SML - Synlait Milk Ltd

[Beagle]

It's hard to believe that a company that has so many productive tailwinds blowing at their back does so many stupid things. They've got an absurd sense of priorities. It's like they've got a whole team of people working on virtue signaling and like a student intern working on the logistics of the business.

Yes that is my sense of it too, absolutely ridiculous !

Well said Minimoke.

[SilverBack]

Oh what a mess---------- deceive !

Bit of a mess yes, but what you would have done if you were a Board member and responsible for the company's progress?
You, took legal advice and proceeded accordingly. Other party takes offence and brings action. Other party is recalcitrant and rejects any out of court settlement. In the meantime significant supply contracts are at risk but High Court rules in your favour and so you commence construction. Worth the risk? All depends on the value of the contracts and surety of the sale contract with yet a different party that you entered into?
Even now, the company still has other avenues to follow so that the factory can go to completion. Gains from supply contracts can outweigh follow on cost to resolve. Is this a valid business decision or stupidity or just absolutely ridiculous?

[silverblizzard888]

One of the problems of high valuations and pressures to grow. If SML had waited for all legal procedures to clear first then they wouldn't be stuck in a situation where either they will have to spend a lot of money paying off the neighbor or buying them out or risk a whole factory becoming a 'quarry' artifact. To think that the factory is near completion too, at least this cash cow still is a profitable business, problem is its just not a very bright cow when it comes to crossing the river and getting stuck, starting to look a little pink from the blushing.

[RTM]

Bit of a mess yes, but what you would have done if you were a Board member and responsible for the company's progress?
You, took legal advice and proceeded accordingly. Other party takes offence and brings action. Other party is recalcitrant and rejects any out of court settlement. In the meantime significant supply contracts are at risk but High Court rules in your favour and so you commence construction. Worth the risk? All depends on the value of the contracts and surety of the sale contract with yet a different party that you entered into?
Even now, the company still has other avenues to follow so that the factory can go to completion. Gains from supply contracts can outweigh follow on cost to resolve. Is this a valid business decision or stupidity or just absolutely ridiculous?

They shouldn't have purchased that land to build their factory. They should have found another plot without covenants. And yes...they might have had to pay a bit more. Suspect they are going to pay more now anyway, maybe a lot more, to get this resolved. I wonder what A2M is thinking ?

[BlackPeter]

They shouldn't have purchased that land to build their factory. They should have found another plot without covenants. And yes...they might have had to pay a bit more. Suspect they are going to pay more now anyway, maybe a lot more, to get this resolved. I wonder what A2M is thinking ?

Correct. And let's face it - it is not hard to find a suitable place with clean title in rural NZ if you have the money and are creating plenty of good jobs.

Buying a place with covenants preventing you to do what you want to do with the land and subsequently starting to build without being sure the covenants are removed is plain stupid. It does not help that they made an agreement to remove the covenants with somebody who neither owns nor controls them.

[Chanchay]

There's is a bunch of unknowns. With the plant finished there will need to be either an appeal or a settlement negotiated for a sum. The size of the sum is unknown but would expect it to be rather small compared to the establishment of the plant.

Very poor sentiment from investors. I got out as previously said but if we see a drop sub 9 I think I will be back in.

Despite the bizzare priorities of management I think as said above. Lots of tail winds. Atm are really propping up the co and I would like to benefit on both sides of the atm,sml equation.

Perhaps investing despite inept management is youthful foolishness, I guess I will find out.

[Beagle]

Inept management almost always leads to poor results notwithstanding industry dynamics tailwinds or otherwise.

I no longer see a reason to hold this stock...far better off in ATM.

[minimoke]

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[Beagle]

There is two ways of valuing a settlement. One is compensation for the loss of the enjoyment of the amenity provided by the Covenants. The other is eh value of a production facility to be free of any risks associated with covenants.

I would think the covenant owner has already been offered compo prior to the sale / purchase agreement going through. He turned it down. I assume a without prejudice offer would also have been made when this went to court at a higher level than the original offer. Obviously it was turned down.

SML are now in a very high risk environment. Appeal court decision are not ones to be taken lightly. That is one very high legal decision. They only get one more throw of the dice at Supreme Court level. Loose that and who knows what could happen.

A very, very poor decision by previous management to turn that first sod of soil before the covenant issue was sorted.

If they have made one poor decision we loose confidence in the rest of their decision making ability. There focus on pretty fonts, te reo and support of toothless climate change legislation tells me they have their eye well off the ball. Still glad I exited when I did.

A casual observer would be forgiven for thinking they didn't know a legal challenge under appeal was underway. I think there is significant risk here and real risk to shareholders in the cavalier manner in which the company simply doesn't tell shareholders material information, (new much lower margin contract with ATM another classic example of company doublespeak). I am so unimpressed I wouldn't be back even if the share price started with a $6 dollar handle.

[minimoke]

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