only be allowed to produce these products if Synlait agrees (presumably against a licence fee or similar).



2) IF exported into China (not sure, though about Daigou channel) needs a Chinese import licence, which is specific for one manufacturer and one factory. This has nothing to do with any contract Synlait might have with ATM, but it is a Chinese regulatory requirement. Synlait's Dunsandel factory does have this licence to export their A2 formula to China. Anybody else producing the same formula (even Pokeno) would need to apply for a new Chinese licence - not easy.

Meaning: Synlait could still deliver all its A2 formula to China, even if Pokeno is shut down (given that only Dunsandel holds to the best of my knowledge the Chinese import licence), however - they clearly would have problems supplying all their other products and markets ...

1. I agree but if SML can’t produce what ATM needs would they not be in breach of their contract to supply? Therefore breaking that contract.

2. Most IF is exported via Daigou is it not through Australian channels? This will change over time I am guessing. So if SML could not provide enough supply it would not matter where they get it from for the Australian market to export via Daigou.

I am aware as long as SML can provide no other company can manufacture to supply to China.

[BlackPeter]

1. I agree but if SML can’t produce what ATM needs would they not be in breach of their contract to supply? Therefore breaking that contract.

2. Most IF is exported via Daigou is it not through Australian channels? This will change over time I am guessing. So if SML could not provide enough supply it would not matter where they get it from for the Australian market to export via Daigou.

I am aware as long as SML can provide no other company can manufacture to supply to China.

Look, it is absolutely irrelevant for Chinese authorities whether Synlait may or may not fullfill any contract they may or may not have with ATM.

They do allow only formula approved in China into the country - and if the factory with approval can't manufacture for any reason, than so be it. No problem for the Chinese authorities and certainly not a reason to allow somebody else to substitute (obviously unless they do have a Chinese licence as well) the product.

Ah yes, and just checked - it looks like these requirements apply as well for daigou ...

https://www.export2asia.com/blog/exporting-baby-formula-china/


CFDA registration of factories required as of January 1, 2018
China’s government have introduced new regulations saying that factories producing baby formula must be registered at CFDA (China’s Food and Drug Administration).

You’ll also be subject to safety inspections and limited to working with 3 formula brands from that same factory.

[Ggcc]

Look, it is absolutely irrelevant for Chinese authorities whether Synlait may or may not fullfill any contract they may or may not have with ATM.

They do allow only formula approved in China into the country - and if the factory with approval can't manufacture for any reason, than so be it. No problem for the Chinese authorities and certainly not a reason to allow somebody else to substitute (obviously unless they do have a Chinese licence as well) the product.

Ah yes, and just checked - it looks like these requirements apply as well for daigou ...

https://www.export2asia.com/blog/exporting-baby-formula-china/

Ok thanks for clearing that up. I did think it was only going to be a problem for SML to export to China. I was wrong.

[Sideshow Bob]

CFO Leaving

https://www.nzx.com/announcements/342255

[BlackPeter]

CFO Leaving

https://www.nzx.com/announcements/342255

Bugger. I met Nigel at various times and had a number of discussions with him. I see him as an extremely capable (and not just) CFO - he clearly was one of the driving forces of Synlait's success story.

Can't say however what his stance and involvement was related to Pokeno - i.e. his departure could be interpreted in a number of ways. But hey - the announcement clearly says he wants to spend more time with his family ... I guess this settles it.

Anyway - big shoes to fill ...

Two down ... how many more of the (once?) winning team to go?

[Sideshow Bob]

Bugger. I met Nigel at various times and had a number of discussions with him. I see him as an extremely capable (and not just) CFO - he clearly was one of the driving forces of Synlait's success story.

Can't say however what his stance and involvement was related to Pokeno - i.e. his departure could be interpreted in a number of ways. But hey - the announcement clearly says he wants to spend more time with his family ... I guess this settles it.

Anyway - big shoes to fill ...

Two down ... how many more of the (once?) winning team to go?

Signaled it early enough - 6 months ahead of time, so think this is always a good move.

[Beagle]

Two down ... how many more of the (once?) winning team to go? Jumping ship before the **** hits the fan ? Perhaps he's just so "overjoyed" with the new culture of the place his heart simply can't take it any longer lol ?

