Significant investment in major growth projects for Synlait
Synlait Milk Ltd · 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand · +643 373 3000 · www.synlait.com
SYNLAIT MILK LIMITED ANNOUNCEMENT NZX: SML
ASX: SM1
20 MARCH 2019
SIGNIFICANT INVESTMENT IN MAJOR
GROWTH PROJECTS FOR SYNLAIT
- NPAT half year profit of $37.3 million
- Re-confirmed guidance for canned infant formula volumes of 41,000 – 45,000 MT
- Manufacturing efficiencies have supported improved production and sales volumes
- Key growth projects including Synlait Pokeno and our Advanced Liquid Dairy Packaging Facility
remain on track
- New growth opportunities in liquid milk, Talbot Forest Cheese and lactoferrin expansion
- New purpose ‘Doing Milk Differently for a Healthier World’ established
SOLID HALF- YEAR EARNINGS PERFORMANCE
Our HY19 NPAT of $37.3 million is 9.6% lower than the $41.3 million achieved in HY18. This remains a solid
result for the first half of the year, with increased sales volumes achieved across our powders and cream
and lactoferrin businesses. The higher sales volumes were achieved due to our ability to increase
production volumes off the same asset base, a very pleasing result and representative of the efficiencies
we are developing in manufacturing through our Integrated Work Systems (IWS) programme.
While our sales volumes of fully finished infant formula were slightly ahead of HY18, these were delivered
at lower margins. This is a result of the new pricing agreement entered into with The a2 Milk Company™
last July, as well as not having the benefit of the higher margin sales to our China based customers that
we enjoyed in HY18. These brands are awaiting State Administration for Market Regulation (SAMR)
registration.
The HY19 result also benefited from the increased efficiencies of our manufacturing plant. We processed
12.4% more milk than in HY18 into 90,466 Metric Tonnes (MT) of product, a 10.5% increase on FY18. This
also reflected higher sales volumes of our powder and cream products at 56,116 MT (HY18 46,111 MT) and
a higher closing finished goods inventory (HY19 – 44,344 MT vs HY18 35,040 MT)
Synlait Milk Ltd · 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand · +643 373 3000 · www.synlait.com
INVESTING FOR OUR NEXT PHASE OF GROWTH
The first half of FY19 has been characterised by the significant investments we have made to our
manufacturing base across all our key categories. This is part of our focus on supporting the growth of our
customers and diversifying our business. Nearly $200 million of capital expenditure was invested in the six
months to 31 January 2019 as we progressed our four major growth projects.
Second infant processing facility at Pokeno
The build of our new infant-capable manufacturing facility in Pokeno continues to be on track for
commissioning for the 2019 / 2020 milk season. This is a $280 million investment which will allow us to
meet customer demand, whilst also eliminating our single-site risk.
At the same time, we are recruiting new milk suppliers in the area. We remain on track for the start of the
2019 / 2020 milk season and are encouraged by the warm welcome we’ve received from Waikato dairy
farmers.
Accessing the Everyday Dairy market through our Advanced Liquid Dairy Packaging facility and the
conditional acquisition of Talbot Forest Cheese
The build of the Advanced Liquid Dairy Packaging facility in Dunsandel was announced in early FY18 in
conjunction with the Foodstuffs South Island (FSSI) supply agreement. The facility will cost $125 million
and gives Synlait the foundation to explore other liquid milk product opportunities which will utilise the
innovation and flexibility offered by the plant. We are on track for completing the new facility and we’re
excited by the discussions we are having with current and prospective customers.
At the end of 2018 Synlait entered into a conditional agreement to acquire selected Talbot Forest Cheese
assets. The acquisition, which is expected to be in the range of $35 - $40 million, will help us optimise our
value chain and supports our growth strategy. The agreement is structured in two parts and settlement is
expected 1 August 2019, once aspects of the conditional agreement have been met. Synlait will then
assume management and operational control of Talbot Forest Cheese, allowing us to manufacture a
variety of cheese products that complement our existing product portfolio. The acquisition allows us to
optimise our manufacturing assets (especially during peak seasonal flows), access new profit pools, and
aligns with our approach to run high-quality, flexible dairy manufacturing capabilities that can be tailored
to meet customer needs.
Lactoferrin capacity expansion complete
We’ve also just completed our $18 million expansion to our Dunsandel lactoferrin facility which has
doubled our lactoferrin manufacturing capacity. This project was completed on time and on budget. We’re
already noticing growing demand for lactoferrin through external sales and in formulations with our infant
formula customers. Our plant is producing extremely high quality lactoferrin, and we remain excited about
the potential for this business as we look to drive capacity increases in an attractive current market pricing
environment.
Synlait Milk Ltd · 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand · +643 373 3000 · www.synlait.com
BUILDING A STRONG TEAM
We have made a large investment in staffing which will support our next phase of growth. At the end of
HY19 we had 748 employees compared to 597 at the same point in FY18. In particular, we have invested in
the capability required to fill the growing number of roles at our new Pokeno facility and support our move
into the liquid milk market. We’ve also invested in our technical expertise to enable product and customer
development, including at our Research and Development Centre at Palmerston North. Our increased
spend on external consultancy has also focused on supporting our product and customer development.
As part of our commitment to looking after our people, we launched our Diversity and Inclusion working
group at the end of 2018. The group aims to bring to life diversity and inclusion in our business. A special
sub-group to support women leaders has also been launched.
‘DOING MILK DIFFERENTLY FOR A HEALTHIER WORLD’
We launched our new purpose and brand identity in November 2018, which speaks to our sustainability
ambitions. ‘Doing Milk Differently for a Healthier World’ describes our forward- thinking and innovative
attitude, as well as our aim for Synlait to contribute to a healthier planet, and healthier communities.
We have always brought a disruptive attitude to our industry and we’ll continue doing that into the future.
We have some clear goals around our strength in being a catalyst for change. We want to create more
value for New Zealand.
Our new purpose is helping to clarify our ambition and strategic focus and reflects how we will continue to
succeed through leveraging our unique sustainable value chain across the environment, our people and
enterprise. These principles will be applied to each category to build successful relationships that
contribute to our long-term success.
We continue to integrate our sustainable supply chain principles into our core business.
In June last year, Synlait announced its renewed commitment to sustainability. Since then, we’ve
continued to progress these initiatives in a range of ways.
Our farming programme Lead With Pride™ was given a boost in June 2018 under the new sustainability
strategy. Higher incentive payments have led to many more of our farmers moving towards certification,
with our Lead With Pride™ accredited milk supply increasing 17% on FY18 volume.
The programme recognises and rewards milk suppliers who achieve dairy farming best practice. We
introduced greenhouse gas (GHG) emissions targets and incentives for farmers with palm kernel expeller
(PKE) free farms in June.
Synlait wants to achieve on-farm reduction of GHGs by 35% per kgMS, reduce water consumption by 20%
per kgMS and reduce nitrogen loss by 45% by 2028. As part of this work we have been investigating
methane reduction and will pilot an on-farm methane inhibitor later this year.
Synlait Milk Ltd · 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand · +643 373 3000 · www.synlait.com
We also have targets for our manufacturing sites including reductions of GHGs and water consumption by
50% and 20% per kgMS respectively.
A major step towards reducing off-farm GHGs by 2028 was made with the commissioning of New
Zealand’s first large-scale electrode boiler earlier this month at Synlait Dunsandel. The boiler uses
electricity rather than coal in the new Advanced Liquid Dairy Packaging Facility. Over a ten-year period the
electrode boiler’s estimated emissions savings are roughly equal to the emissions which would be
produced by 9,600 households.
The installation was undertaken with the help of Orion, who delivered infrastructure upgrades to the
Dunsandel electricity network to provide the necessary power for the electrode boiler.
Synlait has pledged to not build any more coal infrastructure, and we’re looking at ways to address
existing coal use.
In January we lodged our first submission in the certification process to become a Certified B Corporation.
B Corp is a global movement which will measure us objectively to an international community standard.
There are currently 16 Certified B Corporations in New Zealand, and most are small to medium enterprises
(SMEs). We are aiming to be the first large scale, NZX-listed business to join this pioneering cohort.
OUR MILK SUPPLY
We continue to be supported by our Canterbury milk suppliers, and we’re excited to be welcoming our
new Waikato farmers into the fold. As previously mentioned, we’re confident in our ability to attract North
Island milk, and we’re on-track for our 2019 / 2020 milk season.
Environmental challenges, Mycoplasma bovis, and a shifting attitude towards dairy have all contributed to
a somewhat turbulent year for dairy farming. But many of the difficulties we face also provide an
opportunity to further add value. We know what current best practice looks like and so do our farmers.
We now have over 60 farmers Certified as Lead With Pride™. We are also working alongside Munchkin to
make the most of New Zealand’s natural grass-fed system, and we have a well-established a1 protein-free
programme. All three of these special milks programmes enable value to flow back to farmers via incentive
payments over and above the base milk price.
This means the value is being added behind the farm gate and farmers are being rewarded for creating
this additional value.
The demand for dairy remains strong with governments around the world encouraging dairy as a natural
source of good nutrition. Increasing wealth in developing countries continues to drive increased demand.
New Zealand dairy products have a great reputation globally for taste, quality and safety. There is plenty
of opportunity for us to further differentiate and add value.
Synlait Milk Ltd · 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand · +643 373 3000 · www.synlait.com
REGULATORY UPDATE
In January we obtained registration renewal of our Dunsandel plant with the General Administration of
Customs of the People’s Republic of China (GACC) which allows us to continue to export canned infant
formula to China. Synlait Auckland has achieved GACC dairy registration and is progressing with the
GACC infant nutrition process.
Whilst it is difficult to be definitive on timelines, we expect to obtain State Administration for Market
Regulation (SAMR) registration for New Hope’s Akara and E-Akara brands and Bright Dairy’s Pure
Canterbury brand by the end of 2019. The applications have been lodged with SAMR and we’re working
with New Hope and Bright Dairy on the application process.
STRONG GROWTH EXPECTED IN THE SECOND HALF OF FY19
We remain on track for our full year canned infant formula (IFC) volume guidance at between 41,000 –
45,000 MT, with significantly higher volumes forecast to be delivered in the second half of FY19 compared
to the second half of FY18, which saw only an 11% uplift on the first half.
The volume growth in the second half of FY19 is driven by strong growth in The a2 Milk Company’s™
(a2MC) Platinum® brand of infant formula. We maintain our outlook that full year profitability is expected to
increase in FY19, but not at the same rate as FY18.
