That Chris Lee article sums it up- childish governance driven by a vainglorious founder is what I take from that. No wonder A2M has tried to extract itself- what don’t we know yet?
Printable View
That Chris Lee article sums it up- childish governance driven by a vainglorious founder is what I take from that. No wonder A2M has tried to extract itself- what don’t we know yet?
Looks like might close the week under 60c......
Made it to 0.57… what a disaster.
https://www.farmersweekly.co.nz/news...waikato-sites/
Fonterra closing some plants. Getting ready to pick up some Pokeno assets??
0.51 - when do banks put this dog out of its misery
Equity and bonds tanking...the latter now 66-67c on the dollar.
What is to stop Bright simply increasing its position significantly through a CR, which A2 is going to have to participate in or lose its blocking stake, then Bright simply keeps this business afloat and switches its A2 infant formula to supply the likes of Neatle? I believe the average Chinese consumer ( or any consumer) has the intelligence to quickly work out that it’s say the same product made by the same supplier in a different tin? And as Nestle are a very powerful entity in their own right I can imagine their marketing and ability to put it into the market at an attractive price point is very real…
I am invested in both companies, but let’s be real, A2 effectively controls very little, that was proved with Covid, and what’s going on between these two is either a jack up so they can both increase their ownership at our expense or it’s a real relationship breakdown alongside a balance sheet that needs deleveraged, nothing which businessmen at this level should not be able to resolve,
Either way time for some professional from both sides, unless like I suspect it’s the first option…
Bright Dairy will want a deal as for the directors they might be happy walking with some money rather than a receivership notice. Of course unless they have a plan that gets them out of that. ATM will negotiate if it is beneficial to the company, maybe Bright Dairy gets a percentage in ATM
I wish Toddy, no I’m sitting at $2.25 break even point…simply did not see such a breakdown in this relationship, (if that’s what it is)
The financials would have been bumpy but with both of these companies working together it seemed a fair risk if one was willing to play the long game…
Now I’m in on both sides regardless lol
Good question Toddy, in my case investment is small and was out of interest really. Bright can't just wipe the debt so any CR will be hugely diluted to pay off some 500M of debt. The question is why Bright would do that- they are not a white knight here, they have been on the board during a massive loss of value driven by a stupid argument with their biggest customer. A2M are not fools, and they have cash. My bet is that A2M end up with Dunsandel, which is not what Synlait wants, but I don't see another way for banks to get their debt back. Then shareholders can class action the Synlait company and directors for the various profit downgrades when they must have known there was a problem in the A2M relationship much earlier than was announced.
I'm not doubting there is a punt opportunity for those that come on board now.
If there was one thing that I have learnt over the years is that you need to be disciplined about implementing a 'stop loss' to your investment strategy.
Like riding Le Tour De France. It's not about fisnishing first in a stage but more about not losing time.
49c today on low volume.
Company desperately needs some good news.
Interesting to watch the slow motion Metroglass like death spiral of this once proud company
Looks like someone working hard to keep it above 0.50- every time it drops below that, there's a small trade to bring it back up. Hopefully the regulator is watching these trading patterns for suspicious pumping.
https://www.nzx.com/announcements/430307
The Board of Synlait Milk Limited (Synlait) announces that George Adams has been elected Chair and that Dr John Penno, the company’s Co-Founder and Board Appointed Director, has stepped down.
George Adams elected as Synlait Chair
George was appointed as an Independent Director of Synlait in March 2024 to fill a casual vacancy. George’s transition to the Chair role follows the previously signalled plan that Acting Chair Paul McGilvary would return to his position as an Independent Director once a permanent successor was found and elected. George was elected with the full support of the Board.
The Board thanks Paul for his service over the past six months and congratulates George on his new role.
George Adams commented: “It is a privilege to be Chair of Synlait. I look forward to helping oversee Synlait’s path back to profitability and support Grant and his executive team’s execution of the strategy to do so. I thank my fellow Directors, including Paul McGilvary, for their stewardship and counsel during the transition.”
