SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW - For the six months ended 31 January 2022
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SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW For the six months ended 31 January 2022
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PAGE 02 SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW
KEY FINANCIAL METRICS
790.6 M 117.3 M
19% 269%
$ $
REVENUE OPERATING CASH FLOWS
27.9 M 14.5 M 46.0 M
338% 128% 37%
$ $ $
NPAT ADJUSTED NPAT* CAPITAL EXPENDITURE
68.4 M 56.5 M 391.8 M
45% 20% 19%
$ $ $
EBITDA ADJUSTED EBITDA* NET DEBT
9.60 kgMS
27%
$
FORECAST BASE MILK PRICE
FOR 2021/2022 SEASON
All comparisons are to H1 21 which has been restated for a change in accounting policy.
* Excluding Synlait Auckland gain on sale and leaseback and related items.
PAGE 03 SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW
SIX MONTHS IN REVIEW
A LETTER FROM OUR CHAIR
Dear Shareholders Here are some highlights from our • A significantly improved net debt
I have written to you many times, recovery plan: position (down 19% to $391.8
but this is my first as Chair. It was an million) is perhaps our biggest H1
enormous privilege to take on this • Synlait’s cost structure review 22 achievement and will provide
role in January when we appointed and the organisational reset shareholders with comfort that
Grant Watson as CEO. Having been is complete. Most cost saving our recovery plan is on-track. Our
part of Synlait from the outset, I have benefits were realised in improved operating cash flows
seen it as extremely important to help operations and are reflected in (up 269% to $117.3m) and net debt
lead the company through its recent improved gross profitability. We are position benefitted from stronger
challenges and set it up for future on-track to achieve the $7 million profit, greater focus on working
success. While the job is not done yet, in savings the organisational reset capital management, and the sale
you will see from this result that we promised, with $5.2 million realised of the land and buildings at Synlait
have made some big steps in the right in H1 22. A lot of hard work has Auckland. Work will continue in
direction as we reset management gone on under the leadership of the second half with an ongoing
and governance and rebuild our our new CFO Robert Stowell to focus on rebalancing inventory
profitability and balance sheet. implement these changes. We are levels through improved sales
very aware of how challenging performance, while working to
Turning Synlait around and stressful this process was on minimise the impact of shipping
In the first six months of this financial our staff, particularly those whose delays that have been facing all
year (H1 22) significant steps were roles were disestablished. Our exporting companies. We will
taken to reset and rebuild Synlait. decisions were not made lightly, also continue focusing on our
While we cannot relax just yet, and I thank the entire team for their operational costs and capital
our plan to return Synlait to robust professionalism, understanding expenditure.
profitability is on track. and commitment to Synlait
throughout the process.
Synlait Chair Dr John Penno and CEO Grant Watson
PAGE 04 SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW
• In our early years, Synlait built its • We are halfway through the on- As a backdrop to this progress we processes, resource allocation, and The Board and I firmly believe that
profitability and credentials in the boarding of Synlait Pokeno’s new are experiencing extremely high dairy accountability frameworks. Grant is having an Independent Chair is best
global dairy industry by operating multinational customer which will commodity prices which will lead to clearly identifying and articulating what practice, and we hope my tenure will
our Ingredients business to the enable us to produce nutritional a record milk price for our farmers needs to be done to return Synlait to be for a short period as a permanent,
highest standards. By establishing adult and paediatric plant-based this year. An improved focus on our robust profitability. independent successor is found.
an Ingredients business unit as products for the Asia Pacific region. Ingredients business means that after
part of the organisational reset, its The first base powder and finished starting from a weak sales position Governance changes Filling Graeme’s place as an
performance has already improved good trials are complete, and late last season, we have been able As well as aligning structure to strategy Independent Director is Paul McGilvary
with revenues up 54% to $423.7 commercial production is on-track to consistently take advantage of and appointing Grant as CEO, you, who started in January and brings
million driven by commodity prices, to start late 2022. Our dedicated sales conditions, particularly the as shareholders, approved several strong dairy sector experience to
sales volume, product mix, and Nutritionals team is building new strong relative pricing of Skim Milk Governance changes at our Annual Synlait. Notably, Paul was the CEO of
attainment of product premiums. base powder relationships with Powder. The turnaround in our Meeting which have now been HortResearch (now Plant and Food)
Within a context of strong multinational customers and Ingredients business and flexibility implemented. and then CEO of Tatua Dairy Company,
commodity prices, the business Chinese domestic players as the within our product mix has meant before establishing his governance
has benefitted from a greater focus global market rebuilds. Several that very high dairy prices have had Our Chair, Graeme Milne ONZM, career.