[BlackPeter]

Jumping ship before the **** hits the fan ? Perhaps he's just so "overjoyed" with the new culture of the place his heart simply can't take it any longer lol ?

Actually - this might be true. Can't remember him being a fan of pink numbers ....

[Beagle]

Yeap...Synlait making a statement for all things LGTPQ and Heartland for all things Te Reo.
I am very, very cautious when companies make up new objectives and then go right out on a limb promoting them at almost every possible opportunity and am left wondering if they think their own self created objectives (in management and directors minds at least), is just as important or even more important than earnings growth.

[rooster]

Well our Jacinda and her government lead the way on that front and the average NZer seems to lap it up... 😩

[sb9]

Up 5% today on decent volume, expecting positive outcome on Monday 21st Oct perhaps? I think that's date of supreme court decision from memory, can someone confirm.

[Leftfield]

Up 5% today on decent volume, expecting positive outcome on Monday 21st Oct perhaps? I think that's date of supreme court decision from memory, can someone confirm.

I agree re today's SP action and yep that's the date for the hearing that I've noted...

[Beagle]

Not sure you'll get a decision that day though. Its just oral legal representations as to whether a formal appeal to the Supreme court will even be allowed and I would think the Supreme court's decision will be reserved and advised at a later date and even if an appeal is allowed that won't be for quite some time and again will probably be a reserved decision. Market could be getting ahead of itself here.
A negative response either to the right to have a formal appeal or to the appeal itself, (if allowed), in due course could have quite a dramatic impact on the share price.

[Leftfield]

Not sure you'll get a decision that day though. Its just oral legal representations as to whether a formal appeal to the Supreme court will even be allowed and I would think the Supreme court's decision will be reserved and advised at a later date and even if an appeal is allowed that won't be for quite some time and again will probably be a reserved decision. Market could be getting ahead of itself here....


An out of court agreement is possible at anytime.

[Beagle]

An out of court agreement is possible at anytime.

Sure is and has been a possibility for how long now ?

[Leftfield]

Sure is and has been a possibility for how long now ?

OK Beagle you the expert.

[Beagle]

OK Beagle you the expert.

Not the expert at all. Just pointing out the risks and the fact that Synlait have been saying for well over a year now that they are in talks...none of which have been productive so far, hence the request to be allowed to appeal to the Supreme Court.

[RTM]

Not the expert at all. Just pointing out the risks and the fact that Synlait have been saying for well over a year now that they are in talks...none of which have been productive so far, hence the request to be allowed to appeal to the Supreme Court.

I just can’t believe that Synlait don’t have a strong alternative and they are just going through the court stuff to see if they can get a lesser cost option. Can’t believe they would be that irresponsible as to not have this under control. We are just speculating without all the info. Having said that ....I did sell my shares a while ago. Having said that...it’s clearly going to cost them.

[BlackPeter]

I just can’t believe that Synlait don’t have a strong alternative and they are just going through the court stuff to see if they can get a lesser cost option. Can’t believe they would be that irresponsible as to not have this under control. We are just speculating without all the info. Having said that ....I did sell my shares a while ago. Having said that...it’s clearly going to cost them.

Whatever it is - either they or their shareholders are flying blind. If they have a hidden ace, then they might breach their continuous disclosure requirements, and if they haven't then they operate with hope as a a strategy.

Not a good position to be in (not just) for a listed company.

[sb9]

An out of court agreement is possible at anytime.

That's what I'm thinking myself too...

[Beagle]

I just can’t believe that Synlait don’t have a strong alternative and they are just going through the court stuff to see if they can get a lesser cost option. Can’t believe they would be that irresponsible as to not have this under control. We are just speculating without all the info. Having said that ....I did sell my shares a while ago. Having said that...it’s clearly going to cost them.

Fascinating from the sidelines to watch this train journey and possible train wreck and whilst you would think someone is at the controls who knows what they're doing I often wonder..., (what with their all consuming obsession with all things inclusiveness and environmentally politically correct).
The facts we do know are alarming. Fact - They have said they have been talking for over a year now but despite the high court case and all this alleged talking they have made no progress and indeed press reports suggest the other party isn't interested in a settlement.