George will formally stand for election as an Independent Director by Synlait shareholders at the company’s Annual Meeting in December 2024. George’s appointment as Chair is effective immediately.
Dr John Penno steps down as Board Appointed Director
Dr John Penno, Board Appointed Director, will step down from his role. John co-founded Synlait and was Managing Director and CEO for 12 years. In 2018, John became a Board Appointed Director, during which time he was temporarily appointed Acting CEO and then Chair. John’s resignation is effective immediately.
Dr John Penno commented: “I fully support George’s appointment as Chair and remain committed to Synlait’s future as a co-founder and shareholder.”
“Synlait has come a long way since we co-founded the company buying a farm in Te Pirita near Dunsandel almost 25 years ago. We now take world-class nutrition products to the world and have played a disruptive role in the growth of the New Zealand dairy industry. I am proud of what we have achieved. However, now is the right time for me to leave my leadership role with Synlait.”
Paul McGilvary commented: “John has lived and breathed Synlait for almost 25 years. He leaves a strong legacy, which has formed the basis of Synlait’s entrepreneurial nature and spirit to do milk differently for a healthier world. On behalf of the Board, our staff, our farmers, and all stakeholders I would like to publicly thank John for his commitment and enormous contribution to Synlait.”
The Board will commence a search to find a candidate to fill the vacancy of the Board Appointed Director role.
George Adams biography
George has outstanding commercial and governance experience with over 30 years of international business experience in the fast-moving consumer goods and telecommunications industries and an occupational health and safety background.
Before focussing on governance, George held a range of executive leadership positions. Notably he was, Managing Director of Coca-Cola Amatil New Zealand and CFO of British Telecom Northern Ireland. George's governance highlights include being Chair of Bell Tea & Coffee, Chair of the New Zealand Food and Grocery Council and a Director of Hellers Group and Tegel Food.
Today, George is Chair of NZX-listed Bremworth Limited, Director of NZX-listed Arborgen, and Chair of the Business Leaders Health & Safety Forum.
Accelerated changes will happen from today.
With Dr John Penno's departure from the Board, there would be less resistance to selling assets at a discounted price and to capital raising at the terms of Bright Dairy and A2M. I guess Synlait would NOT go into receivership, but the value kept for small shareholders would be minimal.
Bright Dairy has released its 2023 financial data (https://www.brightdairy.com/Investors). Its net profit after tax but before writing down investment in Synlait was ¥967 M (ca. $225 M). After the write-down net profit was ¥523 M., I would guess Bright Dairy could inject $50-100M into Synlait via capital raising. Receivership would create too much uncertainty for Bright Dairy.
The next step will be the CR, where Bright and A2 will gain greater % of Synlait, followed by the announcement of some asset sales, followed by these guys “ makeing up” followed by Synlait shares lifting sharply, and who gains the most? Bright and A2…
Just my thoughts,
This is quite possibly a very bullish development (for the bonds at least) if it turns out that Penno was a major sticking point in the relationship between the firms.
But yes you are right and will be taking any rights I am offered in the CR
Settlement conference between Life Health Foods NZ V Synlait Milk Ltd & Others in the Christchurch High Court yesterday.https://www.courtsofnz.govt.nz/asset...daily-list.pdf Interesting considering today’s announcement.
Could be this? https://lifehealthfoods.co.nz/recall/
John Penno probably leaving because he doesn't want to play a part in gutting his prized legacy.
Meanwhile the new Chair "George is Chair of NZX-listed Bremworth Limited, Director of NZX-listed Arborgen", guy sure knows how to pick them. Pick the lowest margin and most underperforming businesses you can to be apart of the board.
Right, I'm in for the ride......
Just bought a massive 10 shares.
I'm 1% down already. :t_up:
Market cap not far off from going under $100m
I tell people in my job there is good debt and bad debt. SML have neither. They have toxic debt :(
Arborgen Appointed 19 August 2019 - Share price August 2019 was 18 cents today its 15.8 cents
Bremworth 1 June 2018 - Share price in June 2018 was 60 cents, today its 43.5 cents
So overall no the share price has not improved since he joint their boards. Thats not to mention that Bremworth share price also benefited off their insurance lottery or else they would be much lower.
