Synlait October Conference Presentation

TO DAYTO MORROW
Synlait Milk Limited October 2018

- This presentation is intended to constitute a summary of certain
information about Synlait Milk Limited (“Synlait”). It should be read
in conjunction with, and subject to, the explanations and views in the
documents previously released to the market by Synlait, including
Synlait’s Annual Report for the period ended 31 July 2018.
- This presentation is provided for information purposes only. The
information contained in this presentation is not intended to be
relied upon as advice to investors and does not take into account
the investment objectives, financial situation or needs of any
particular investor. Investors should assess their own individual
financial circumstances and should consult with their own legal,
tax, business and/or financial advisers or consultants before making
any investment decision.
- Certain statements in this presentation constitute forward looking
statements and projections as they relate to matters other than
statements of historical fact. Such forward looking statements
and projections are provided as a general guide only based
on management’s current expectations and assumptions and
should not be relied upon as an indication or guarantee of future
performance. Forward looking statements and projections involve
known and unknown risks, uncertainties, assumptions and other
important factors, many of which are beyond the control of Synlait
and which are subject to change without notice. Actual results,
performance or achievements may differ materially from those
expressed or implied in this presentation. No person is under any
obligation to update this presentation at any time after its release
except as required by law and the NZX Main Board Listing Rules.
- Past performance information is given for illustration purposes only
and is not indicative of future performance and no guarantee of
future returns is implied or given.
- While all reasonable care has been taken in relation to the
preparation of this presentation, to the maximum extent permitted
by law, no representation or warranty, expressed or implied, is
made as to the accuracy, adequacy, reliability, completeness or
reasonableness of any statements, estimates or opinions or other
information contained in this presentation, any of which may
change without notice. To the maximum extent permitted by law,
Synlait, its subsidiaries, and their respective directors, officers,
employees, contractors, agents, advisors and affiliates disclaim
and will have no liability and responsibility (including, without
limitation, liability for negligence) for any direct or indirect loss
or damage which may be suffered by any person through use
of or reliance on anything contained in, or omitted from, this
presentation.
- Forward looking statements in this presentation are unaudited and
may include non-GAAP financial measures and information. Not all
of the financial information (including any non-GAAP information)
will have been prepared in accordance with, nor is it intended to
comply with: (i) the financial or other reporting requirements of any
regulatory body; or (ii) the accounting principles generally accepted
in New Zealand or any other jurisdiction with IFRS. Some figures
may be rounded and so actual calculation of the figures may differ
from the figures in this presentation. Some of the information in this
presentation is based on non-GAAP financial information, which
does not have a standardised meaning prescribed by GAAP and
therefore may not be comparable to similar financial information
presented by other entities. Non-GAAP financial information in this
presentation has not been audited or reviewed.
- All values are expressed in New Zealand currency unless otherwise
stated.
- All intellectual property, proprietary and other rights and interests in
this presentation are owned by Synlait.
- This presentation is not an offer or an invitation to acquire Synlait’s
shares or any other financial products and is not a product
disclosure statement, prospectus or other offering document, under
New Zealand law or any other law.
DISCLAIMER
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TO DAY
CFO’S REMARKS
STRATEGIC UPDATE
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CFO’S REMARKS
TO DAY
- RECORD FULL-YEAR PROFIT OF $74.6 MILLION, UP 89%
ON FY17 PRIMARILY DUE TO INCREASED CONSUMER
PACKAGED INFANT FORMULA SALES VOLUMES
- GROSS PROFIT PER METRIC TONNE UP 63% TO $1,294,
DRIVEN BY CONSUMER PACKAGED INFANT FORMULA
SALES INCREASING TO 28% OF TOTAL SALES (FY17 13%)
- ANNOUNCED APPOINTMENT OF LEON CLEMENT AS CEO
- COMMITTED TO MEETING BOLD SUSTAINABILITY
TA R G E T S BY 2028
- 0.8X LEVERAGE RATIO AND GEARING OF 20.9%
- STRONG BALANCE SHEET EQUIPPED TO SUPPORT
CIRCA $300 MILLION OF CAPITAL INVESTMENT IN FY19
- PROFITABILITY EXPECTED TO INCREASE IN FY19 BUT NOT
AT THE SAME RATE AS FY18
Nigel Greenwood
CHIEF FINANCIAL OFFICER