on sales phasing and pricing, along initiatives and trials are underway. no impact on our ability to pay a retired from the Board at the Annual
with an improved cost structure competitive milk price. Meeting after 17 years. To enable me Qikai Lu (Albert) and Min Ben have
and FX position. The team is • Dairyworks’ ambition to be the to step into the Chair role and deliver stepped down as the Bright Dairy
actively developing sales strategies second biggest player in the New Grant Watson’s appointment as CEO a well-managed leadership transition Holding Limited appointed Directors
and has increased engagement Zealand consumer dairy food was made in light of the challenges with Grant, a constitution change was on the Synlait Board. On behalf of all
with our multinational customers to category is gaining traction. It Synlait faced in the last 12 to 18 months. required so that the Board Chair could Directors, thank you to Albert and Min
build repeatable, predictable, and launched its own-branded milk and Grant has made an excellent start be a Non-Independent Director. The for their contribution and commitment
profitable business for the cream range in the Foodservice in his role and brings a very strong Annual Meeting resolution passed with to Synlait. Albert and Min are replaced
long-term. channel in H1 22. Category commercial focus to the next stage of overwhelming shareholder support, by Min Chen (Joyce) and Dr Gui Min
extension also continues for its our recovery plan. His discipline when it thank you. I am not an Independent (Gracie). Joyce joined Bright Dairy
Protein Fit yoghurt range which comes to execution is relentless. We are Chair. I have had a long history with in 2007 and has been Chief Internal
has achieved national distribution already seeing increased accountability the company holding several roles Auditor since 2016. Gracie is Director of
and can be found in 300 New filter through to our internal planning including, co-founder, CEO and director. Marketing of the Nutrition Section and
Zealand stores. has a Ph.D. in pharmacology.PAGE 05 SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW
Finally, Graeme’s 17-year tenure with Synlait’s goal throughout this pandemic recovery plan. I hope today’s result
Synlait needs to be acknowledged. has been to keep our people safe, keep demonstrates we are on-track to
Graeme joined Synlait when we were their families safe, keep our facilities provide you with a significantly stronger
a dairy farm and shared our vision of running, and keep COVID-19 away – not balance sheet and robust profitability
building a world-class manufacturing just for us, but for all New Zealanders, by the end of this financial year.
company in Dunsandel. Graeme had and our friends in the global community.
an enormous influence on the strategy New Zealand’s COVID-19 situation Stay safe and well.
and direction of Synlait as our plans became very real, very quickly and we
came together – and we literally are extremely proud of how our people
built Dunsandel from the ground up. responded to keep each other safe. Our
Right from the beginning he had an workforce is fully vaccinated and our
unwavering commitment of time, daily rapid antigen testing programme Dr John Penno
energy, and experience to give to has detected dozens of presumptive Chair
Synlait and to me personally. His calm results, which has ensured that our
nature has carried us through good and people and facilities remain safe.
bad times. Graeme, on behalf of the
Board, leadership team and staff, thank It has been a challenging first half,
you for your enormous contribution to particularly with the added complexity
Synlait’s growth. of Omicron. Thank you to our Synlait
team for their continued patience,
Our ongoing response to COVID-19 commitment, and determination as we
proves successful work with Grant and the leadership
It has been a challenging period for team to turn this business around.
our people. Our Auckland and Pokeno
teams spent the majority of H1 22 in I look forward to continuing to meet
lockdown as the COVID-19 Delta variant with you in my new role as Chair.