A copy of Synlait’s HY19 Interim Report and accompanying presentation can be found at
https://www.synlait.com/news/
ENDS
For more information about Synlait visit www.synlait.com
or contact:
Jessica Thorn
Senior Communications Advisor, Synlait Milk
P: +64 3 373 3353
E: jessica.thorn@synlait.com
---
INTERIM REPORT 2019
OUR YEAR IN THE MAKING
DOING MILK DIFFERENTLY
PRODUCT INNOVATION
Continue to develop new growth opportunities
with the investments in liquid milk, Talbot Forest
Cheese, and doubling our lactoferrin capacity
SUSTAINING REVENUE
GROWING OUR CUSTOMER
RELATIONSHIPS
Key focus on meeting our commitments to
Foodstuffs South Island through the Advanced
Liquid Dairy Packaging Facility
$37.3m
NPAT H1 FY19
FOR A HEALTHIER WORLD
VALUE CHAIN IMPROVEMENTS
Efficiencies achieved in manufacturing have
supported improved sales volumes across our
powders and cream, canned infant formula and
lactoferrin businesses
ENVIRONMENT
Commenced a number of climate change,
mitigation of water degradation, circular economy,
and environmental and animal welfare initiatives
BEST WORK PLACE
Will continue to build a diverse and inclusive
community of great people throughout Synlait,
at all levels of the organisation
CONTENTS
TO SUCCEED
WE WILL LEVERAGE OUR
UNIQUE SUSTAINABLE
VALUE CHAIN IN EACH
CATEGORY TO BUILD
SUCCESSFUL BUSINESSES
THAT CONTRIBUTE TO OUR
LONG-TERM SUCCESS
CONTENTSLEADERSHIP UPDATE | PG 6FINANCIAL STATEMENTS | PG 13
OUR CATEGORIES
OUR SUSTAINABLE VALUE CHAIN
EnvironmentPeopleEnterprise
Infant NutritionEveryday Dairy
Adult Nutrition
Ingredients
LEADERSHIP UPDATE
GRAEME MILNE
CHAIRMAN
6
Synlait Milk Limited Interim Report 2019
LEADERSHIP UPDATE
LEON CLEMENT
CHIEF EXECUTIVE OFFICER
7
Synlait Milk Limited Interim Report 2019
When we look back...
“WE WILL FEEL PROUD
OF THE BOLD STANCE
WE HAVE TAKEN,
THE GLOBAL DIFFERENCE
WE HAVE MADE AND
THE SUSTAINABLE
DIVERSIFIED COMPANY
WE HAVE BUILT
TOGETHER”
Synlait Milk Limited Interim Report 2019
8
HY19 OVERVIEW
-N PAT half year profit of $37.3 million
-Re-confirmed guidance for canned
infant formula volumes of 41,000 –
45,000 MT
-Manufacturing efficiencies have
supported improved production
and sales volumes
-Key growth projects including
Synlait Pokeno and our Advanced
Liquid Dairy Packaging Facility
remain on track
-New growth opportunities in
liquid milk, Talbot Forest Cheese
and lactoferrin expansion
-New purpose ‘Doing Milk Differently
for a Healthier World’ established
SOLID HALF-YEAR EARNINGS
PERFORMANCE
Our HY19 NPAT of $37.3 million is 9.7% lower than the
$41.3 million achieved in HY18. This remains a solid result for
the first half of the year, with increased sales volumes achieved
across our powders and cream and lactoferrin businesses.
HIGHER SALES VOLUMES WERE
ACHIEVED DUE TO OUR ABILITY
TO INCREASE PRODUCTION
VOLUMES OFF THE SAME ASSET
BASE, A VERY PLEASING RESULT
AND REPRESENTATIVE OF THE
EFFICIENCIES WE ARE DEVELOPING
IN MANUFACTURING THROUGH OUR
INTEGRATED WORK SYSTEMS (IWS)
PROGRAMME.
While our sales volumes of fully finished infant formula were
slightly ahead of HY18, these were delivered at lower margins.
This as a result of new pricing arrangements with major
customers, as well as not having the benefit of the higher
margin sales to our China based customers that we enjoyed
in HY18. These brands are awaiting registration with the State
Administration for Market Regulation (SAMR) in China.
The HY19 result also benefited from the increased efficiencies
of our manufacturing plant. We processed 12.4% more milk than
in HY18 into 90,495 Metric Tonnes (MT) of product, a 10.5%
increase on FY18. This also reflected higher sales volumes of
our powder and cream products at 56,116 MT (HY18 44,435 MT)
and a higher closing finished goods inventory (HY19 44,344 MT
versus HY18 35,040 MT)
LEADERSHIP UPDATE
Graeme Milne and Leon Clement
Synlait Milk Limited Interim Report 2019
9
INVESTING FOR OUR NEXT
PHASE OF GROWTH
The first half of FY19 has been characterised by the significant
investments we have made to our manufacturing base across
all our key categories. This is part of our focus on supporting
the growth of our customers and diversifying our business.
Nearly $200 million of capital expenditure was invested in the
six months to 31 January 2019 as we progressed our four major
growth projects.
Second infant processing facility at Pokeno
The build of our new infant-capable manufacturing facility in
Pokeno continues to be on track for commissioning for the
2019 / 2020 milk season. This is a $260 million investment
which will allow us to meet customer demand, whilst also
eliminating our single-site risk.
At the same time, we are recruiting new milk suppliers in the
area. We remain on track for the start of the 2019 / 2020 milk
season and are encouraged by the warm welcome we’ve
received from Waikato dairy farmers.
Accessing the Everyday Dairy market through our Advanced
Liquid Dairy Packaging facility and the conditional acquisition
of Talbot Forest Cheese
The build of the Advanced Liquid Dairy Packaging facility in
Dunsandel was announced in early FY18 in conjunction with
the Foodstuffs South Island (FSSI) supply agreement. The
facility will cost $125 million and gives Synlait the foundation
to explore other liquid milk product opportunities which will
utilise the innovation and flexibility offered by the plant.
We are on track for completing the new facility and we’re
excited by the discussions we are having with current and
prospective customers.
At the end of 2018 Synlait entered into a conditional
agreement to acquire selected Talbot Forest Cheese assets.
The acquisition, which is expected to be in the range of $35 -
$40 million, will help us optimise our value chain and supports
our growth strategy. The agreement is structured in two parts
and settlement is expected 1 August 2019, once aspects of
the conditional agreement have been met. Synlait will then
assume management and operational control of Talbot Forest
Cheese, allowing us to manufacture a variety of cheese
products that complement our existing product portfolio. The
acquisition allows us to optimise our manufacturing assets
(especially during peak seasonal flows), access new profit
pools, and aligns with our approach to run high-quality, flexible
dairy manufacturing capabilities that can be tailored to meet
customer needs.
Lactoferrin capacity expansion complete
We’ve also just completed our $18 million expansion to our
Dunsandel lactoferrin facility which has doubled our lactoferrin
manufacturing capacity. This project was completed on time
and on budget. We’re already noticing growing demand for
lactoferrin through external sales and in formulations with our
infant formula customers.
OUR PLANT IS PRODUCING
EXTREMELY HIGH QUALITY
LACTOFERRIN, AND WE REMAIN
EXCITED ABOUT THE POTENTIAL
FOR THIS BUSINESS AS WE LOOK
TO DRIVE CAPACITY INCREASES IN
AN ATTRACTIVE CURRENT MARKET
PRICING ENVIRONMENT.
BUILDING A STRONG TEAM
We have made a large investment in staffing which will
support our next phase of growth. At the end of HY19 we had
748 employees compared to 597 at the same point in FY18.
In particular, we have invested in the capability required to
fill the growing number of roles at our new Pokeno facility,
and support our move into the liquid milk market. We’ve
also invested in our technical expertise to enable product
and customer development, including at our Research and
Development Centre at Palmerston North. Our increased spend
on external consultancy has also focused on supporting our
product and customer development.
As part of our commitment to looking after our people, we
launched our Diversity and Inclusion working group at the end
of 2018. The group aims to bring to life diversity and inclusion
in our business. A special sub-group to support women leaders
has also been launched.
LEADERSHIP UPDATE CONTINUED
Graeme Milne and Leon Clement
Synlait Milk Limited Interim Report 2019
10
‘DOING MI
LK DIFFERENTLY
FOR A HEALTHIER WORLD’
We launched ou
r new purpose and brand identity in November
2018, which speaks to our sustainability ambitions. ‘Doing
Milk Differently for a Healthier World’ describes our forward-
thinking and innovative attitude, as well as our aim for Synlait
to contribute to a healthier planet, and healthier communities.
We have always
brought a disruptive attitude to our industry
and we’ll continue doing that into the future.
WE
HAVE SOME CLEAR GOALS
AROUND OUR STRENGTH IN BEING
A CATALYST FOR CHANGE.
WE WANT TO CREATE MORE VALUE
FOR NEW ZEALAND.
Our new purpose
is helping to clarify our ambition and strategic
focus, and reflects how we will continue to succeed through
leveraging our unique sustainable value chain across the
environment, our people and enterprise. These principles will
be applied to each category to build successful relationships
that contribute to our long-term success.
WE CONTINUE TO INTEGRATE
OUR SUSTAINABLE SUPPLY CHAIN
PRINCIPLES INTO OUR CORE
BUSINESS.
I
n June last year, Synlait announced its renewed commitment
to sustainability. Since then, we’ve continued to progress these
initiatives in a range of ways.
Our farming programme Lead With Pride™ was given a boost
in June 2018 under the new sustainability strategy. Higher
incentive payments have led to many more of our farmers
moving towards certification, with our Lead With Pride™ certified
milk supply increasing to over 60 farms.
The programme recognises and rewards milk suppliers who
achieve dairy farming best practice. We introduced greenhouse
gas (GHG) emissions targets and incentives for farmers with
palm kernel expeller (PKE) free farms in June.
Synlait wants to achieve on-farm reduction of GHGs by 35% per
kgMS, reduce water consumption by 20% per kgMS and reduce
nitrogen loss by 45% by 2028. As part of this work we have
been investigating methane reduction and will pilot an on-farm
methane inhibitor later this year.
We also have targets for our manufacturing sites including
reductions of GHGs and water consumption by 50% and 20%
per kgMS respectively.