From an ex-farmer in Waikato:
"Talked to Fonterra area rep today. Reckons might be about 220 Waikato suppliers to Synlait, thinks 70 have put in notice to stop supply."
Ghee it's hard to see any value in Pokeno if that's the reality. But at least there's a two year cessation period (according to this article) which might give them enough time to recapitalise and win back some of those farmers.
But I wonder how that looks to potential buyers. Even if they buy it and financially secure Pokeno, some of those 70 farmers might just've had enough and will go to the safer Fonterra option even under a new owner. Lots of uncertainty
Lots of uncertainty with this one, I see a little more volume today…I guess if they announced any asset sales prior to CR would see a decent return on investment…
Wouldn’t fit with my feeling that they don’t want us to participate in a CR though…
https://www.ruralnewsgroup.co.nz/dai...t/takeover-bid
Takeover bid?
Written by Milking It
OPINION: Canterbury milk processor Synlait is showing no sign of bouncing back from its financial doldrums.
The listed company’s share price has dropped to 50c/share, valuing the company at only around $100 million. The share price has been travelling south despite the company working hard to sell off under-utilised assets and reduce debt.
Milking It reckons all this means a takeover bid could be around the corner. Watch out for Bright Dairy of China; it already owns 39% of Synlait and could easily fork out a couple hundred million to buy the company outright.
The Chinese know how to run successful dairy companies in NZ; just look at Westland Milk, which reported a record revenue of over $1b last financial year.
My feeling is this is the outcome that Bright really want and have engineered…maybe like has been pointed out I am giving them to much credit however these guys are not short term players nor like you point out above are they ignorant in the industry they are heavily in…they are across the NZ dairy industry involved in multiple JV, just can’t see them letting Synlait go,
A2 have a blocking stake ? How does Bright stack up with foreign ownership laws if it makes an outright ownership bid?
If Bright Dairy really wants to control Synlait, it has many options. For example, it could lend $200m to Synlait at an interest rate of 10%+. Can Synlait borrow from other parties to pay $130m back to banks by July 15 and pay $180m bonds in December? The answer is obviously NO. Selling assets in a hurry is not a good idea at all.
Can Bright even make a takeover over for Synlait? They would need OIO approval and A2 agreement in the case of a straight takeover offer to get to 90% of the available shares
They would still need the OIO for a scheme of agreement attempt, 75%…?
Agreed, it's not as easy as Bright deciding to buy- and there's the bonds to think about. With 560M of debt, and a dispute with A2M as 50% of the revenue, it'd be a big ask to pay more than that to take it over. More likely is a massively diluted cap raise (but then there's the dispute to think of with A2M). Other possibility is the only saleable asset is Duansandel and A2M the only real buyer with the cash to pay for it.
The more likely case than a takeover would be Bright buying the North Island assets.
Why not just sell the North Island assets to Open Country who are expanding their supplier network each year and with a higher payout than Fonterra should be able to fill the factory quickly .They seem to run a very tight ship ,if anyone can may a go of it Open Country would be my bet. Sylait is then left with the South Island a capital raise and problem solved
I assume like all selling processes, they will offer it to everyone and take the highest price. Seems like a waste of time that they are spending a few months on a strategic asset review to come to the conclusion they need to sell their assets as if it was a surprise to them, and will likely be spending another 6 months in a tendering process, likely needing another extension from the banks, but just in the nick of time to have money to repay their bonds (only if the sale is successful). They are working on such a short timeline and likely have to sell at fire sale prices.
OCD have never come close to matching Fonterras payout. They do pay quarterly and it can be hard to compare but its often miles behind on an annual basis. How they achieved market share was a combination of regulations around monopolies and Fonterra farmers cashing in their shares which were worth much more 15 years ago. Long story big picture.
Westland Dairy as a reference point for how the Chinese operate:
Most of us can remember wondering (and then, laughing) at the Chinese company Yili paying $3.41 per share (vs independent valuation of $0.88 to $1.38) for the loss making Westland and taking over Westland's heavy debt burden of $342m.