- STRENGTHENED RELATIONSHIP WITH THE A2 MILK
COMPANY™ WITH ANNOUNCEMENT OF EXTENDED
SUPPLY AGREEMENT
- MANUFACTURING DIVERSIFICATION BEGUN WITH GROUND
BREAKING ON SYNLAIT POKENO
- EVERYDAY DAIRY CATEGORY EXPANSION BEGUN WITH:
- ADVANCED LIQUID DAIRY PACKAGING FACILITY PROGRESS,
SUPPORTED BY FOODSTUFFS SOUTH ISLAND CONTRACT
- CONDITIONAL AGREEMENT TO ENTER THE CHEESE CATEGORY
THROUGH ACQUISITION OF TALBOT FOREST CHEESE ASSETS
(EFFECTIVE 1 AUGUST 2019)
- BEGAN CONSTRUCTION TO DOUBLE LACTOFERRIN
CAPACIT Y, UNDERPINNED BY SUPPLY AGREEMENT
- MOMENTUM CREATED FOR NEXT STAGE OF GROWTH,
UNDERPINNED BY SUSTAINABILITY FOCUS
STRATEGIC UPDATE
TO DAY

INGREDIENTS
INFANT NUTRITIONEVERYDAY DAIRY
ADULT NUTRITION
WE WILL LEVERAGE OUR UNIQUE SUSTAINABLE VALUE CHAIN
IN EACH CATEGORY TO BUILD SUCCESSFUL BUSINESSES
THAT CONTRIBUTE TO OUR LONG-TERM SUCCESS
TO SUCCEED
OUR CATEGORIES
SUSTAINABLE VALUE CHAIN
ENVIRONMENTPEOPLEENTERPRISE
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ENVIRONMENT
2028 REDUCTIONS PER KGMS:
- 35% less on-farm greenhouse gas (GHG) emissions
- 50% less off-farm GHG emissions
- 20% reduction in on-farm and off-farm water use
- 45% reduction in nitrogen loss to waterways
$1.3 million budgeted for PKE-free incentives in FY19
Installation of New Zealand’s first large scale electrode boiler
at Synlait Dunsandel
Increasing number of certified Lead With Pride™ suppliers,
Australasia’s only internationally accredited ISO/IEC 17065 dairy farm
assurance system
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PEOPLE
HEALTH, SAFETY AND WELLNESS
- Total Recordable Injury Frequency Rate (TRIFR) decreased from
25.1 to 18.1 per million hours worked, a 28% improvement
- Critical Risk Projects to manage health, safety and wellness priorities
throughout organisation
TALENT ATTRACTION + DEVELOPMENT
- Gallup Q12 employee engagement score improved from 31st to 61st
percentile of peer group
DIVERSITY
- Launched Diversity and Inclusion Policy to attract, equip and empower
talented leaders
- Three key appointments to Senior Leadership Team in FY18
- Will continue to build a diverse and inclusive community of great people
throughout Synlait, at all levels of the organisation
- The Policy is available to view on our website
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ENTERPRISE
INVESTMENT IN INNOVATION
- Targeting R+D spend in FY19 equal to 1.5% of revenue
FOOD SAFETY AND QUALITY
- Uphold highest quality and safety standards, the cornerstone of
Synlait’s business
SUSTAINABLE SUPPLY
- Partner with farmers, suppliers and customers who share our philosophy
ACCOUNTABILITY AND TRANSPARENCY
- Aiming to become first NZX-listed B Corp. in 2019
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FY18 CONTRACTED
MILK SUPPLY (kgMS)
Base Supply
A1 protein-free milk
Grass Fed™ Milk*
6,733,010
21,396,720
35,486,722
*20,298,854 kgMS of Lead With Pride™ Milk were contracted in FY18
AUCKLAND
• 35,000 MT infant formula canning capacity
• CNCA and SAMR registration in progress
POKENO
• Plant on schedule for 2019 / 2020 milk season commission
• A1 protein-free and Lead With Pride
TM
milk pools being formed
PALMERSTON NORTH
• R+D staff to grow from seven to 15 by the end of FY19
• Overall R+D spend targeted to reach 1.5% of revenue in FY19
DUNSANDEL
• Advanced Liquid Dairy Packaging Facility on track for March 2019 commission
• Lactoferrin expansion on track for November 2018 commission
OUR GEOGRAPHIC
FOOTPRINT
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SYNLAIT’S INTEGRATED VALUE CHAIN
RESEARCH + CATEGORY
DEVELOPMENT
- Select categories and markets
- Design products
- Innovate production and processes
QUALITY TESTING
LABORATORY
- Zero defects targets
- Test raw materials, finished
products and facilities
- Full quality assurance and
traceability
CUSTOMERS
- Our brand partners
market, promote, and
distribute their products
MANUFACTURING
EXCELLENCE
- High-spec, large-scale plants
- Control all aspects of product quality
- Optimise plant utilisation
REGULATORY
CAPABILITY
- Provide market access for our customers
- Secure regulatory approval for products
CONSUMER
CONSUMER PACKAGING
- Ownership of brand registrations
- Two state-of-the-art canning lines
DIFFERENTIATED
MILK SUPPLY
- Three-year rolling contracts
- Stream differentiated liquid milks
(A1 protein-free milk, Grass Fed
TM
,
Lead With Pride
TM
)