Fact - Despite not knowing the odds on a successful outcome there are two clear hurdles to overcome in the Supreme court situation. Hurdle 1. Getting them to allow a formal objection, (we don't know the odds of who will be successful with their oral submissions), so lets call that 50/50 odds. Hurdle 2. If hurdle 1 is successfully jumped there is the formal appeal which could go either way, so again lets ascribe a 50/50 chance, (although I think its lower than this because the law in relation to covenants on property rights go's back well over a hundred years and is highly likely to trump any zoning the Council have allowed), but lets stick with 50/50. Statistically the odds on jumping two hurdles in a row both with a 50/50 probability are of course one in four.

What's Synlait's plan for the highly likely eventuality of the Supreme court not granting them any relief ? Will the neighbour's immediately move to seek an injunction to stop Synlait operating their plant and then literally have Synlait at their complete mercy in terms of having to pay whatever they feel like demanding in compensation ? The pathway to Synlait being legally greenmailed for a very large sum of money seems pretty clear to me and looks far more likely than any other outcome.

I think Synlait have been asleep at the wheel and the pending train wreck will make for fascinating viewing, (from the sidelines). Like you, I got off the train a while back having serious concerns anyone knew where it was really going.

[winner69]

Hey beagle - good point ‘watching this train journey and possible train wreck and whilst you would think someone is at the controls......’

The future is autonomous cars and we already have driverless trains .....maybe we have an autonomous management team as well....Synlait leading the way again.

[Marilyn Munroe]

If the conveyancing solicitor did't give "here be dragons" advice maybe the solicitors professional negligence insurer is running the negotiations

Boop boop de do
Marilyn

[BlackPeter]

Hey beagle - good point ‘watching this train journey and possible train wreck and whilst you would think someone is at the controls......’

The future is autonomous cars and we already have driverless trains .....maybe we have an autonomous management team as well....Synlait leading the way again.

Help me with my understanding of the English language, but I always thought there is a difference between "driverless" and "autonomous". Am I right?

As well, Synlait management is clearly not driver-less, it just appears the driver made some risky decisions ...

[winner69]

Help me with my understanding of the English language, but I always thought there is a difference between "driverless" and "autonomous". Am I right?

As well, Synlait management is clearly not driver-less, it just appears the driver made some risky decisions ...

Yes teacher very bad ....might even get Peat telling me off as well

Never mind - I'll blame my ancestory instead lack of education

[winner69]

I note Graeme Milne, Chair, Is a finalist in the Chairperson of the Year section of the Deloittes Top 200 Awards

Good effort


Chairperson of the Year is awarded to the top board performer from the previous year. The judging criteria include the performance of the organisation(s) and the extent to which the winner has contributed to the performance of the board(s) he or she chairs. Judges will also take into account the regard in which the winner is held by peers. Also of importance is the understanding of, and commitment to, promoting high standards of corporate governance.

[Beagle]

Well...today's the day. If they don't announce a deal brokered over the weekend or on the footsteps of the Supreme court this morning the company effectively plays Russian roulette trying to get satisfaction through the Supreme court with about 1 chance in 6 of being successful, (my best estimate).
News Flash. Synlait as the self appointed champions of all things inclusiveness have a lot of work left to do.
LGBTQ should have an F on the end for fat people as new research shows they are actively discriminated against https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12278108

[Leftfield]

Well...today's the day. ... with about 1 chance in 6 of being successful, (my best estimate).
News Flash. Synlait as the self appointed champions of all things inclusiveness have a lot of work left to do.
LGBTQ ..

I don't really want to argue with the Beagle's dogged insistence on his expertise on all matters legal and LGBTQ re SML, but for those interested in an alternative viewpoint I happened to be in the Supreme Court this morning and had the privilege of hearing both parties oral submissions.

I don't intend to summarise the cases here but suffice it to say each party's written submission equaled several phone books (remember them?) of legal argument and evidence.

I came away with the distinct impression from the verbal submissions and questioning, that SML have a good chance of a reasonable and possibly favourable outcome.