Well, turned out Yili knew exactly what they were doing - turnover has increased by 52% to $1.065b from the $698m in 2019 when Yili took over the company. More importantly, Yili has turned Westland losses to profits - $38.9m in 2022 and $55.9m in 2023.
So a Chinese company with unequalled access to overseas markets (especially China) and deep pockets bought a NZ dairy company which was in financial distress and under its management and ownership, turned it into a highly profitable growth dairy company.
Sounds familiar?
Yes and they had the strength to manipulate the market to achieve the outcome they wanted. Its often said the Chinese take a 100 year view versus our money in your pocket today approach. Adding on their desire for food security and open your eyes to how short sighted and naive we are.
The Westland purchase by this other Chinese company doesn't look like a fantastic investment based on EV/Earnings multiple even using last years profit.
Bright has lost a truck load of money with SML and need to pour more in for their food security.
NZ farmers and the many hundreds of employees on big pay packets at SML are the big winners here. Chinese investment decisions look very poor to me.
Some very good points made, thank you.
At the end of the day Bright are involved in NZ dairy, they completely control access to the market in China ( let’s face it SAMR is a control function, for both quality and access)
just cannot see them walking away from this business, and on top of that while A2 are working on options they really don’t have a commercially viable one currently nor will they in the time frame this is all going to happen, so in all honesty they also cannot let this tank…
Only my thoughts,
Glad you said that as fonterra say the same thing so I asked them how open countries payment of matching Fonterra’s payment plus 10cents is a lesser payment.To date I have had no reply am very interested to find out how fonterra plus 10 is less than Fonterra’s payout.look forward to finding out
A few points to note :
1. It is almost impossible for an outsider to know what kind of real profits are made by NZ companies owned by multi-nationals due to transfer pricing. Just have to look at how little Google and Apple subsidiaries make in NZ and particularly difficult with manufacturing companies. I worked for a NZ company owned by overseas interests and the NZ company hardly ever made much accounting profit (due to HQ imposed costs) but we all got our bonuses based upon pre-HQ costs!
2. Yili's actual investment in Westland amounted to $242.5m as the debt of $345.5m was retained in Westland (presumably with Yili's guarantee). So the profit of $55.9m in 2023 was after interest costs.
As for Bright, it has lost money based upon book value but the game could just be starting for them. The big losers could turn out to be ATM and the 40% minority shareholders.
Anyway, interesting times ahead.
"Apple Sales NZ reported a net profit of $31.3 million in the 12 months ended June 30 on revenue of $1.21 billion."
Beggars belief that Apple NZ only made 2.9% on its NZ revenues!
NZ should impose punitive taxes on Apple for evading NZ tax.
In contrast, the EU last year imposed a 13 billion euro tax on Apple for using Ireland to circumvent EU taxes.
And just in this morning :
"Facebook NZ has reported its profit jumped by a third for the 12 months to December 31, 2023 - albeit in the context of reported revenue that was again dwarfed by payments to a sister company in lower-tax Ireland.
The firm is part of the Mark Zuckerberg-founded Meta, which also owns Instagram and WhatsApp, among other properties.
Facebook NZ booked total comprehensive income after tax of $3.1m, up from $2.8m in 2022.
Revenue edged up to $9.1m from the previous year’s $8.7m.
Payments to Meta Platforms Ireland for purchases of services rose 5 per cent to $157.4m from $149m in 2022."
I don't own shares in Synlait so I don't follow them at all and haven't for years. So I was profoundly shocked when I became aware that their shareprice was 46.5c! The last I remember of them was before the pandemic when the shares were over $9! That is a staggering loss of capital for investors on the order of 95% or so. With a few exceptions, like the terrible (as in it should never have been listed) biotech Genesis Research and Development Corp and a few others, I haven't seen anything like this since the bad old days following the 1987 sharemarket crash when all the Corps went belly up and investors lost all the money they had borrowed from the bank. The dreaded permanent loss of capital, but, still owing the Bank! Judge Corp, Chase Corp, Renoulf Corp, Equticorp, et al. Corpse, rather than Corps, would be the more accurate description of them and that was even before the market collapsed. So I feel for any investors in Synlait who find themselves in this position, and there will be plenty of them too.