RAW MATERIALS
PROCUREMENT
- Procure high-quality ingredients
- Undertake quality audits of suppliers
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MANUFACTURING EXCELLENCE
CUSTOMERS
HIGH SPECIFICATION SPRAY DRYERS
120,000 MT CAPACITY
D3
D2
DRYER
D1
AMF PLANT
LACTOFERRIN
DRYER
WETMIX KITCHENS
80,000 MT CAPACITY
WETMIX 2
WETMIX 1
WETMIX
CONSUMER PACKAGING
70,000 MT CAPACITY
DUNSANDEL
AUCKLAND
AUCKLAND
CANNING
BASE POWDER
A1 PROTEIN-FREE
MILK
GRASS FED™
LEAD WITH
PRIDE
TM
REGULAR
FARMS
REGULAR
FARMS
A1 PROTEIN-FREE
MILK
LEAD WITH
PRIDE
TM
CONTRACTED FARMS
APPROX. 200
DUNSANDEL
POKENO*
(2019-2020

MILK SEASON)
This diagram shows capacity across our core categories of powders and infant formula. It does not include the conditional acquisition of Talbot Forest Cheese assets or the Advanced Liquid Dairy Packaging Facility
* Not shown in headline capacities
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A PORTFOLIO OF INFANT FORMULA CUSTOMER PARTNERSHIPS
- Registration with State Administration
for Market Regulation (SAMR - the
replacement organisation for CFDA)
received in FY18
- Exclusive supplier of the a2 Milk
Company’s
TM
infant formula to China
and Australasia markets
- Sold in Australia and New Zealand
- Pending U.S. Food and Drug
Administration (FDA) review
- Exclusive supplier of Munchkin’s
100% Grass Fed
TM
infant formula
DIFFERENTIATEDCHINA DOMESTIC
- Five-year supply agreement
signed in February 2018
- SAMR registration
application submitted
- Five-year supply agreement
signed in August 2017
- SAMR registration application
submitted for Akara; e-Akara
to be submitted in 2018
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TO MORROW
CEO’S INITIAL OBSERVATIONS
OUTLOOK - GROWTH AND
CAPABILITIES
F19 OUTLOOK
Synlait Milk Limited October 2018

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PG

14

TO DAY
INITIAL OBSERVATIONS
SYNLAIT IS FAST
SYNLAIT IS STRONG
SYNLAIT IS STRATEGIC

TO DO
WHAT ARE WE TRYING
TO ACHIEVE
WHAT:
- Maintain growth and rapidly diversify
HOW:
- Shore up our existing profit engine whilst
we broaden into new profit pools

TO MORROW
WHAT ARE OUR
CHALLENGES
- Concentration risk
- Focus and implementation risk
- Need for inorganic growth
- Unpredictable environment and
regulatory climate
CEO’S INITIAL OBSERVATIONS
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CURRENT
CURRENT
NEW
NEW
CUSTOMERS
CATEGORIES
1
2
3
4
Core Profit Engine
Adjacent Growth Engine
Expansion Engine
OUTLOOK
1
2
3
4
GROWTH: DEEPER AND BROADER = CHASE PROFIT POOLS
Deepen relationships with existing customers and build
into new categories
Broaden customer base in core categories
Accelerate development of new profit pools with new customers
and categories

CAPABILITIES: LEAPFROG = CREATE LONG TERM VALUE
- Research and development + innovation
- Sustainability as a purpose-led differentiator
- World class quality
- Low-cost manufacture (IWS)
- Continue to differentiate milk supply
- Great place to grow - engagement, talent, strategic capabilities
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- Continued growth in a2MC volumes
- Expect SAMR approval for New Hope’s Akara brand and
Bright Dairy’s Pure Canterbury brand
- Expect future growth in Munchkin’s Grass Fed
TM
ANZ sales
through both domestic and cross-border channels
FY19 OUTLOOK
ACTUALFORECAST
FY16FY17FY18FY19
41,000 - 45,000
18,776
35,580
15,999
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
CONSUMER PACKAGED INFANT FORMULA SALES
MT
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INVESTORS
Clayton Cleek, CFA, Investor Relations Officer
+64 21 916 070
Clayton.Cleek@synlait.com
MEDIA
Dan Walraven, Corporate Affairs Manager
+64 27 836 7532
Daniel.Walraven@synlait.com