From the words of the judges came words such as 'abuse of process' and 'opportunistic appeal' and 'other industrial plants in the area ignored by this appeal' and 'a possibility that the lower courts may have got it wrong'.

After hearing arguments this morning the judges adjourned to make a ruling, so we await a ruling with interest.

JMHO.... I don't hold SML, but do hold ATM.

[RTM]

I don't really want to argue with the Beagle's dogged insistence on his expertise on all matters legal and LGBTQ re SML, but for those interested in an alternative viewpoint I happened to be in the Supreme Court this morning and had the privilege of hearing both parties oral submissions.

I don't intend to summarise the cases here but suffice it to say each party's written submission equaled several phone books (remember them?) of legal argument and evidence.

I came away with the distinct impression from the verbal submissions and questioning, that SML have a good chance of a reasonable and possibly favourable outcome.

From the words of the judges came words such as 'abuse of process' and 'opportunistic appeal' and 'other industrial plants in the area ignored by this appeal' and 'a possibility that the lower courts may have got it wrong'.

After hearing arguments this morning the judges adjourned to make a ruling, so we await a ruling with interest.

JMHO.... I don't hold SML, but do hold ATM.

So nice to have a post based on facts and not supposition.
Thank you.
RTM

[Beagle]

Except that its not facts per se, its one persons opinion of how (s)he perceived the proceedings went. Like all individual observations of events its quite possible that one's own viewpoint is clouded by a previously held perspective. Two people can see exactly the same traffic accident and as I am sure you know, have completely opposite views on who was at fault. To illustrate my point here is a very good example of two very different opinions on how the same meeting went http://www.sharechat.co.nz/article/fb5360c3/comvita-chair-neil-craig-eyes-the-exit-once-he-finds-a-new-ceo.html?utm_medium=email&utm_campaign=Comvita%20chair%20Neil%20Craig%20eyes %20the%20exit%20once%20he%20finds%20a%20new%20CEO&utm_content=Comvita%20chair%20Neil%20Craig%20eyes% 20the%20exit%20once%20he%20finds%20a%20new%20CEO+C ID_72cb783f1c3a7df9d3d2a6b574df3702&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlefb5360c3comvit a-chair-neil-craig-eyes-the-exit-once-he-finds-a-new-ceohtml

[Sideshow Bob]

Except that its not facts per se, its one persons opinion of how (s)he perceived the proceedings went. Like all individual observations of events its quite possible that one's own viewpoint is clouded by a previously held perspective. Two people can see exactly the same traffic accident and as I am sure you know, have completely opposite views on who was at fault. To illustrate my point here is a very good example of two very different opinions on how the same meeting went http://www.sharechat.co.nz/article/fb5360c3/comvita-chair-neil-craig-eyes-the-exit-once-he-finds-a-new-ceo.html?utm_medium=email&utm_campaign=Comvita%20chair%20Neil%20Craig%20eyes %20the%20exit%20once%20he%20finds%20a%20new%20CEO&utm_content=Comvita%20chair%20Neil%20Craig%20eyes% 20the%20exit%20once%20he%20finds%20a%20new%20CEO+C ID_72cb783f1c3a7df9d3d2a6b574df3702&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlefb5360c3comvit a-chair-neil-craig-eyes-the-exit-once-he-finds-a-new-ceohtml

Regardless of perception or viewpoint, when it comes to such matters, it will come down to law and legal precedents.

Appreciated a little first-hand account of some of the proceedings LF!

[Filthy]

I don't really want to argue with the Beagle's dogged insistence on his expertise on all matters legal and LGBTQ re SML, but for those interested in an alternative viewpoint I happened to be in the Supreme Court this morning and had the privilege of hearing both parties oral submissions.

I don't intend to summarise the cases here but suffice it to say each party's written submission equaled several phone books (remember them?) of legal argument and evidence.

I came away with the distinct impression from the verbal submissions and questioning, that SML have a good chance of a reasonable and possibly favourable outcome.

From the words of the judges came words such as 'abuse of process' and 'opportunistic appeal' and 'other industrial plants in the area ignored by this appeal' and 'a possibility that the lower courts may have got it wrong'.