The question for me is how did this happen when New Zealand is supposed to be the Saudi Arabia of milk, and milk is our largest export earner? And can those lessons be applied to other NZX-listed companies in order to avoid investing in them?
Things very different in today's environment- the China domestic industry has grown up, has become very capable and much safer. CCP driving a nationalistic buy local campaign. Chinese companies were paying over the odds to buy expertise and process for reasons of food security. That ship has largely sailed with almost no stainless steel investment in NZ anymore, and places like Happy Valley, Bodco, DNL etc all facing huge capacity and no demand issues. What was true for Westland, and to an extent Synlait when Mitsui wanted out- that was good for Bright. Is more investment in NZ good for Bright? time will tell. Maybe not.
Yili via Westland is continuing to invest in new manufacturing plants - unlike Synlait, Westland has been restructured and focus on increasing supply of products in strong demand.
Synlait embarked on an ambitious debt funded expansion into manufacturing products without ascertaining proper demand - eg. $70m into Plant based nutritional products. Guess they thought they could come up with another A2 winner?
https://www.stuff.co.nz/business/350...-wrong-synlait
Dairy company Synlait was at one point the best performing stock on the NZX.
But this week the company, which describes itself a “game changer” in the industry, reported a $96 million first-half loss and plans to offload under-performing assets in an effort to turn its fortunes around.
Shares in the former dairy industry darling, which once traded at more than $13, slumped to just 67 cents after the result was revealed on Tuesday.
Trouble has been brewing at the company for years.
This plant based nutritional has still to play out, the next 6-12 months will be telling on the demand the new customer has. It will prove some diversification to the customer base something Synlait is struggling with. I agree that Synlait does have quite the appetite for risk without the luxury of the working capital to support this.
Strategic acquiring of Dairyworks to diversify market reach and product portfolio only attempt to sell-off a couple years later is just an example of the mismanagement of this business not to mention the investment into liquid products 5 years ago which hasn't delivered anything in terms of meaningful volume (a couple tonnes of UHT cream but not enough scale to be profitable).
The three big clouds: customer diversification, debit levels and inventory management.
From what I can tell of the footprint OC are building another dryer at Horotiu. They have a shiny new (substantial) warehouse right across the road in the PoA inland port.
Pretty sure that I saw Fonterra reducing stainless in the Waikato… some examples of investment but more examples of retrenchment I think
"Fonterra confirms Waikato plant closures, hopes to redeploy staff
Benn Bathgate
Benn Bathgate
April 12, 2024
Share
FC6C067251754256B75935EB32578EBA
The Fonterra Dairy Factory in Waitoa, which is set to see 41 roles ‘impacted’ due to changes revealed by the dairy giant.
CHRISTEL YARDLEY / WAIKATO TIMES
Dairy giant Fonterra has confirmed plans to close a number of plants at two of its Waikato sites, a move the company said would see 41 jobs “impacted”.
Fonterra’s director of NZ manufacturing, Alan Van Der Nagel, told the Waikato Times that like all good businesses, they are “always looking to optimise our operations”.
“Waitoa PDC (specialty powders) and the site’s coal centre, along with dryer one and two at Te Rapa, have served us well,” he said.
“But they are ageing assets and are no longer efficient to operate. For these reasons, we have let our teams know of plans to close these plants. Our Waitoa and Te Rapa manufacturing sites will continue to operate."
https://www.waikatotimes.co.nz/nz-ne...redeploy-staff
"OCD’s new Horotiu plant is next to Affco’s meat processing plant and headquarters."
https://www.ruralnewsgroup.co.nz/dai...-big-milestone
More competition
"Olam Food Ingredients (ofi), the company behind a multi-million dollar milk processing plant in Tokoroa, has moved into its second phase of investment and is looking for farmers to supply milk for “specialised and sustainable protein” ingredients."
https://www.stuff.co.nz/business/300...-local-farmers
Got to move with the times and the above are indicative of aged inefficient plants being put to ‘pasture’ and new efficient plants being brought onstream.