A major step towards reducing off-farm GHGs by 2028 was
made with the commissioning of New Zealand’s first large-scale
electrode boiler earlier this month at Synlait Dunsandel. The
boiler uses electricity rather than coal in the new Advanced
Liquid Dairy Packaging Facility. Over a ten-year period the
electrode boiler’s estimated emissions savings are roughly
equal to the emissions which would be produced by 9,600
households.
The installation was undertaken with the help of Orion, who
delivered infrastructure upgrades to the Dunsandel electricity
network to provide the necessary power for the electrode boiler.
SYNLAIT HAS PLEDGED TO
NOT BUILD ANY MORE COAL
INFRASTRUCTURE, AND WE’RE
LOOKING AT WAYS TO ADDRESS
EXISTING COAL USE.
In January we lodged our first submission in the certification
process to become a Certified B Corporation. B Corp is a global
movement which will measure us objectively to an international
community standard. There are currently 16 Certified B
Corporations in New Zealand, and most are small to medium
enterprises (SMEs). We are aiming to be the first large scale,
NZX-listed business to join this pioneering cohort.
LEADERSHIP UPDATE CONTINUED
Graeme Milne and Leon Clement
Synlait Milk Limited Interim Report 2019
11
LEADERSHIP UPDATE CONTINUED
Graeme Milne and Leon Clement
OUR MILK SUPPLY
We continue to be supported by our Canterbury milk suppliers,
and we’re excited to be welcoming our new Waikato farmers
into the fold. As previously mentioned, we’re confident in our
ability to attract North Island milk, and we’re on-track for our
2019 / 2020 milk season.
Environmental challenges, Mycoplasma bovis, and a shifting
attitude towards dairy have all contributed to a somewhat
turbulent year for dairy farming. But many of the difficulties we
face also provide an opportunity to further add value. We know
what current best practice looks like and so do our farmers.
We now have over 60 farmers Certified as Lead With Pride™.
We are also working alongside Munchkin to make the most
of New Zealand’s natural grass-fed system, and we have a
well-established a1 protein-free programme. All three of these
special milks programmes enable value to flow back to farmers
via incentive payments over and above the base milk price.
This means the value is being added behind the farm gate and
farmers are being rewarded for creating this additional value.
The demand for dairy remains strong with governments around
the world encouraging dairy as a natural source of good
nutrition. Increasing wealth in developing countries continues
to drive increased demand.
NEW ZEALAND DAIRY PRODUCTS
HAVE A GREAT REPUTATION
GLOBALLY FOR TASTE, QUALITY
AND SAFETY. THERE IS PLENTY OF
OPPORTUNITY FOR US TO FURTHER
DIFFERENTIATE AND ADD VALUE.
REGU L ATORY U PDATE
In January we obtained registration renewal of our Dunsandel
plant with the General Administration of Customs of the
People’s Republic of China (GACC) which allows us to continue
to export canned infant formula to China.
SYNLAIT AUCKLAND HAS
ACHIEVED GACC GENERAL
DAIRY REGISTRATION AND IS
PROGRESSING WITH THE GACC
INFANT NUTRITION PROCESS.
Whilst it is difficult to be definitive on timelines, we expect
to obtain State Administration for Market Regulation (SAMR)
registration for New Hope’s Akara and E-Akara brands and
Bright Dairy’s Pure Canterbury brand by the end of 2019. The
applications have been lodged with SAMR and we’re working
with New Hope and Bright Dairy on the application process.
STRONG GROWTH EXPECTED
IN THE SECOND HALF OF FY19
We remain on track for our full year canned infant formula
(IFC) volume guidance at between 41,000 – 45,000 MT, with
significantly higher volumes forecast to be delivered in the
second half of FY19 compared to the second half of FY18, which
saw only an 11% uplift on the first half.
The volume growth in the second half of FY19 is driven by
strong growth in The a2 Milk Company’s™ (a2MC) infant formula
products. We maintain our outlook that full year profitability is
expected to increase in FY19, but not at the same rate as FY18.
Graeme Milne
CHAIRMAN
Leon Clement
CHIEF EXECUTIVE OFFICER
Synlait Milk Limited Interim Report 2019
12
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
HY19
FINANCIAL
STATEMENTS
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
1313
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
CONTENTS PAGE
Directors’ responsibility statement 15
Income statement 16
Statement of comprehensive income 17
Statement of changes in equity 18
Statement of financial position 19
Statement of cash flows 20
Notes to the condensed interim financial statements 21
1 Reporting entity 21
2 Basis of preparation of six monthly financial report 21
3 Revenue recognition 23
4 Segment information 23
5 Expenses 24
6 Reconciliation of profit after income tax to net cash outflow from operating activities 25
7 Trade and other receivables 25
8 Inventories 26
9 Current assets – Other current assets 26
10 Property, plant and equipment 26
11 Intangible assets 26
12 Loans and borrowings 27
13 Share capital 27
14 Financial instruments 27
15 Related party transactions 28
16 Contingencies 29
17 Commitments 29
18 Events occurring after the reporting period 29
Independent review report 30
Directory 31
SYNLAIT MILK LIMITED CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
14
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors are pleased to present the condensed interim financial statements for Synlait Milk Limited and its subsidiaries, Synlait
Milk Finance Limited, The New Zealand Dairy Company Limited, and Eighty Nine Richard Pearse Drive Limited (together “the Group”)
as set out on pages 16 to 30 for the six months ended 31 January 2019.
The Directors are responsible for ensuring that the condensed interim financial statements present fairly the financial position of the
Group as at 31 January 2019 and the financial performance and cash flows for the six months ended on that date.
The Directors consider that the condensed interim financial statements of the Group have been prepared using appropriate
accounting policies, consistently applied and supported by reasonable judgements and estimates and that all relevant financial
reporting and accounting standards have been followed.
The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination of
the financial position of the Group and facilitate compliance of the financial statements with the Financial Markets Conduct Act 2013.
For and on behalf of the Board.
DIRECTORS’ DECLARATION
31 January 2019
Willem (Bill) Jan Roest
INDEPENDENT DIRECTOR
19 March 2019
Graeme Milne
CHAIRMAN
19 March 2019
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
15
INCOME STATEMENT
For the six months ended 31 January 2019
The accompanying notes form part of and are to be read in conjunction with these financial statements.
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
Notes$’000$’000$’000
Revenue3470,950439,316879,001
Cost of sales5(385,061)(353,307)(712,533)
Gross profit85,889
86,009166,468
Other income3337326430
Share of (loss)/profit from associates(580)189426
Sales and distribution expenses5(12,410)(8,574)(20,603)
Administrative and operating expenses5(16,782)(15,873)(33,636)
Earnings before net finance costs and income tax 56,45462,077113,085
Finance expenses(4,097)(4,497)(8,969)
Finance income7415361,023
Loss on derecognition of financial assets(755)(591)(1,329)
Net finance costs(4,111)
(4,552)(9,275)
Profit before income tax52,34357,525103,810
Income tax expense(15,025)(16,208)(29,257)
Net profit after tax for the period37,318
41,31774,553
Earnings per share
Basic and diluted earnings per share (cents)20.8223.0541.60
Comparative numbers have been restated due to a voluntary change in accounting policy. Refer to the statement of accounting policies.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
16
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
Notes$’000$’000$’000
Profit for the period37,31841,31774,553
Items that may be reclassified subsequently to profit and loss
Effective portion of changes in fair value of cash flow hedges14,5291,043(38,081)
Income tax on other comprehensive income(4,068)(292)10,663
Total items that may be reclassified subsequently to profit and loss10,461751(27,418)
Other comprehensive income for the period, net of tax10,461
751(27,418)
Total comprehensive income for the year47,779
42,06847,135
Comparative numbers have been restated due to a voluntary change in accounting policy. Refer to the statement of accounting policies.
STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 January 2019
The accompanying notes form part of and are to be read in conjunction with these financial statements.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
17
Share
capital
Unaudited
Employee
benefits
reserve
Unaudited
Cash flow
hedge
reserve
Unaudited
Retained
earnings
Unaudited
Total
equity
Unaudited
Notes$’000$’000$’000$’000$’000
Equity as at 1 August 2017268,0743616,62291,984376,716
Profit or loss for the period–––41,31741,317
Other comprehensive income
Effective portion of changes in fair
value of cash flow hedges
––668–668
Movement in time value hedge reserve––375–375
Income tax on other comprehensive income––(292)–(292)
Total other comprehensive income
––751–751
Total comprehensive income
––75141,31742,068
Employee benefits reserve–238––238
Total contributions by and distributions
to owners
–238––238
Equity as at 31 January 2018
268,07427417,373133,301419,022
Equity as at 1 August 2018268,074930(10,796)166,536424,744
Profit or loss for the period–––37,31837,318
Other comprehensive income
Effective portion of changes in fair
value of cash flow hedges
––14,383–14,383
Movement in time value hedge reserve––146–146
Income tax on other comprehensive income––(4,068)–(4,068)
Total other comprehensive income ––10,461–10,461
Total comprehensive income
––10,46137,31847,779
Employee benefits reserve–293––293
Total contributions by and distributions
to owners
–293––293
Equity as at 31 January 2019
268,0741,223(335)203,854472,816
Comparative numbers have been restated due to a voluntary change in accounting policy. Refer to the statement of accounting policies.
STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 January 2019
The accompanying notes form part of and are to be read in conjunction with these financial statements.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
18
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
Notes$’000$’000$’000
Current assets
Cash and cash equivalents13,49388,87832,129
Trade and other receivables745,19147,05547,145
Intangible assets114,1701702,951
Goods and services tax refundable4,8514,5996,536
Income accruals and prepayments2,4162,0814,340
Inventories8234,879170,071145,404
Derivative financial instruments147,14019,2792,906
Other current assets919,738–1,375
Total current assets331,878332,133242,786
Non-current assets
Property, plant and equipment10698,408480,009537,669
Intangible assets1110,4355,5058,100
Goodwill3,6433,6433,643
Other investments110453690
Derivative financial instruments144,90311,329793
Total non-current assets717,499500,939550,895
Total assets1,049,377833,072793,681
Current liabilities
Loans and borrowings12131,09954,94449,321
Trade and other payables193,458204,013152,199
Current tax liabilities40,80629,77427,391
Derivative financial instruments147,2343,6097,783
Total current liabilities372,597292,340236,694
Non-current liabilities
Loans and borrowings12169,29183,66797,065
Deferred tax liabilities29,95834,10624,364
Derivative financial instruments144,7153,93710,814
Total non-current liabilities203,964121,710132,243
Total liabilities576,561414,050368,937
Equity
Share capital13268,074268,074268,074
Reserves88717,647(9,866)
Retained earnings203,855133,301166,536
Total equity attributable to equity holders of the Group472,816419,022424,744
Total equity and liabilities1,049,377833,072793,681
Comparative numbers have been restated due to a voluntary change in accounting policy. Refer to the statement of accounting policies.