circulated in our largest city. Now all our I am committed to delivering a well-
teams across New Zealand have been managed leadership transition with
impacted by Omicron. Grant and continuing to support our Synlait has mandated that all staff, contractors and
visitors must be fully vaccinated against COVID-19
to enter our facilities. As an additional precaution
all staff are currently undergoing daily rapid
antigen testing on entry to our sites. Here a staff
member is tested by our health and safety team on
arrival at work.PAGE 06 SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW
FIRST IMPRESSIONS
FROM OUR NEW CEO
Tēnā koe shareholders About me
It is an absolute privilege to have I joined the Synlait team from Miraka,
joined Synlait as CEO. I have watched a Taupō based dairy company
Synlait’s journey for years. One thing I where I was CEO. Miraka is owned
have always appreciated about Synlait predominantly by two Māori whānau
is that it is well positioned – it has both who came together to build the world’s
scale and agility. The opportunity to be first dairy-processing plant powered by
your CEO was too good to turn down. geothermal energy. My time at Miraka
This is an amazing role in an innovative, gave me an appreciation for Māori
entrepreneurial business with world culture and business, and for their
class sustainability credentials. highly sustainable farming practices.
My first 10 weeks have been a Prior to Miraka, I spent 10 years at
whirlwind of learning. In my first report Fonterra. I held several roles including
to you, our shareholders, I will introduce Director of Global Foodservice,
myself, share my first impressions, Managing Director of Tip Top, and
and communicate my priorities for the Director of Route and Foodservice
second half of this financial year. (Fonterra Brands New Zealand).
I started my career at McDonald’s New
Zealand where my first role was instore
making Big Macs. During my 18 years
with the business, I worked my way up
through the organisation to become
Chief Operating Officer.
CEO Grant Watson outside the milk
reception bay at our Dunsandel facilityPAGE 07 SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW
Throughout my career I have held months into a two year recovery KEY PRIORITIES 3. Rebuilding our team and
several governance and directorship plan. Our team is driving the plan internal culture following a
roles and been involved in smaller forward with pace. 1. The successful delivery of critical period of constant change and
entrepreneurial businesses. projects. These include: reorganisation. We need to
3. Greater focus and accountability ensure our people feel engaged,
I have inherited an enormous legacy is required to get to the next level • Successful renewal of our committed, and reenergised
from John Penno and the Board. I To deliver on our enormous SAMR license for Chinese to successfully build our
believe my appointment represents a potential and return Synlait to labelled a2 Platinum® Infant business back up and return it to
step change in our journey as Synlait strong, sustainable growth we Formula to ensure our sustainable profitable growth.
enters 2022 with significant change need a greater level of focus access to the China market is
and challenge behind it. I am excited to and accountability right across retained. 4. Reviewing our strategy to ensure
take the experiences from my career the organisation. Improving our it has sufficient clarity and focus
to shape and grow Synlait for the systems, tools, and processes will • Successful implementation of to deliver the second year of our
better. My vision is for Synlait to be a improve our ability to execute with our new Enterprise Resource recovery plan.
world class organisation enabled by excellence – this is a significant Planning system on 1 August.
a culture of innovation, accountability, opportunity. Since joining the team I have spent
sustainability, and a true sense of • Ensure readiness to time with our staff, farmer suppliers,
purpose. 4. Our people make successfully commence and customers. I look forward to
Synlait what it is today commercial production hearing your perspectives on Synlait as
We have a fantastic base of for Synlait Pokeno’s new we connect over the coming months.
FIRST IMPRESSIONS
loyal farmer suppliers who multinational customer.
1. Synlait has amazing DNA remain committed to delivering Nāku iti nei, nā.
Our innovative and disruptive excellence through Lead With 2. Navigating Omicron’s impact on
culture along with our strong Pride™. We continue to strengthen our people and supply chains,
sustainability credentials is what our relationships with current and ultimately deliver on the
sets us apart. Our team’s desire to customers and build connections goal Synlait set at the start of this
do things differently is infectious with future ones. Of course, we pandemic, which was to keep our
and evident everywhere. people safe, keep their families Grant Watson
cannot do what we do without our
safe, keep our facilities running, CEO
staff. Our team has been through
2. Momentum is building a challenging couple of years, and meet the needs of our farmer
Today’s result validates that and I am impressed with their suppliers and customers.
momentum is building. We are six commitment and loyalty to Synlait.You can also read