After hearing arguments this morning the judges adjourned to make a ruling, so we await a ruling with interest.

JMHO.... I don't hold SML, but do hold ATM.

thanks mate

[RupertBear]

I don't really want to argue with the Beagle's dogged insistence on his expertise on all matters legal and LGBTQ re SML, but for those interested in an alternative viewpoint I happened to be in the Supreme Court this morning and had the privilege of hearing both parties oral submissions.

I don't intend to summarise the cases here but suffice it to say each party's written submission equaled several phone books (remember them?) of legal argument and evidence.

I came away with the distinct impression from the verbal submissions and questioning, that SML have a good chance of a reasonable and possibly favourable outcome.

From the words of the judges came words such as 'abuse of process' and 'opportunistic appeal' and 'other industrial plants in the area ignored by this appeal' and 'a possibility that the lower courts may have got it wrong'.

After hearing arguments this morning the judges adjourned to make a ruling, so we await a ruling with interest.

JMHO.... I don't hold SML, but do hold ATM.

thanks for posting Left field much appreciated

[BlackPeter]

I don't really want to argue with the Beagle's dogged insistence on his expertise on all matters legal and LGBTQ re SML, but for those interested in an alternative viewpoint I happened to be in the Supreme Court this morning and had the privilege of hearing both parties oral submissions.

I don't intend to summarise the cases here but suffice it to say each party's written submission equaled several phone books (remember them?) of legal argument and evidence.

I came away with the distinct impression from the verbal submissions and questioning, that SML have a good chance of a reasonable and possibly favourable outcome.

From the words of the judges came words such as 'abuse of process' and 'opportunistic appeal' and 'other industrial plants in the area ignored by this appeal' and 'a possibility that the lower courts may have got it wrong'.

After hearing arguments this morning the judges adjourned to make a ruling, so we await a ruling with interest.

JMHO.... I don't hold SML, but do hold ATM.

Interesting summary - thanks for sharing.

Quite surprised, though that according to your report the audience could be let to believe that the judges seem to take already clear sides in the oral hearing and making judgement calls - obviously before they heard and read through all the arguments ...

I always thought that this sort of stuff it is only happening in banana republics and totalitarian regimes that judges judge before they have all the facts. Naive me assuming a court in New Zealand has to be impartial.

May I ask why you joined the hearing? Curiosity, professional interest or similar?

As well - do you want to give us an idea whether you have legal experience which would help you to read the judges (potentially preconceived) views?

[Leftfield]

BP,

I have already stated my comments were JMHO (after listening for several hours of legal arguments - hopefully with an open mind.)

I attended the hearing because I have experience with planning and zoning decisions. I wont justify my comments any further, you are free to ignore them.

You make some assumptions about “banana republics and totalitarian regimes", which are incorrect.

I stress that the judges did not make any rulings, or decisions, or display any bias.

The words I noted were merely used in questions and discussions with and by the submitters regarding their various legal arguments. You should not assume the judges have preconceived views.

I already have stated that the judges adjourned without making a ruling and that we await this.

[Beagle]

SC 50/2019 is the case number.
These are the facts as the Court Of Appeal saw them
https://forms.justice.govt.nz/search/Documents/pdf/jdo/65/alfresco/service/api/node/content/workspace/SpacesStore/f2e68638-58c3-4efd-8453-d46c9fa9d2b3/f2e68638-58c3-4efd-8453-d46c9fa9d2b3.pdf

As a non holder and I also don't have a short position, I do not suffer from confirmation bias.
I have merely observed Synlait's approach which I have found at times to be quite interesting and surpising.

[BlackPeter]

You make some assumptions about “banana republics and totalitarian regimes", which are incorrect.


No assumptions at all. Just an observation that these sort of things (as they came across) would happen in “banana republics and totalitarian regimes", which is absolutely correct.

By the way - I do have currently no interest in Synlait (well, but a small A2M holding) and observe the unfolding story only as interested citizen.