STATEMENT OF FINANCIAL POSITION
As at 31 January 2019
The accompanying notes form part of and are to be read in conjunction with these financial statements.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
19
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
Notes$’000$’000$’000
Cash flows from operating activities
Cash receipts from customers484,155470,931893,618
Cash paid for milk purchased(299,317)(268,216)(494,695)
Cash paid to other creditors and employees(155,065)(128,215)(285,163)
Net movement in goods and services tax 1,684481(1,456)
Income tax (payments) / refunds––(13,914)
Net cash inflow from operating activities631,457
74,98198,390
Cash flows from investing activities
Interest received7415361,023
Acquisition of property, plant and equipment(174,635)(34,492)(110,416)
Proceeds from sale of property, plant and equipment8–(168)
Other investments - Talbot(17,238)––
Acquisition of intangible assets (4,790)(3,175)(9,873)
Net cash (outflow) from investing activities(195,914)
(37,131)(119,434)
Cash flows from financing activities
Drawdown of borrowings 72,300–13,700
Net movement in working capital and trade finance facilities81,778(17,504)(23,126)
Interest paid(8,257)(5,295)(11,228)
Net cash inflow / (outflow) from financing activities145,821
(22,799)(20,654)
Net (decrease) / increase in cash and cash equivalents(18,636)
15,051(41,698)
Cash and cash equivalents at the beginning of the period32,12973,82773,827
Cash and cash equivalents at end of the period13,493
88,87832,129
STATEMENT OF CASH FLOWS
For the six months ended 31 January 2019
The accompanying notes form part of and are to be read in conjunction with these financial statements.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
20
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
1 REPORTING ENTITY
The consolidated condensed interim financial statements
presented are those of the Group, including Synlait Milk
Limited and its subsidiaries Synlait Milk Finance Limited,
The New Zealand Dairy Company Limited, and Eighty Nine
Richard Pearse Drive Limited.
Synlait Milk Limited is primarily involved in the manufacture and
sale of dairy products.
The parent company, Synlait Milk Limited, is a profit-oriented
entity, domiciled in New Zealand, registered under the
Companies Act 1993 and listed on the New Zealand Stock
Exchange and the Australian Securities Exchange. Synlait Milk
Limited is a FMC reporting entity under the Financial Market
Conducts Act 2013 and its financial statements comply with
that Act.
2 BASIS OF PREPARATION OF SIX MONTHLY
FINANCIAL REPORT
The unaudited consolidated condensed interim financial
statements have been prepared in accordance with Generally
Accepted Accounting Practice (NZ GAAP) as appropriate for
interim financial statements. They comply with International
Accounting Standard 34 (IAS 34) and New Zealand equivalent
to International Accounting Standard 34 (NZ IAS 34) Interim
Financial Reporting and other applicable financial reporting
standards appropriate for profit oriented entities.
Synlait Milk Limited is subject to seasonal fluctuations which
have an impact on both revenue and production levels due to
northern hemisphere dairy market demand and the dairy milking
season. Synlait Milk Limited recognises this is the nature of the
industry and plans and manages the business accordingly.
Items included in the condensed interim financial statements
of the Group are measured using the currency of the primary
economic environment in which the entity operates (‘the
functional currency’). The financial statements are presented
in New Zealand Dollars ($), which is the Group’s functional
currency and are rounded to the nearest thousand ($000).
There has been two significant changes in accounting policies
during the current period. NZ IFRS 15 Revenue from Contracts
with Customers and NZ IFRS 9 (2014) Financial Instruments
have been adopted from 1 August 2018. Apart from the
impact of these two standards, the same accounting policies
and methods of computation are followed in these financial
statements as the most recent annual financial statements for
the year ended 31 July 2018.
Milk accrual
At interim reporting date, the milk accrual is a key management
estimate. The milk accrual represents the amount the Group
is forecasting to pay its suppliers for the current year less
advance payments made during the period. The Group’s policy
is to value its inventory using the weighted average monthly
milk price necessary to achieve the Group’s forecast annual
milk price for the season. Managements’ forecast of the milk
price for the season is the basis of the calculation of the milk
accrual and at interim reporting date requires judgement from
management. Key assumptions in the calculation of the forecast
annual milk price for the season include dairy commodity prices,
on-farm milk composition, sales and production curve, annual
foreign exchange conversion rate and other conversion costs.
(a) Changes in Accounting Policies
The Group adopted a policy of revaluing its property, plant
and equipment in 2009 with the first revaluation applied with
an effective date of 31 July 2012. The Group has relied upon
independent valuations of such assets for determining fair
value. As dairy processing assets are specialised in nature
and there is a limited market for trading them in New Zealand
revaluations have been prepared on a depreciated
replacement cost basis to determine the fair market value.
During the year ended 31 July 2018, the Group elected to
make a voluntary change in accounting policy in relation to
the measurement basis for property, plant, and equipment
and move to a cost basis as it is reliable and more relevant.
The cost basis is considered a reliable basis for measurement
of property, plant, and equipment as the Group has maintained
its fixed asset register with comprehensive records of the cost
and accumulated depreciation of all assets. Cost will become
increasingly relevant as the Group continues to expand into
new business segments in multiple geographical locations.
Cost aligns with both local and global dairy industry practice
for similar long lived core operating assets. Cost also aligns
with the policy of the Group’s largest shareholder, Bright Dairy
& Food Co., Ltd.
The change in accounting policy has been applied
retrospectively to the year ended 31 July 2012 which is the
effective date of the first revaluation the Group applied to its
property, plant, and equipment. The Group has maintained
detailed cost records which have allowed for property, plant,
and equipment to be restated at actual historical cost less
subsequent accumulated depreciation in each of the previous
fiscal years dating back to 31 July 2012.
For further information, please refer to the Group’s FY18 Annual
Report available on the Group’s website.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
21
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
The change in accounting policy has had the following impacts on the prior years presented in the financial statements:
31 January
2018
31 January
2017
31 January
2016
31 January
2015
31 January
2014
31 January
2013
31 January
2012
$’000$’000$’000$’000$’000$’000$’000
Decrease in depreciation908908908300300300–
Increase in income tax expense(254)(254)(254)(84)(84)(84)–
Increase in profit for the year654
654654216216216–
Decrease in property, plant and
equipment
(21,529)(23,346)(25,162)(9,560)(10,159)(10,758)–
Decrease in deferred tax5,8166,3256,8332,6292,7972,964–
Decrease in asset revaluation
reserve
(20,276)
(20,276)(20,276)(8,008)(8,008)(8,008)–
31 January
2018
Unaudited
31 January
2017
Unaudited
31 January
2016
Unaudited
31 January
2015
Unaudited
31 January
2014
Unaudited
31 January
2013
Unaudited
31 January
2012
Unaudited
$$$$$$$
Increase in basic and diluted
earnings per share ($)
0.004
0.0040.0040.0020.0020.0020.000
(b) Revenue recognition
NZ IFRS 15 establishes a single comprehensive revenue recognition model that applies to revenue arising from contracts with
customers across all industries. The Group adopted NZ IFRS 15 from 1 August 2018 and applied the new standard on a modified
retrospective basis, which means no adjustments are required for comparative periods. In line with management expectation, the
new standard has had an immaterial impact on the Group and no adjustments were required. The Group will continue to monitor the
impact of this standard.
(c) Financial Instruments
NZ IFRS 9 establishes the principles for hedge accounting measurement, classification and impairment of financial assets. The
Group has previously adopted NZ IFRS 9 (2013) effective from 1 August 2014. NZ IFRS 9 (2014) is the final replacement of IAS 39
and consolidates previous issuances of NZ IFRS 9. The Group adopted NZ IFRS 9 (2014) from 1 August 2018 and applied the new
standard on a retrospective basis. The Group adopted the simplified approach to recognise lifetime expected credit losses for
financial assets as required or permitted by NZ IFRS 9 (2014). During the period, an impairment loss of $0.06m was recognised. In
line with management expectation, the new standard has not had a material impact for the Group.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
22
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
3 REVENUE RECOGNITION
Sales of goods
The Group manufactures and sells a range of milk powder and milk powder related products to customers.
Revenue from contracts with customers is recognised when the control of the goods has been transferred to customers, being
at the point when the goods are delivered. Delivery of goods is completed (i.e. the performance obligation is fulfilled) when the
goods have been delivered pursuant to the terms of the specific contract agreed with the customer and the risks associated with
ownership have been transferred to the customer.
Revenue is measured according to the contracted price agreed with customers, which represents fair value of the consideration
received or receivable, net of returns, discounts and allowances. Revenue is only recognised to the extent that it is highly probable
that a significant reversal will not occur. The payment terms vary depending on the individual contracts. No deemed financing
components are present as there are no significant timing differences between the payment terms and revenue recognition.
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
$’000$’000$’000
Dairy products470,950439,316879,001
Other sundry income337326430
471,287
439,642879,431
4 SEGMENT INFORMATION
The Group currently operates in one industry, being the manufacture and sale of milk powder and milk powder related products.
The Board makes resource allocation decisions based on expected cash flows and results of the Group’s operations as a whole and
the Group therefore has one segment.
Although the Group sells to many different countries, the Group operates in one principal geographical area being New Zealand.
Revenues of approximately 64% are derived from the top three external customers (31 January 2018: 68%, 31 July 2018: 69%).
