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Friday 20 May 2022

Synlait posts $28.5m loss, taps Grant Watson to be new CEO

27th September 2021 By Bridget O'Connell | | @foodtickernz

Embattled dairy company Synlait has appointed Miraka boss Grant Watson as its new chief executive and pledged a return to “robust profitability” after falling to a loss of $28.5m for the year to July 2021.

In posting its first annual loss since listing eight years ago, the Dunsandel-headquartered group attempted to draw a line in the sand following what interim chief executive John Penno described as a “very challenging financial year”.

Grant Watson

Net profit after tax plunged 138% to finish at the deep end of its May forecast of a loss between $20m – $30m, reflecting a $102.8m reduction on the prior year.

EBITDA fell 78% to $37.3m, while revenue rose 5% to $1.37m.

“Today marks the start of a new chapter as we set out a clear plan to return to robust profitability,” Penno said.

This included the recruitment of Watson, who has only been at Miraka since February, to lead the group from January 2022 and return it to the black by the end of the next financial year in July 2023.

“Prior to Miraka, Grant led the significant growth of Fonterra’s global foodservice business and has overseen the successful commercialisation of numerous value-added dairy products. This is a key part of Synlait’s strategy going forward and we look forward to benefiting from his skills and experience,” Penno said.

The group also made acting chief financial officer Robert Stowell permanent and was seeking shareholder support for governance changes, which would transition Penno from interim chief executive to the chair’s seat, and keep retiring chair Graeme Milne on board as a board advisor for a year.

Watson would be fronting a plan to rebuild the milk powder producer, which saw the shape of its business change dramatically in December last year when cornerstone shareholder and customer A2 Milk Company slashed its volume forecasts in the face of Covid-19 disruption.

As a result, Synlait had to write down its inventory and reset its demand outlook.

Following a Q4 review, Synlait was now looking for improved performance across its ingredients division where it is predicting a return to normal trading conditions and tighter management.

It is also looking for growth from its nutritionals business and emerging liquids business which manufactured high-specification, long-life consumer-packaged beverages, foodservice cream products, and ready to feed infant formula, and its consumer-facing Dairyworks and Talbot Forest Cheese.

“Synlait’s performance will build into FY23 as its new multinational customer at Synlait Pokeno ramps
up, and its liquids and consumer foods businesses continue to grow,” it said.

Synlait said it will also be targeting cost savings. It recently announced up to 150 jobs being cut.

The group added that planned reductions in inventory at Synlait and Dairyworks would generate operating cashflows in excess of earnings.

“These strong cashflows will enable Synlait to complete its capital expenditure programme and reduce debt to comfortable levels over the next two years,” the company said.

The next financial year would also include a one-off gain on sale of approximately $17m from the sale and leaseback of the land and building at Synlait Auckland.

“By the end of FY23, the recovery plan will have seen Synlait return to similar levels of profitability, operating cash flows, and debt ratios as the years leading into FY21.”



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