While it is clear to me that the other side of this agreement might well just opportunistically exploit their legal position (but don't most people do that, if they can?) do I find it mind boggling that Synlait's board and management allowed the company to get into such a precarious position clearly by nobody's fault but their own. If a big company wants to build a factory in rural New Zealand there is basically infinite supply of land without any prohibitive covenents around - and I understand that they even could have built without problems on their Pokeno site avoiding the convenants (which effect only parts of their site).

If they would drive a car with this attitude the courts would call it reckless driving ... but hey, it is just about risks and money :):

[Beagle]

[12] In March 2018, Synlait obtained (on a non-notified basis) resource consent to undertake earthworks on the land it was buying from STL and, in May 2018, it obtained a further consent permitting it to construct and operate a dairy factory on the land.5 It then commenced construction of the dairy factory.
[13] NZIPL’s solicitors wrote to STL’s solicitors on 19 June 2018 demanding that STL require that all works in breach of the covenants cease and advising that NZIPL would be opposing STL’s originating application. STL did not respond.
This extract from the court of Appeal ruling is very interesting BP. Important to note that Synlait obtained consent to build on a non notified basis so the neighbour's would have no idea and then as soon as consent is obtained they commence building and don't even respond to what amounts to a cease and desist demand that works are in breech of covenant rights.
Just go ahead and continue to gamble quarter of a billion dollars of shareholders money knowing full well at the time their right to build the factory would be rigorously challenged. To me this is gross arrogance and recklessness on such a grand scale I'm not sure as a former shareholder I could ever trust management or the board again.
$262m is the total profit of the company for the six years leading up to this decision. Puts the size of this fiasco into its true perspective.
Even worse, this gamble was made using borrowed funds putting the company into a very highly leveraged and vulnerable position. It beggars belief.

How about this for a show of complete arrogance, note the timeframe here and that they had just been issued with a legal challenge on 19 June 2018.
The very next day what do they do ?...announce to the market confirmation of the commissioning date of the plant https://www.nzx.com/announcements/319620
No mention to shareholders that the plant's build is going to be subject to a legal challenge. Not only is this an extremely arrogant response to the legal cease and desist but is also gross recklessness and non disclosure to shareholders is effectively concealment of a very relevant fact. Shortly after this the CEO steps down and most recently the CFO has announced his resignation. If the custard completely hits the fan will we see board changes ?

[Ggcc]

This extract from the court of Appeal ruling is very interesting BP. Important to note that Synlait obtained consent to build on a non notified basis so the neighbour's would have no idea and then as soon as consent is obtained they commence building and don't even respond to what amounts to a cease and desist demand that works are in breech of covenant rights.
Just go ahead and continue to gamble quarter of a billion dollars of shareholders money knowing full well at the time their right to build the factory would be rigorously challenged. To me this is gross arrogance and recklessness on such a grand scale I'm not sure as a former shareholder I could ever trust management or the board again.
$262m is the total profit of the company for the six years leading up to this decision. Puts the size of this fiasco into its true perspective.
Even worse, this gamble was made using borrowed funds putting the company into a very highly leveraged and vulnerable position. It beggars belief.

How about this for a show of complete arrogance, note the timeframe here and that they had just been issued with a legal challenge on 19 June 2018.
The very next day what do they do ?...announce to the market confirmation of the commissioning date of the plant https://www.nzx.com/announcements/319620
No mention to shareholders that the plant's build is going to be subject to a legal challenge. Not only is this an extremely arrogant response to the legal cease and desist but is also gross recklessness and non disclosure to shareholders is effectively concealment of a very relevant fact. Shortly after this the CEO steps down and most recently the CFO has announced his resignation. If the custard completely hits the fan will we see board changes ?
It could be that A2 will bail them out and buy company for a song if this heads south. It is in the interest of A2 to keep this machine going.

[BlackPeter]

It could be that A2 will bail them out and buy company for a song if this heads south. It is in the interest of A2 to keep this machine going.

Possible - but how would this help Synlait shareholders?

[Ggcc]

Possible - but how would this help Synlait shareholders?
Maybe no exchange of cash and rather that SML shareholders get shares in A2 for a set price that the majority agrees upon. I know that sounds simple, but many shareholders would be fuming as they bought on Hype and have to sell at a loss. Either that or they all sell at a loss... Like a mortgagee sale.