The proportion of sales revenue by geographical area is summarised below:
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
China11%11%8%
Rest of Asia28%21%24%
Middle East and Africa8%11%9%
New Zealand29%32%30%
Australia22%22%26%
Rest of World2%4%3%
Total100%
100%100%
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
23
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
5 EXPENSES
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
Notes$’000$’000$’000
The following items of expenditure are included in cost of sales
Depreciation and amortisation12,05910,51922,354
Employee benefit expense21,99020,06742,948
(Decrease) / increase in inventory provision8(4,162)2,717393
Increase / (decrease) in onerous contracts provision81,7931,116(12)
The following items of expenditure are included in sales and distribution
Depreciation and amortisation7657751,640
Employee benefit expense4,9553,9138,964
Rent1,6359432,450
Product and regulatory testing47019280
Sales and marketing792291949
Consultancy5142451,128
The following items of expenditure are included in administrative and operating
Depreciation and amortisation8637491,562
Employee benefit expense8,6878,06717,141
Directors fees344288601
Share based payments expense331238588
Across the business, there has been an increase in employee benefit expenditure. The increase for sales and distribution is driven
by the significant investment into the Categories team, and Innovation and Technical Services team, particularly due to research and
development, and continuous improvement. Administrative and operating employee benefit expenditure has increased primarily to
support the business’ continued growth and for cost of sales the increase predominantly relates to the new liquid milk plant, which is
due for commissioning in March 2019.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
24
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
6 RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
$’000$’000$’000
Profit for the period37,31841,31774,553
Non-cash and non-operating items:
Depreciation and amortisation of non-current assets13,68712,04325,556
(Loss) / Gain on sale of fixed assets(8)3168
Write off intangible assets––175
Share of loss / (profit) from associate580(189)(426)
Non-cash share based payments expense331238588
Interest costs classified as financing cash flow4,1544,4979,001
Interest received classified as investing cash flow(741)(536)(1,023)
Loss on derecognition of financial assets6985911,297
Deferred tax1,4873281,846
(Loss) / gain on derivative financial instruments(463)1,487323
Movements in working capital:
Decrease in trade and other receivables1,95331,97431,884
Decrease / (increase) in income accruals and prepayments1,924781(1,477)
(Increase) in inventories(89,475)(87,375)(62,709)
Decrease / (increase) in other current assets1,684481(1,456)
Increase in trade and other payables44,91353,4616,592
Increase in current tax liabilities13,41515,88013,498
Net cash inflow from operating activities31,457
74,98198,390
7 TRADE AND OTHER RECEIVABLES
The Group has derecognised trade receivables that have been sold pursuant to the terms of receivables purchase agreements
that the Group has entered into with its bankers. The Group has assessed the terms of the agreements and has determined that
substantially all the risks and rewards have been transferred to the respective banks. During the six months ended 31 January 2019,
the Group amended a receivable assignment agreement to include an additional existing customer. No trade receivables have yet
been sold for this customer.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
25
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
8 INVENTORIES
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
$’000$’000$’000
Raw materials at cost46,73927,33722,833
Finished goods at cost157,413137,04194,881
Finished goods at net realisable value30,7275,69327,690
Total inventories234,879
170,071145,404
Both the value and tonnage of both finished goods inventory and raw materials has increased significantly from comparative
periods. Inventory holdings at half year are generally higher than year end due to the seasonality of milk.
Finished goods inventories at $188.1m (44,344 MT) have increased significantly from comparative periods (January 2018:$142.7m,
35,040 MT; July 2018: $122.6m, 26,726 MT). The increase is primarily due to increased volumes of canned infant formula forecast to
be sold in the second half of FY19, and a strong milk production season which has exceeded expectations.
Raw materials at $46.7m (11,836 MT) are up on comparative periods (January 2018: $27.3m, 6,921 MT; July 2018: $22.8m, 6,737 MT)
due to high levels of holdover stock required to meet forecast second half canned infant formula sales.
The total inventory provision as at reporting date was $2.3m (31 January 2018: $4.5m, 31 July 2018: $2.1m) which entirely related
to finished goods
Included within this is the onerous contracts provision, which as at reporting date totalled $2.0m (31 January 2018: $0.2m,
31 July 2018: $1.3m). Onerous contracts have risen in value due a rise in the exchange rate, decreasing NZD returns from USD
contracts, and a rise in commodity prices, driving up cost to manufacture and therefore cost on hand.
9 CURRENT ASSETS – OTHER CURRENT ASSETS
On 18 September 2018, the Group entered into a conditional agreement to acquire selected assets of Talbot Forest Cheese Limited
and Talbot Forest Properties Limited (the Vendor) with settlement expected in August 2019. Prior to the 2019 settlement date, Synlait
is providing the Vendor with a secured loan facility. This loan facility enables the Vendor to complete a capital works programme and
satisfy other aspects of the conditional agreement. During the period, the loan advanced was $17.2m (31 January 2018: $nil).
10 PROPERTY, PLANT AND EQUIPMENT
During the six months ended 31 January 2019, $175.9m has been added to capital work in progress primarily relating to two capital
projects (Synlait Pokeno and the Advanced Liquid Dairy Packaging Facility). During this period, $52.9m of historical capital work in
progress as well as additions during the six months have been transferred to fixed assets.
11 INTANGIBLE ASSETS
New Zealand Units (NZUs) are purchased to offset carbon emissions under the New Zealand Emissions Trading Scheme. The units
are measured at cost. As at 31 January 2019, the Group held $4.2m of current NZUs and $1.1m of non-current NZUs (31 January 2018:
$0.2m current, $nil non-current, 31 July 2018: $3.0m current, $0.0 non-current).
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
26
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
12 LOANS AND BORROWINGS
Interest bearing liabilities are recognised initially at fair value, net of transaction costs incurred. Interest bearing liabilities are
subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value
is recognised in the profit and loss component of the consolidated statement of comprehensive income over the period of the
borrowings using the effective interest method.
Period endedYear ended
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
$’000$’000$’000
Current liabilities
Working capital facility (syndicated) NZD93,400––
Working capital facility (syndicated) USD37,69954,94449,321
131,099
54,94449,321
Non-current liabilities
Bank loans170,00084,00097,700
Loan facility fees(709)(333)(635)
169,291
83,66797,065
The bank loans and working capital facility within Synlait Milk Limited are secured under the terms of the General Security Deed
dated 26 June 2013, by which all present and future property is secured to the ANZ Bank and Bank of New Zealand. The Group
facilities include:
– A secured revolving credit facility (Facility A) of $150m that matures on 31 July 2021, with an amortisation of $30m on 1 August
2020.
– A secured revolving credit facility (Facility B) of $100m that matures on 31 July 2023.
– A secured working capital facility of NZD $225m that matures on 20 August 2019.
The Group is subject to capital requirements imposed by its bank through covenants agreed as part of the lending facility
arrangements. The Group has met all externally imposed capital requirements for the six months ended 31 January 2019,
31 January 2018 and the year ended 31 July 2018.
13 SHARE CAPITAL
The Group had 179,223,028 ordinary shares on issue as at 31 January 2019 (31 January 2018: 179,223,028, 31 July 2018:
179,223,028).
14 FINANCIAL INSTRUMENTS
Commodity derivatives
During the period the Group entered into a small number of commodity derivative contracts to further support the Group’s existing
financial risk management strategy. The movement in the fair value of the commodity derivatives is included within the cash flow
hedge reserve.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
27
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
15 RELATED PARTY TRANSACTIONS
Parent entity
Bright Dairy Holding Limited holds 39.04% of the shares issued by the Synlait Milk Limited (31 January 2018: 39.04%, 31 July 2018:
39.04%). Bright Dairy Holding Limited is a subsidiary of Bright Food (Group) Co. Limited, a State Owned Enterprise domiciled in the
Peoples Republic of China.
Other related entities
In June 2013 a subsidiary of Synlait Milk Limited, Synlait Milk Finance Limited, was set up primarily for holding all banking facilities for
the Group and related interest rate swaps. Funds are loaned to Synlait Milk Limited and interest is charged at market rates.
In January 2015, the Group acquired 25% of the shares of Sichuan New Hope Nutritionals, an infant formula company registered
in China. This company owns and markets the “Akara” and “E-Akara” infant formula brands in the Chinese market, which are
exclusively manufactured by Synlait Milk Limited.
In May 2017 Synlait Milk Limited acquired 100% of the share capital of The New Zealand Dairy Company Limited and Eighty Nine
Richard Pearse Drive Limited. The New Zealand Dairy Company was constructing a blending and canning plant in Auckland.
Eighty Nine Richard Pearse Drive Limited owns the land and buildings at which the Auckland blending and canning plant has been
constructed. Eighty Nine Richard Pearse Drive leased its land and buildings to The New Zealand Dairy Company Limited, and now
leases them to Synlait Milk Limited.
(a) Transactions with other related parties
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
$’000$’000$’000
Purchase of goods and services
Bright Dairy and Food Co Ltd – Directors fees9684176
Sale of goods and services
Bright Dairy and Food Co Ltd – Sale of milk powder products6,464361584
Bright Dairy and Food Co Ltd – Reimbursement of costs(91)(61)(150)
Sichuan New Hope Nutritional Foods Co. Ltd – Sale of milk powder products–7,3017,301
All transactions with related parties are at arm’s length on normal trading terms.
(b) Outstanding balances
The following balances are outstanding at the reporting date in relation to transactions with related parties:
31 January
2019
Unaudited
31 January
2018
Unaudited
31 July
2018
Audited
$’000$’000$’000
Current receivables (sales of goods and services)
Bright Dairy and Food Co Ltd – Sale of milk powder products111
Bright Dairy and Food Co Ltd – Reimbursement of costs(133)(125)(129)
Sichuan New Hope Nutritionals Ltd – Sale of milk powder products(68)(27)(66)
Sichuan New Hope Nutritionals Ltd – Reimbursement of costs280263283
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
28
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2019
16 CONTINGENCIES
As at 31 January 2019 the Group had no contingent liabilities or assets (31 January 2018: $nil, 31 July 2018: $nil).
17 COMMITMENTS
The Group has committed expenditure for the construction of a new liquid milk processing plant of $26.3m as at 31 January 2019
(31 January 2018: $95.9, 31 July 2018: $74.0). The total value of this construction contract is $125m. The Group is also in the process
of constructing the Pokeno processing plant and has committed expenditure of $140.0 as at 31 January 2019 (31 January 2018: $nil,
31 July 2018: $163.8m). The total value of this construction contract is $260.0m. As at 31 January 2019, there is no further capital
commitment (31 January 2018: $nil, 31 July 2018: $9.0m).
18 EVENTS OCCURRING AFTER THE REPORTING PERIOD
There were no events occurring subsequent to 31 January 2019 which require adjustment to or disclosure in the financial
statements.
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
29
INDEPENDENT REVIEW REPORT
31 January 2019
TO THE SHAREHOLDERS OF SYNLAIT MILK LIMITED
We have reviewed the condensed consolidated interim financial statements of Synlait Milk Limited and its subsidiaries (‘the Group’)
which comprise the consolidated statement of financial position as at 31 January 2019, and the consolidated income statement,
consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the period ended on that date, and a summary of significant accounting policies and other explanatory information on
pages 16 to 29.
