SML - Synlait Milk Ltd

[xafalcon]

To date, the philosophy of this company seems to be along the lines of "build it and they will come"

Well, there has been a huge amount of building over the past 4 years, but still no big fish appear to have been landed.

Where are the big infant formula players like Wyeth, Mead Jonhson, Abbott, Nutricia? One would expect a pretty good deal could be struck for a major chunk of plant capacity. So why are they not showing interest and jumping on board?

The cost of funding all that new capacity and processing equipment must put SML at a significant disadvantage to Fonterra and Westland Milk when it comes to matching farmer milk payment price. SML absolutely must do this to secure their milk supply since they are not a supplier owned co-operative. Catch 22

I wonder if their balance sheet was previously held up by extremely favourable commodity prices, which have now disappeared and don't sound like they will return in the short term. Is the perfect storm brewing here?

[ruaboy]

Taking a quick look at it, Fonterra last year made approx ten cents per milk solid processed, synlait made approx 40 cents a kilo milk solid processed.Since Synlait suppliers don't have to own shares in the company to supply, Synlait is in the prime position that it can get its milk at a small discount. It appears to me that Synlait has done very well in a short amount of time and should only improve, esp as Fonterra seems to be carrying a lot of excess fat

[Billy Boy]

I read somewhere that a big Chinese investor was being chased to the Chinese govt on fraud charges.
BB

[BlackPeter]

I read somewhere that a big Chinese investor was being chased to the Chinese govt on fraud charges.
BB

How is this relevant for SML?

[Billy Boy]

How is this relevant for SML?

Coz he is a big (if not the biggest) investor in SML. Also I think SML were looking to use him as a priority ticket to the Chinese Market.

[xafalcon]

Taking a quick look at it, Fonterra last year made approx ten cents per milk solid processed, synlait made approx 40 cents a kilo milk solid processed.Since Synlait suppliers don't have to own shares in the company to supply, Synlait is in the prime position that it can get its milk at a small discount. It appears to me that Synlait has done very well in a short amount of time and should only improve, esp as Fonterra seems to be carrying a lot of excess fat

Fonterra is a co-operative. If it "made" lots of money, it's supplying shareholder owners would be paid less and consequently be very unhappy. Ask any shareholder how much they appreciate "retentions"

Fonterra supplying shareholders also get an extra payment on top of the milk payment, like a dividend.

Due to hardware constraints last dairy season, Fonterra was unable to maximise returns to suppliers. This was widely understood to be equivalent to about $0.50/kgMS.

This probably makes the comparison seem better than it would otherwise be

But the seeming lack of a credible major infant formula customer after 3 years is the major worry in my opinion

[BlackPeter]

Coz he is a big (if not the biggest) investor in SML. Also I think SML were looking to use him as a priority ticket to the Chinese Market.

So whom are you talking about? Their (with a large distance) largest share holder is Bright Dairy (Chinese owned). I guess they have an office in one of the tax havens ... but lots of companies have.

Do you have a reference or link to support your statement - or is this just one of the urban myths and rumours which need the news vacuum of the summer season to spread around?

[Billy Boy]

So whom are you talking about?

Do you have a reference or link to support your statement - or is this just one of the urban myths and rumours which need the news vacuum of the summer season to spread around?

My friend next door remind''s me it was a Radio report, Jenny Ruth or Rod Orham or the likes, and it
went like " The Chinese Govt is cracking down on corruption and Mr. XXXXX who has strong connections with SML is one scone such person being investigated."
Now I am not going to listen to play backs of RNZ to try and find it. My original post was worded in such a way as to receive further verification and info from other posters, I hoped.
BB

[Citizen Erased]

http://www.dailymail.co.uk/wires/reu...ng-31-mln.html

[BlackPeter]

http://www.dailymail.co.uk/wires/reu...ng-31-mln.html

CE - cheers for the link.

"The allegations against Wang Zongnan relate to his time at state-owned companies Shanghai Friendship Group and Lianhua Supermarket Holdings Co Ltd.
Wang was general manager at Shanghai Friendship Group and then at Lianhua Supermarket before becoming chairman at Bright Food in 2006 until his resignation for health reasons in 2013."

So given that the allegations are related to the job he was holding before he worked for Bright Food, and given that he does not work for them anymore (resigned 2013) - unlikely, no matter what the verdict, to have any fallout for Synlait.