[waterboy]

Has anyone come across a date when we can expect a decision about this weeks court case.
Have a small holding but looking to get out, can't invest in companies that don't keep shareholders informed of all relevant information like appeals on land they are building on. My investments turn into gambling when that happens.
Whole thing is ridiculous, how can someone get a covenant for 200 years (I read that somewhere but cant recall reference) on land in a major growth area when we have housing and industrial land shortages.
How can a covenant over rule planning rules and land use consents.
I think synlait are hoping for a common sense decision but often the law is not about common sense decisions so who knows which way it will go. Why they didn't change the factory configuration to avoid building on the disputed land I can't understand either.

[Beagle]

There will be a decision (on whether a formal appeal is allowed, keep in mind this was just oral submissions on whether a formal appeal is to be alolowable), whenever the judges make up their minds.
Reserved decisions have no specific timeframe.
Even if they allow the appeal, there's still the appeal itself, (which will be many months away from a hearing) and the decision from any allowed formal appeal will no doubt be reserved so there's potentially many more months to wait after that.
Best to decide for yourself if you think management and the board have progressed this Pokeno development in a prudent manner or not consistent with good commerical practice that you would expect of them when investing a quarter of a billion dollars of shareholders money.

[waterboy]

There will be a decision (on whether a formal appeal is allowed, keep in mind this was just oral submissions on whether a formal appeal is to be alolowable), whenever the judges make up their minds.
Reserved decisions have no specific timeframe.
Even if they allow the appeal, there's still the appeal itself, (which will be many months away from a hearing) and the decision from any allowed formal appeal will no doubt be reserved so there's potentially many more months to wait after that.
Best to decide for yourself if you think management and the board have progressed this Pokeno development in a prudent manner or not consistent with good commerical practice that you would expect of them when investing a quarter of a billion dollars of shareholders money.

Thanks for that, it is wait and see for now.
On a more positive note at least the share price has been going up last few days, up again today but flat is aus? Will be able to get out break even if this continues a little further.

[sb9]

Inching slowly close to $10 mark, must've been good outing at court as per lf's comments earlier in the week.

[Leftfield]

Inching slowly close to $10 mark, must've been good outing at court as per lf's comments earlier in the week.

Thanks sb9. Perhaps others have been listening with more open minds than others.

Enough said on this from me. GLH's.

[Ggcc]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/343246/310519.pdf

[winner69]

Great news

Synlait announces the conditional purchase of Dairyworks for $112 million, subject to Overseas Investment Office approval. This is reflective of an approximate 7.5 x EBITDA multiple based on the last twelve months earnings.

The acquisition of Dairyworks will provide Synlait with another meaningful move towards the delivery of our Everyday Dairy strategy andcomplements the company’s recent acquisition of cheese manufacturer Talbot Forest.

Synlait CEO Leon Clement commented: “This is an exciting opportunity for Synlait. This business is a great strategic fit for us and an important step in growing our presence in the Everyday Dairy category.”

“Dairyworks is a nimble and innovative company. It will fit well with Synlait and provides us with an opportunity to keep optimising our value chain while giving access into Australia where Dairyworks presence is growing.”

“Opportunities exist in both businesses to streamline supply chains and enhance our competitiveness. It gives us the ability to optimise how we process milk solids and get the most value from our supply of milk. We’re excited by this opportunity as we work to capture more value in the dairy market in New Zealand and globally.”

[Beagle]

How are they going to pay for it given the balance sheet is already stretched ? (No mention of that in the press release...there's your hint right there on what's coming).
Stretch it further, will the banks even allow this with ~ 57% gearing already ? and then what if the custard hits the fan with Pokeno ? What we know with this company its what they don't tell you that should worry you. They don't tell you the settlement date or how they will fund it. Its probably conditional on a large rights issue but with their track record of concealment, such a minor thing, why bother telling shareholders about that till the last minute ?
Large "deeply" discounted rights issue just around the corner...the dog barked it first.
How deep and how much will depend upon how much money they need to fix the Pokeno fiasco.

