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Synlait, A2 sell-off follows Clement resignation

13th April 2021 By Bridget O'Connell | | @foodtickernz

Synlait and A2 Milk’s share prices both fell on Monday as investors reacted to the shock resignation of Synlait boss Leon Clement, who will depart the business in three weeks.

After opening at $3.52 yesterday, shares in the listed milk powder producer fell to a low of $3.40 before paring back to $3.43 at market close. Two years ago the shares were trading at $10.63.

Synlait’s cornerstone customer and shareholder, A2 Milk, for which it was the sole supplier of infant milk powder, also suffered contagion from the news of Clement’s sudden departure with its shares sliding slightly from $8.60 to close Monday at $8.57.

Clement’s departure from the Dunsandel-headquartered group was announced yesterday morning, with no reason given for the decision.

The board of the milk powder producer, which has faced significant headwinds from Covid-19, said his decision to resign was accepted “with regret”.

Clement would leave the business at the end of April. From 1 May, Synlait co-founder and former chief executive, John Penno, would become interim CEO.

In a statement to the NZX on Monday morning, Synlait chair Graeme Milne called Clement an authentic and transformational leader.

“He has successfully repositioned Synlait’s purpose, ambition, and strategy to make us a more diversified and sustainable company,” he said.

Under Clement’s leadership, Synlait had been pursuing a diversification strategy from its primary business of supplying infant formula to its cornerstone customer and shareholder A2 Milk.

This had seen it invest $150m to purchase cheese companies Talbot Forest Cheese and Dairyworks as it extended into the consumer market.

The company also grew its manufacturing sites with the development of a new factory at Pokeno and a new liquid plant at Dunsandel.

Synlait said Clement had “maintained growth momentum towards its $2bn revenue target with more than $500m of top line growth delivered, achieving more than $1bn in revenue for first time in FY19 and delivering record NPAT result of $82.2m”.

However, this was before Covid-19 disruption had a significant impact on business – mostly at the hands of A2 Milk whose channels to China and supply chains had been severely disrupted.

In its interim results last month, Synlait’s net profit plunged 76% to $6.4m, with “significant uncertainty and volatility” forecasted to continue into the second half.

In the statement, Clement added that it had been a privilege to lead Synlait: “It has been an intensive period of change and growth and I am proud of our achievements.”

Synlait said recruitment to replace Clement, who joined the group from Fonterra in 2018, was set to start shortly.



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