SML - Synlait Milk Ltd

[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-websit...758/306172.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-websit...758/306172.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 (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 (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.