This report is made solely to the Group’s shareholders, as a body. Our review has been undertaken so that we might state to the
company’s shareholders those matters we are required to state to them in a review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company’s shareholders as a body, for
our engagement, for this report, or for the opinions we have formed.
BOARD OF DIRECTORS’ RESPONSIBILITIES
The Board of Directors are responsible for the preparation and fair presentation of the condensed consolidated interim financial
statements, in accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial Reporting and for such internal
control as the Board of Directors determine is necessary to enable the preparation and fair presentation of the condensed
consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.
OUR RESPONSIBILITIES
Our responsibility is to express a conclusion on the condensed consolidated interim financial statements based on our review.
We conducted our review in accordance with NZ SRE 2410 Review of Financial Statements Performed by the Independent Auditor
of the Entity (‘NZ SRE 2410’). NZ SRE 2410 requires us to conclude whether anything has come to our attention that causes us to
believe that the condensed consolidated interim financial statements, taken as a whole, are not prepared, in all material respects, in
accordance with NZ IAS 34 Interim Financial Reporting and IAS 34 Interim Financial Reporting. As the auditor of Synlait Milk Limited,
NZ SRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial statements.
A review of the condensed consolidated interim financial statements in accordance with NZ SRE 2410 is a limited assurance
engagement. The auditor performs procedures, primarily consisting of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit conducted in accordance with
International Standards on Auditing (New Zealand). Accordingly we do not express an audit opinion on those financial statements.
Other than in our capacity as auditor and the provision of taxation compliance services, we have no relationship with or interests in
Synlait Milk Limited or its subsidiaries. These services have not impaired our independence as auditor of the Company and Group.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial
statements of the Group do not present fairly, in all material respects, the financial position of the Group as at 31 January 2019 and
its financial performance and cash flows for the period ended on that date in accordance with NZ IAS 34 Interim Financial Reporting
and IAS 34 Interim Financial Reporting.
19 March 2019
Chartered Accountants
AUCKLAND, New Zealand
Synlait Milk Limited Condensed Consolidated Interim Financial Statements for the six months ended 31 January 2019
30
DIRECTORY
1 REGISTERED OFFICE
1028 Heslerton Road
RD13, Rakaia 7783
New Zealand
Telephone: +64 3 373 3000
Email: info@synlait.com
2 BOARD OF DIRECTORS
Graeme Roderick Milne (Chair of the Board)
– Independent Director
Min Ben – Bright Dairy Director
Ian Samuel (Sam) Knowles – Independent Director
Qikai (Albert) Lu – Bright Dairy Director
Dr. John William Penno – Board Appointed Director
Hon. Ruth Margaret Richardson (Chair of the Remuneration
and Governance Committee) – Bright Dairy Director
Willem (Bill) Jan Roest (Chair of the Audit and Risk
Committee) – Independent Director
Sihang (Edward) Yang – Bright Dairy Director
3 SENIOR LEADERSHIP TEAM
Leon Clement – Chief Executive Officer
Nigel Greenwood – Chief Financial Officer
Neil Betteridge – Director, Operations
Matthew Foster – General Manager, Strategic Projects
Chris France – Director, Strategy and Business Transformation
Dr. Suzan Horst – Director, Quality, Regulatory and
Laboratory Services
Martijn Jager – Director, Sales and Business Development
Deborah Marris – Director, Legal, Risk and Governance
Antony Moess – General Manager, Manufacturing
Hamish Reid – Director, Sustainability and Brand
Roger Schwarzenbach – General Manager, Innovation
and Technical Services
Rob Stowell – General Manager, Supply Chain
Callam Weetman – General Manager, Sales
Boyd Williams – Director, People, Culture and Performance
4 AUDITOR
Deloitte Limited
80 Queen Street
Auckland 1010
New Zealand
5 LAWYERS
MinterEllisonRuddWatts
Lumley Centre
88 Shortland St
Auckland 1010
6 BANKERS
ANZ Bank New Zealand Limited
The Bank of New Zealand
7 INVESTMENT BANKERS
First NZ Capital Securities Limited
8 SHARE REGISTRAR
Computershare Investor Services Limited
Private Bag 92119
Auckland 1142
Level 2
159 Hurstmere Rd
Takapuna
Auckland 0622
Freephone (within NZ): 0800 467 335
Telephone: +64 9 488 8777
Facsimile: +64 9 488 8787
9 MANAGING YOUR SHAREHOLDING ONLINE
To change your address, update your payment instructions and
to view your registered details including transactions, please
visit www.investorcentre.com/nz
General enquiries can be directed to
enquiry@computershare.co.nz
Please assist our registry by quoting your CSN or shareholder
number when making enquiries.
10 OTHER INFORMATION
Please visit us at our website www.synlait.com
Synlait Milk Limited Interim Report 2019
31
SYNLAIT MILK LIMITED
1028 Heslerton Road
RD13, Rakaia 7783
Private Bag 806
Ashburton 7740
P + 64 3 373 3000
www.synlait.com
---
OUR YEAR IN THE MAKING
SYNLAIT MILK LIMITED HALF YEAR REPORT 2019
- 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 Interim Report for the period ended 31 January 2019.
- 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
PG 2
Synlait Milk Limited Half Year Report 2019
I
STRATEGIC
U PDATE
LEON CLEMENT
CHIEF EXECUTIVE OFFICER
Synlait Milk Limited Half Year Report 2019
I
PG 3
INTERIM
R E S U LT S
U PDATE
LEON CLEMENT
CHIEF EXECUTIVE OFFICER
- Half year net profit of $37.3 million compared to
$41.3 million for the same period last year (HY18)
- Re-confirm guidance for canned infant formula volumes
of 41,000 - 45,000 MT and that profitability is expected
to increase in FY19, but not at the same rate as FY18
- Key growth projects, the Advanced Liquid Dairy
Packaging Facility at Dunsandel and our second
infant-capable facility at Pokeno, remain on schedule
and on budget
- Continue to develop new growth opportunities with the
investments in liquid milk, Talbot Forest Cheese, and
doubling our lactoferrin capacity
- Efficiencies achieved in manufacturing have supported
improved sales volumes across our ingredients,
powders and cream, and lactoferrin businesses
- Our new purpose ‘Doing Milk Differently for a
Healthier World’ established
PG 4
Synlait Milk Limited Half Year Report 2019
I
STATED OBJECTIVESPROGRESS TO DATE
GROWTH:
DEEPER AND BROADER =
CHASE PROFIT POOLS
1. Deepen relationships with existing
customers and build into new
categories
2. Broaden customer base in core
categories
3. Accelerate development of new
profit pools with new customers
and categories
CAPABILITIES:
LEAPFROG =
CREATE LONG TERM VALUE
4. - 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
GROWTH:
DEEPER AND BROADER =
CHASE PROFIT POOLS
1. Continue to meet customer demands
through strategic partnerships and
supply chain responsiveness
2. Major investments in Everyday Dairy
category through the Advanced
Liquid Dairy Packaging Facility and
conditional acquisition of Talbot
Forest Cheese
3. Doubled lactoferrin manufacturing
capacity, enabling a significant
expected uplift in production and sales
volume in FY19
CAPABILITIES:
LEAPFROG =
CREATE LONG TERM VALUE
4. - Increased R&D investment in
Infant Nutrition and Everyday Dairy
categories
- 12.4% increase in milk processed
as a result of realising significant
manufacturing efficiencies
- Lead with Pride
TM
certified farms
increased to over 60
- Commenced a number of climate
change, water degradation, circular
economy, and environmental and
animal welfare initiatives
VS
PG 5
Synlait Milk Limited Half Year Report 2019
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DOING MILK DIFFERENTLY FOR A HEALTHIER WORLD
PG 6
OUR PURPOSE
Essential Nutrition
The milk nutrition products we
manufacture provide genuine benefits for
human health and wellbeing for millions of
people throughout the world.
Sustainability
People and planet underpin all we do.
Sustainability isn’t a catchphrase for
us. It’s at the core of what we’re doing
everyday – all of us.
Being Different
Our company was born disruptive. It is this
spirit that has driven our success. To do
things differently than we did yesterday,
to try things that haven’t been done
before, is at our core.
PG 6
Synlait Milk Limited Half Year Report 2019
I
When we look back...
“WE WILL FEEL PROUD
OF THE BOLD STANCE
WE HAVE TAKEN,
THE GLOBAL DIFFERENCE
WE HAVE MADE AND
THE SUSTAINABLE
DIVERSIFIED COMPANY
WE HAVE BUILT
TOGETHER”
EnvironmentEnterprisePeople
Ingredients
Adult Nutrition
Infant NutritionEveryday Dairy
OUR AMBITIONOUR STRATEGY
DOING MILK DIFFERENTLY
OUR CATEGORIES
FOR A HEALTHIER WORLD
OUR SUSTAINABLE VALUE CHAIN
PG 7
Synlait Milk Limited Half Year Report 2019
I
INFANT NUTRITION UPDATE
Infant Nutrition business continues to grow
- Continue to build on our strong partnership with The a2 Milk Company
TM
- Other brands are taking longer than expected to achieve regulatory
approval in China and the United States
- Building capacity to support future anticipated growth
- Remain on track to deliver FY19 canned infant formula volume guidance
of 41,000 - 45,000 MT
Second infant-capable processing site at Pokeno remains on track to
be commissioned for the 2019 / 2020 milk season
- Second site provides geographical diversification and the ability to
optimise production across our two sites
- The Pokeno plant is expected to have its MPI sign-off received
early FY20
- Start-up product mix is expected to be a mixture of ingredients and
infant formula base powder
Milk supply development remains on track for the start of the
2019 / 2020 milk season
Infant Nutrition
PG 8
Synlait Milk Limited Half Year Report 2019
I
THE a2 MILK COMPANY
1)
The a2 Milk Company Interim Results presentation
Synlait has exclusive supply rights for The a2 Milk Company’s
TM
canned infant formula products for the Australia / New Zealand (ANZ)
and China markets
- Exclusive supply partnership for infant nutrition in ANZ and China
- Announced 5 year minimum supply agreement in July 2018
- The a2 Milk Company
is a 17.4% shareholder in Synlait
- The two companies continue to work closely together to grow
our respective businesses
- The a2 Milk Company
TM
is currently the largest New Zealand
company on the NZX by market capitalisation*, and grew revenue
from $111 million in FY14 to $923 million in FY18
Synlait maintains an A1 protein-free milk pool, allowing it to create
products for The a2 Milk Company
TM
The a2 Milk Company continues to build a strong market position
in the China infant formula market through its broad range of
distribution channels
- 35.7% market share in Australian grocery and pharmacy
(1)
- Kantar IF consumption value share of 5.7% for Tier 1 and Key A
cities in China
(1)
- ~12,250 MBS stores in China
(1)
- Strong cross border e-commerce (CBEC) presence in China
A2
protein
A2
protein
A1
protein
a2 MILK
TM
CONVENTIONAL MILK
Infant Nutrition
* As at 18 March 2019
PG 9
Synlait Milk Limited Half Year Report 2019
I
- Five year minimum supply
agreement signed in July 2018
- Exclusive supply rights for The
a2 Milk Company’s
TM
infant
formula products to China and
Australia / New Zealand markets
REGULATORY UPDATE
- Most functions of the former AQSIQ and
CFDA have merged into SAMR and the
remaining functions of AQSIQ have moved
to GACC which includes overseas factory
registrations
- Obtained registration renewal of our
Dunsandel plant with the GACC (previously
CNCA) in January allowing Synlait to
continue to export canned infant formula
to China
- Auckland plant has achieved GACC dairy
registration and is progressing with the
GACC infant formula milk powder process
- Agreement to supply Munchkin’s
Grass Fed
TM
infant formula
- Sold in Australia and New Zealand
- Currently selling Stage 2 Grass
Fed™ formula in United States and
resubmitting USFDA for Stage 1
- Five-year supply agreement
signed in August 2017
- SAMR registration application
submitted for Akara and e-Akara.