Interesting thing is that it has taken overseas interests to provide real competition to Fonterra (being OCD, Olam, Westland and Synlait). Otherwise, NZ farmers would still be at the complete mercy of the incompetent dated management of Fonterra of old.
So do farmers want to continue to support new entrants or risk being held hostage to Fonterra as they were in the last?
I see in todays Business News that a large dairy system which owes the BNZ $36 mil has had receivers appointed, is the the sign of things to come, can someone add further details ?
I am hearing even the biggest ones with 50 % equity being contacted weekly by their banks while being gouged 8.5% interest
"Rising costs, falling revenue
The 2022/23 dairy season was a bad combination of rising costs and falling revenue. DairyNZ estimates that dairy operating expenses in 2022/23 amounted to $8.16 per kgMS, up sharply from $7.23 in 2021/22. The start of the war in Ukraine in early 2022 led to a sharp rise in the cost of diesel and fertiliser, and rampant inflation bumped up the cost of nearly everything else. Fonterra’s payout to farmers for 2022/23 was estimated to be $8.20, down from a record level of $9.30 in 2021/22. These shifts take the average farm from a solid profit in 2021/22 to barely breaking even in 2022/23. Across the dairy farming industry, this amounted to a drop in revenue of $2.0b.
Heading into the 2023/24 season, Fonterra dropped its forecast payout further, to $7, then $6.75, driven primarily by weaker demand from China. The latest drop amounts to a $2.7b fall in revenue for dairy farmers, on top of the $2.0b drop in the previous season. DairyNZ forecasts that costs will ease slightly, taking the break-even point down to $7.51 for the 2023/24 season – an improvement, but still higher than revenue. The reduction in break-even is in part driven by farmers deferring expenditure to match the lower payout."
https://www.infometrics.co.nz/articl...-dairy-farmers
Been around since 2018 but I suspect a lot longer than that
https://app.companiesoffice.govt.nz/.../shareholdings
All I can see is Bright Dairy will end up with a business Partner and takeover this dog. ATM might be the runner up and it will be with conditions that work for both parties.
Milk, in any form whether its infant formula or solid etc is always going to be needed, she’s tough times balancing the books all round at the moment ( farmer or processor) however the market has its stellar years too
All industry's have peaks and troughs, this is simply one of the low periods.
Im in the milk not from cows camp. You can't get beer from a cow but you can brew it.
"Global dairy price recovery forecast to be slower than expected - Rabobank"
https://www.nzherald.co.nz/the-count...EA7HG7HRUMUAU/
"A large-scale dairy farming business once worth more than $125 million but placed in receivership last month owes its bank $36.5m, a court judgment reveals.
https://www.nzherald.co.nz/business/...DWHULGYN7QNEM/
The dairy industry needs a strategic A2 policy
https://www.interest.co.nz/rural-new...a2-beta-casein
"To understand the opportunity that New Zealand now faces, the first point is to recognise that a2Milk has trademarks but no blocking patents. Accordingly, there must be renewal and exit clauses within the current licence that lead to an exit strategy with due notice. It would be remarkable if that were not the case".
For SML, the trouble started when they bit the hand that fed them. Diversification was the right choice for SML, they executed it very badly and then doubled down with a fight or fights with A2M without the contractual backing. When this all comes out, I reckon we are in for a messy story of ego and vanity for SML to even think they could bluster their way through this
With founder gone, prepare for a cap raise is my best guess. With Fonterra exiting consumer, timing ain't great for selling Dairyworks and North Island assets
"If people seriously think that SML is going to sell Dairyworks and the NI assets, they obviously do not have the foggiest idea of what's happening behind the scenes."
Yesterday, what my farmer contact in the Waikato who supplies milksolids to SML said when we were discussing the state of the dairy industry.
So why wouldnt Graham Hart buy SML along with the Fonterra consumer brands , wrap them together and float the enterprise on the NZX, ASX and what ever other exchange would suit. !!