SML - Synlait Milk Ltd

[silverblizzard888]

I think Abbott is also in the picture now that SML is compliant with the FDA and can supply the US. Potentially another shortage looming there and SML could play an important part for Abbott and even A2 in supplying the US market.

"U.S. Food and Drug Administration recently sent warning letters to ByHeart Inc., Reckitt/Mead Johnson Nutrition, and Perrigo Wisconsin that outline shortfalls in how all three handle potential contamination and gave the formula makers a short timeline to respond. Additionally, one of Reckitt’s plants also didn’t make sure that the equipment and utensils used are of “appropriate design and were installed to facilitate their intended function and their cleaning and maintenance.” "

"warning letters from the FDA to the formula manufacturers “indicate that another formula crisis should soon be underway. Just four companies — including Mead Johnson and Perrigo — comprise 90% of the U.S. baby formula market, meaning that if just one factory is forced to stop production due to safety concerns, it could send a massive shock to the U.S. formula supply, creating a repeat of last year’s baby formula shortage"
"
https://www.deseret.com/2023/9/28/23...n-fail-act-fda

[Lego_Man]

One of the best risk-adjusted fixed interest investments in the market has to be the SML 2024 bonds imo.

I have quietly picked up a parcel in recent times and believe that those who bought the bonds at 3.83% pa yield and sold out at up to 18% pa have not thought through the strategic nature of SML to Bright Foods and ATM.

Both would be very happy to take out the company completely at around current valuations (sp $1.43 vs NTA of $3.21) which could yet happen if SML makes a heavily discounted rights issue, underwritten by the principal shareholders.

Do the bondholders have any idea how long (& geopolitically difficult) it takes for a China company to build up a primary sector player like SML? Have a look at how long it took Singapore's Olam International to build up its multi-billion food empire?

There will be a time to play SML shares - the major risk now being the NZX re-indexing in December.

It's a rare opportunity where the bonds offer you equity like payoff on your thesis.

[Balance]

And dairy prices continue their recovery - augurs well for SML’s inventory/stock.

https://www.stuff.co.nz/business/far...l-dairy-prices

The price of whole milk powder, which has the most impact on farmgate milk prices, gained for a third straight global auction, welcome news for dairy farmers as the industry heads into peak milk season.

The average price for whole milk powder rose 4.8% to US$2931 (NZ$4870) a tonne at the Global Dairy Trade auction overnight. The overall index gained 4.4% with five of the seven products increasing in price.

[silverblizzard888]

Milk price is up on Fonterra's side, thats a good sign of recovering demand and SML should likely be seeing a similar situation.

"Fonterra Co-operative Group Ltd today raised the 2023/24 season forecast Farmgate Milk Price range to $6.50 - $8.00 per kgMS, with a new midpoint of $7.25 per kgMS, up 50 cents."

https://www.nzx.com/announcements/419593

[Sideshow Bob]

Synlait's take on it.....

https://www.nzx.com/announcements/420061

Synlait Milk Limited (Synlait) will enter into a confidential binding arbitration process with The a2 Milk Company to determine the validity of the notice of cancellation of the exclusivity arrangements under the Nutritional Powders Manufacturing and Supply Agreement (NPMSA) for the a2 Platinum® and other nutritional products.

Synlait disputes that The a2 Milk Company has the right to cancel the exclusivity arrangements. Representatives of the companies engaged in a period of good faith negotiations; however, the dispute remains unresolved.

Synlait reminds the market that:

• Any cancellation relates only to the exclusivity arrangements. The NPMSA remains in place but may be terminated by either party on three years’ notice.

• Synlait continues to hold the Chinese regulatory State Administration for Market Regulation (SAMR) licence which is attached to Synlait’s Dunsandel manufacturing facilities. The licence is for The a2 Milk Company’s Chinese labelled 至初® Infant Formula (stages one, two and three), the company expects to manufacture those products for The a2 Milk Company for products destined for the China market for the period of that licence (currently expiring September 2027).

[Balance]

The arbitration is binding - that's good.

Provides certainty one way or the other rather than a long dragged out lawyers' bonanza.

[billkiapi]

Abitration is long and expensive, make no mistake that it is aa bonanza for lawyers. ATM's position is entrenched here which would suggest they think they have enough to win an arbitration hearing. What will be interesting is if there is also any other court proceedings that orbit this issue.

[billkiapi]

Frankly, I'd be sweating if I was a director of Synlait

[winner69]

Frankly, I'd be sweating if I was a director of Synlait

Esp if Synlait stock/sales/delivery data is a bit wonky because of that new ERP system they been trying to grapple with for last couple of years

[percy]

23 October 2023
Resignation of Synlait Chair
The Synlait Milk Limited (Synlait) Board advises that Simon Robertson has resigned as Chair and
Independent Director of the company.
Synlait’s Nominations Sub-Committee will immediately commence a search for an Independent Director to
fill the vacancy. The Board expects the new Independent Director will be suitable to be appointed as
Chair.
Independent Director Paul McGilvary has been elected Acting Chair until the position is permanently filled.
Paul was elected with the full support of the Board.