Anticipate Akara approval in
2019, and e-Akara approval at a
later date
- Five-year supply agreement
signed in February 2018
- SAMR registration application
submitted, anticipate approval
in 2019
PORTFOLIO OF INFANT FORMULA CUSTOMER
PARTNERSHIPS
Infant Nutrition
PG 10
Synlait Milk Limited Half Year Report 2019
I
EVERYDAY DAIRY
Advanced Liquid Dairy Packaging Facility is currently
being commissioned
- In parallel the plant will be going through all the required export
registrations for the China market
- Product development across all categories is progressing well
Talbot Forest Cheese business is executing to plan, with the investment
expected to be completed on 1 August 2019
- The acquisition supports our growth strategy and will help us to
optimise our value chain
- Allows manufacturing of a variety of cheese products that complement
our existing product portfolio, optimisation of manufacturing assets
during peak seasonal flows and accessing of new profit pools
- The acquisition is aligned with our approach to run high-quality,
flexible dairy manufacturing capabilities that can be tailored to meet
customer needs
In addition to other liquid milk opportunities, Synlait is currently
evaluating a number of options to target high-returning, fast-growing
pasteurised and long-life dairy beverages, including:
- UHT cream for foodservice
- Ambient drinking yoghurt
- Functional beverages
- Ready-to-drink infant formula products are also being evaluated
for the plant
Everyday Dairy
PG 11
Synlait Milk Limited Half Year Report 2019
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INGREDIENTS + LACTOFERRIN
Synlait has experienced a strong HY19 in the ingredients business,
supported by a significant realisation of manufacturing efficiencies
- Milk processed for HY19 has grown from 38.3m kgMS to 43.1m kgMS,
12.4% higher than HY18
- Contracted milk supply up from 41.4m kgMS to 41.7m kgMS
- Net purchases of milk of 1.4m kgMS
- Ingredients production up from 59,873 MT in HY18 to 72,484 MT
in HY19, a 21% increase
Increases in capacity have been enabled by a 6% improvement in
Overall Equipment Effectiveness (OEE)
Synlait has a strong and growing customer base for lactoferrin,
primarily for use in the premium infant formula market
- Synlait doubled its lactoferrin manufacturing capacity effective
from November 2018
- The investment in additional capacity was underpinned by a multi-
year agreement for infant formula-grade lactoferrin signed with a
multinational customer for approximately half of Synlait’s capacity
Synlait has developed world leading lactoferrin manufacturing
technology to enable production of infant grade product which is
attracting significant market demand
- Synlait produced 7 MT of lactoferrin in HY19 and sold 6 MT at a
gross margin of $397,938 per MT
- Expect to produce circa 20 MT in H2 FY19
Milk Processed (millions of litres)
120
100
80
60
40
20
_
AugSeptOctNovDecJanFebMarAprMayJunJul
FY18FY19
Ingredients
Lactoferrin Production Volume (MT)
28
24
20
16
12
8
4
_
MT
FY14FY19FY18FY17FY16FY15
7
20
8
121212
Lactoferrin Volume (MT)Forecast H2 FY19 Lactoferrin Volume
4
PG 12
Synlait Milk Limited Half Year Report 2019
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ENVIRONMENT
Welfare
Circular
economy
Climate
change
Water
Lead agriculture’s response to climate change
- Greenhouse gas reduction targets: -35% on-farm;
-50% off-farm per kgMS
- 32 initiatives underway. Two main focus areas
1. On-farm methane reduction. Piloting inhibitor late 2019
2. Decarbonising manufacturing energy. Electrode
boiler live in March
Minimise water use and eliminate water degradation
- Targets: -20% per kgMS; -45% N loss; +20% waste
water quality
- Deploying best on-farm practices that address water
degradation
- Collaborating on emerging technology to improve
waste water quality
Pioneer the circular economy system in
New Zealand
- Targets: Zero waste to landfill
- Eliminating single use plastics
- Pioneering circular economy
Lead stewardship for animals, biodiversity + soil
- Advancing our system for maximum animal
health + wellbeing
- Restore biodiversity, enhancing our farming system
- Enhance soil health to build farm performance
and resilience
Environment
Energy Plant Solutions’
3D model of Synlait’s
electrode boiler.
PG 13
Synlait Milk Limited Half Year Report 2019
I
Safety
Diversity
Attraction
PEOPLE
People
Health, Safety and Wellness
- Total Recordable Injury Frequency Rate (TRIFR)
decreased from 18.1 to 15.8 per million hours worked
in HY19, a 13% improvement
- Critical Risk Projects are progressing with engineering
controls supporting the risk reduction
- Launched wellness programme, with mental health and
physical health assessments offered to all employees
Attraction and Engagement
- Gallup Q12 employee engagement score improved
from 31st to 61st percentile of peer group
Diversity
- Training leaders to remove conscious and unconscious
biases from their decision making
- Accelerating development of women and Ma
-
ori who
are underrepresented in leadership positions
- Building a diverse and inclusive culture
- Introducing flexible working to support people
managing multiple roles in their everyday life
PG 14
Synlait Milk Limited Half Year Report 2019
I
Transparency
Safe food
Innovation
Sustainable
supply
ENTERPRISE
Enterprise
Lead the food industry for transparency + accountability
- On-track for B Corp certification by 30 June 2019
- Committed to Science Based Targets initiative
- Climate Change impact to be reported through CDP
by 30 April 2019
- ESG risk rating performance received with commitment
to improve
Uphold highest food safety and quality standards, the
cornerstone of Synlait’s business
- Synlait secured GACC registration renewal for the
Dunsandel site
- Focus on food safety and quality systems and
processes, and quality performance culture through
IWS frameworks
Investing in innovation to establish a world class
value chain
- Strengthened innovation capability and capacity
across core disciplines and categories to drive
strategy execution
- Successfully building ambient stable liquids and
Infant Nutrition NPD pipeline
- Delivered significant efficiency, yield and quality
gains across manufacturing processes
Partnering with farmers and customers who share our
sustainable supply philosophy
- Increased Lead With Pride
TM
accredited farmers to over 60
- New agreements signed with key suppliers incorporating
sustainability requirements
PG 15
Synlait Milk Limited Half Year Report 2019
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OUR
FINANCIAL
R E S U LT S
NIGEL GREENWOOD
CHIEF FINANCIAL OFFICER
Synlait Milk Limited Half Year Report 2019
I
PG 16
NPAT: $37.3 million in HY19 vs. $41.3 million in HY18
- Significant increase in manufacturing efficiencies enabled 12.4%
more milk to be processed in HY19
- Powders and cream sales in HY19, increased to 56,116 MT from
44,435 MT in HY18, a 26% increase
- While canned infant formula volumes were up 5% on HY18 to
17,684 MT these were at lower margins
- Significant investments in headcount and consultancy costs to
support growth: Everyday Dairy category, technical (R&D), and
capacity at Pokeno
Earnings Summary
NZ$ MillionsHY19HY18
EBITDA$70.2$74.1
EBIT $56.5 $62.1
Earnings Per Share (basic and diluted)20.82 cents 23.05 cents
OVERVIEW
FY16FY17FY18HY19
Net Profit After Tax
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
–
$ Millions
35.7
24.8
10.9
39.5
28.2
11.3
74.6
33.3
41.3
37.3
37.3
1H2H
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
–
1H2H
FY16FY17FY18HY19
IFC Sales Volume Drives NPAT
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
–
MT$ Millions
35.7
10,753
5,246
39.5
12,427
74.6
18,741
16,839
17,684
6,349
NPAT
Forecast IFC
41,000-45,000 MT
PG 17
Synlait Milk Limited Half Year Report 2019
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*Sales volumes for specialty ingredients are not shown on the graph.
HY19 powders and cream volumes increased 26% on prior year,
due to 12.4% more milk being processed than in HY18
- This was enabled by improved manufacturing efficiencies as a
result of our IWS programme
Canned infant sales volumes slightly ahead of HY18. Second half sales
volumes will represent a higher proportion of total sales than in FY18
Finished goods inventory of 44,344 MT was 27% higher than HY18,
reflecting the increase in milk processed in HY19
- Includes ingredients, bulk infant formula, and finished canned
infant formula
- Raw materials inventory also well up on HY18 to support second
half infant formula production
Sales of lactoferrin increased to 6 MT from 4 MT in HY18
- Lactoferrin sales exclude volume used internally
SALES VOLUME AND INVENTORY
Sales Volumes*
100,000
80,000
60,000
40,000
20,000
_
MT
HY16HY17HY19HY18
46,348
5,246
41,102
61,044
6,349
54,695
56,116
17,684
73,800
44,435
16,839
61,274
Powders and CreamConsumer Packaged Products
HY16HY17HY18HY19
Finished Goods Inventory
70,000
60,000
50,000
40,000
30,000
20,000
10,000
–
MT
45,185
35,040
44,344
42,962
PG 18
Synlait Milk Limited Half Year Report 2019
I
*Production volumes for specialty ingredients are not shown on the graph.