[RupertBear]

How are they going to pay for it given the balance sheet is already stretched ? (No mention of that in the press release...there's your hint right there on what's coming).
Stretch it further, will the banks even allow this with ~ 57% gearing already ? and then what if the custard hits the fan with Pokeno ? What we know with this company its what they don't tell you that should worry you. They don't tell you the settlement date or how they will fund it. Its probably conditional on a large rights issue but with their track record of concealment, such a minor thing, why bother telling shareholders about that till the last minute ?
Large "deeply" discounted rights issue just around the corner...the dog barked it first.
How deep and how much will depend upon how much money they need to fix the Pokeno fiasco.

Synlait says it has sufficient bank facilities in place to fund the acquisition and, given it is subject to OIO approval, payment is not expected until sometime in the first quarter of 2020. The purchase price represents about 7.5 times earnings before interest, tax, depreciation and amortisation, based on the last twelve-months earnings, it said.

[Beagle]

Where in their NZX announcement do they say that mate ?
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/343246/310519.pdf

[RupertBear]

https://moneyonline.cmail19.com/t/r-l-jddlxhl-jtthlynij-y/

hope that link works...

[Beagle]

Thanks RupertBear. Shame they didn't articulate that in their formal NZX announcement.
I still wonder how they write a big cheque to fix the Pokeno fiasco ?

[dreamcatcher]

Thanks RupertBear. Shame they didn't articulate that in their formal NZX announcement.
I still wonder how they write a big cheque to fix the Pokeno fiasco ?

Maybe they won't need to write any cheque regarding Pokeno. Most here know your empty glass position as your constant down ramps suggest, but thank you for your concerns for holders............

[sb9]

Maybe they won't need to write any cheque regarding Pokeno. Most here know your empty glass position as your constant down ramps suggest, but thank you for your concerns for holders............

Well said, that's how i read it too. Looks like the risk arising out of Pokeno settlement has mitigated quite substantially from Monday's oral hearing at supreme court. Too early to read though, in the meantime Synlait going ahead with their future plans and am sure if needed A2's war chest of cash is readily available to access.

[Beagle]

ATM have plenty and are easily able to underwrite any cash issue required. That much is certain.

[waterboy]

Where in their NZX announcement do they say that mate ?
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/343246/310519.pdf

Was wondering the same thing, they missed that important piece of information out... somebody knew about this in last few days as the market response today has been very lacklustre, the action earlier in the week probably had nothing to do with the court case. Still acquisition makes sense hope it gets through OIO.

[RTM]

Looks like they will continue to progress this through the legal system.
Lawyers will be doing well.
They must be very confident of getting a result in their favour.

https://www.nzx.com/announcements/343387

[Beagle]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/343389/310740.pdf

Good news for shareholders and probably raises the possibility of a settlement between the parties before the formal appeal date...or there's one more hurdle to jump.
De-risks the shares a bit. Shares down 30 cents on this good news suggests to me the recent run up was almost certainly insiders buying on inside information about the acquisition announced last week.

[peat]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/343389/310740.pdf

Good news for shareholders ...
De-risks the shares a bit.

Is it good news?
More like not bad news
It only grants the right to appeal. It doesn't comment on the possibility of the appeals success, other than considering that it wont waste the Courts time, so in a very minor sense I guess its a nod. But... could still well fail.

[Beagle]

Crystal clear there are two separate hurdles to jump peat. Hurdle 1, Oral submissions to allow a formal appeal, Hurdle 2, the formal appeal itself.
If they had of tripped up at the first hurdle they were completely shikkered so yes its good news and if each hurdle is a 50/50 chance they're now twice as likely to get satisfaction through the supreme court than they were on Friday. But I think there's a bit more to this than a straight hurdle jump.
1. Obviously the Supreme court judges think there is some merit to Synlait's argument as if they didn't they wouldn't have allowed the formal appeal, hence the appeal itself is more likely to be favourable.
2. The aggrieved party will know this and I think there's a much higher chance of an out of court settlement now.

Absolutely its a good news day for Synlait shareholders but the shares ended up down 30 cents. How can anyone come up with a plausible explanation for this other than the obvious that insiders were bidding the price up on the acquisition last week ?