First half milk processed up 12.4% on HY18 at 43.1 million kgMS
- Total production increased by 10.5% to 90,495 MT in HY19 vs
81,828 MT in HY18, with production volumes up on HY18 primarily
in powders and cream
- Product mix shifted to powders and cream (81% in HY19 vs. 78%
in HY18), a result of increased manufacturing efficiency
Production of lactoferrin increased from 3 MT in HY18 to 7 MT
in HY19
PRODUCTION VOLUME
Production Volumes*
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
_
70.0
60.0
50.0
40.0
30.0
20.0
10.0
_
MTkgMS (millions)
72,852
17,636
64,001
17,821
36.7
5,714
69,132
HY16
41.9
38.3
43.1
7,088
75,886
HY17HY19HY18
Powders and CreamConsumer Packaged Products
Milk Processed
PG 19
Synlait Milk Limited Half Year Report 2019
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Gross profit per MT was lower than HY18, primarily due to a product
mix shift towards lower margin powders and cream
However, the lower margin per MT on canned infant formula sales
also impacted margin
Expect gross profit per MT to expand in H2 FY19, with canned infant
formula sales increasing as a share of total sales
Whilst gross profit per MT has declined, overall gross profit has been
maintained as Synlait experiences the benefits of scale
GROSS PROFIT PERFORMANCE
166.5
85.9
1H2H
FY16FY17FY18HY19
Gross Profit
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
–
$ Millions
59.6
42.5
67.6
80.5
86.0
85.9
44.5
102.1
112.1
Gross Profit Per MT
1,600
1,400
1,200
1,000
800
600
400
200
0
$
HY16
900
HY19
1,164
H2 FY18
1,195
HY18
1,403
H2 FY17
830
HY17
716
H2 FY16
839
PG 20
Synlait Milk Limited Half Year Report 2019
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Increase in overheads reflective of headcount investment to
support growth in Everyday Dairy category, Technical (R&D) and
capacity at Pokeno
- Net overheads have increased by $4.7 million or 19.2% from
HY18 to $29.2 million
- Overheads are broadly in line with H2 FY18
- Largest driver of the increase is employee and consultancy costs,
which reflects the continued investment into capability for research
and development, business development and leadership to support
continuing growth of the existing business, and development of
new opportunities
OVERHEADS
FY16FY17FY18HY19
Overheads
60.0
50.0
40.0
30.0
20.0
10.0
_
$ Millions
38.6
21.6
17.0
44.6
23.0
21.6
54.2
29.7
24.5
29.2
29.2
1H2H
29.2
HY18Employee CostsConsultancy
Overheads
35.0
30.0
25.0
20.0
15.0
10.0
5.0
_
$ Millions
24.5
1.7
0.1
2.9
HY19Other
PG 21
Synlait Milk Limited Half Year Report 2019
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Synlait typically experiences weak cash flows in H1 due to the milk
production curve
- Operating cashflow has reduced in HY19 to $31.5 million, down from
$75.0 million in HY18, which was somewhat of an anomaly year
- Whilst down on HY18, HY19 operating cash flows remain strong
relative to previous half years
- The reduction in operating cash flows is primarily due to:
- Inventory balances of both finished goods and raw materials have
built on higher than expected production volumes, and to meet
forecast IFC sales in H2 FY19
- Increase in overhead expenditure to support the business
- We anticipate strong operating cashflow generation in the second
half of the year due to the sell down of carry over inventory and
increased canned infant formula sales
OPERATING CASH FLOW
Operating Cashflow
200.0
150.0
100.0
50.0
_
(50.0)
$ Millions
99.9
4.0
129.4
(14.2)
23.4
75.0
FY16FY17FY18HY19
1H2H
103.9
115.2
98.4
31.5
31.5
PG 22
Synlait Milk Limited Half Year Report 2019
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Significant investment in major growth projects
- $250.4 million of capital expenditure over the 12 month period from
HY18 to HY19. The major components of this were:
- Second infant-capable manufacturing facility in Pokeno
$109.4 million of $260 million
- Liquid Milk Plant at Dunsandel $101.8 million of $125 million
- Lactoferrin plant upgrades at Dunsandel $18.5 million
- $28.7 million of intangibles and investments expenditure, with
conditional investment of $17.2 million in Talbot Forrest Cheese
(secured loan)
- Closing net debt of $287.6 million, forecast to increase at year end
to $320 - $340 million
- Capital projects will continue to be funded through existing debt
facilities and operating cashflows
- No need to raise capital, but no dividend while on strong growth
trajectory
- Detail on Bank Facilities and Covenants is included in the Appendix
NET DEBT
Net Debt
350.0
300.0
250.0
200.0
150.0
100.0
50.0
_
$Millions
HY16
292.0
HY19
287.6
H2 FY18
114.9
HY18
49.7
H2 FY17
82.6
HY17
146.6
H2 FY16
213.9
Net Debt Bridge
350.0
300.0
250.0
200.0
150.0
100.0
50.0
_
$ Millions
13.00.7
49.7
28.7
250.4
54.9
287.6
HY18Investment
Capex
Purchase of
Investments
and
Intangibles
Cash In-Flow
from Operating
Activities
HY19Net Interest
Paid
Other
PG 23
Synlait Milk Limited Half Year Report 2019
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OUTLOOK
LEON CLEMENT
CHIEF EXECUTIVE OFFICER
PG 24
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Remain on track to deliver FY19 canned infant formula volume
guidance of 41,000 - 45,000 MT, with higher sales volumes forecast
in H2 FY19
- Higher share of annual canned infant formula volumes were delivered
in HY18 versus HY19
- Volume growth in H2 FY19 driven by:
- Continued growth in The a2 Milk Company
TM
volumes
- Maintaining Munchkin’s Grass Fed
TM
ANZ sales through both
domestic and cross-border channels
Synlait will be hosting an Investor Day at the Dunsandel Site in early
June, following the opening of the Advanced Liquid Dairy Packaging
Facility. Details to be provided in the coming weeks
SECOND HALF RETURNS
Canned Infant Formula Sales
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
_
MT
15,999
10,753
5,246
18,766
12,427
6,349
35,580
18,741
16,839
17,684
41,000
45,000
Guidance
Range
FY16FY17FY18HY19
1H2H
PG 25
Synlait Milk Limited Half Year Report 2019
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APPENDICES
Synlait Milk Limited Half Year Report 2019
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PG 26
SYNLAIT’S INTEGRATED VALUE CHAIN
PG 27
Synlait Milk Limited Half Year Report 2019
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DIFFERENTIATED
MILK SUPPLY
- Milk streaming (A1 protein free milk,
Grass Fed
TM
, Lead With Pride
TM
)
- Farm ISO certification programme
(Lead With Pride
TM
)
- Three-year rolling contracts
RAW MATERIALS
PROCUREMENT
- Source high quality ingredients & packaging
- Agile and risk based approach based on
customer needs
- Robust supplier Quality Management
RESEARCH + CATEGORY
DEVELOPMENT
- Dedicated R&D facility at Palmerston North
- Focus on innovating production and process
- New product development in attractive
categories and markets
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
- Operate high spec, large scale plants
- Efficiencies driven through Integrated
Work System (IWS) programme
- Control all aspects of product quality
REGULATORY
CAPABILITY
- Provide market access for our customers
- Secure regulatory approval for products and
manufacturing sites
CONSUMER
CONSUMER PACKAGING
- Ownership of brand registrations
- Two state-of-the-art canning lines
FULL LOGISTICS SERVICES
MANUFACTURING EXCELLENCE
HIGH SPECIFICATION SPRAY DRYERS
120,000 MT CAPACITY
WETMIX KITCHENS
80,000 MT CAPACITY
CONSUMER PACKAGING
70,000 MT CAPACITY
CONTRACTED FARMS
APPROX. 200, TOTAL SUPPLY
APPROX. 65M kgMS
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
D3
D2
DRYER
45,000 MT
CAPACITY
165,000 MT
CAPACITY
D1
AMF PLANT*
LACTOFERRIN
DRYER*
WETMIX 2
WETMIX 1
WETMIX
45,000 MT
CAPACITY
125,000 MT
CAPACITY
DUNSANDEL
AUCKLAND
AUCKLAND
CANNING
70,000 MT
CAPACITY
BASE POWDER
A1 PROTEIN-FREE
MILK
GRASS FED™
LEAD WITH
PRIDE
TM
REGULAR
FARMS
REGULAR
FARMS
A1 PROTEIN-FREE
MILK
LEAD WITH
PRIDE
TM
DUNSANDEL
POKENO*
(2019-2020
MILK SEASON)
CUSTOMERS
TOTAL
PG 28
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FY19 CONTRACTED
MILK SUPPLY (KGMS)
Base Supply
A1 protein-free milk
Grass Fed™ Milk*
5,521,377
24,152,968
34,911,799
AUCKLAND CANNING
• SAMR registration in progress
TEMUKA
• Talbot Forest Cheese acquisition on track for 1 August completion
POKENO
• Plant on schedule for 2019 / 2020 milk season commissioning
• 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
DUNSANDEL
• Advanced Liquid Dairy Packaging Facility on track for March 2019 commissioning
OUR GEOGRAPHIC
FOOTPRINT
PG 29
Synlait Milk Limited Half Year Report 2019
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1
Gross profit per MT includes both external sales volumes and internal transfers of bulk infant formula to blending and consumer packaging.
Sales Volume (MT)Gross Profit ($m)Gross Profit / MT
HY19FY18HY18HY19FY18HY18HY19FY18HY18
Powders and Cream
1
56,116 93,042 44,435 69.6 134.4 71.6 959 1,065 1,192
Consumer Packaged17,684 35,580 16,839 14.0 27.6 13.5 789 777 800
Lactoferrin6 16 4 2.3 4.4 0.9 397,938285,757 213,681
Total73,806128,637 61,27885.9 166.5 86.0 1,164 1,294 1,403
GROSS PROFIT BY CATEGORY
PG 30
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BANKING FACILITIES AND COVENANTS
We have four key bank covenants in place within our syndicated bank
facility agreement.
These are:
1. Interest cover ratio – EBITDA to interest expense of no less than 3.00x
based on full year forecast result
2. Minimum shareholders funds – no less than $295.5 million
3. Working capital ratio – inventory and debtors to working capital facility
outstanding of no less than 1.5:1
4. Leverage ratio – Total debt to EBITDA is no greater than 3.5x
Synlait currently has three syndicated bank facilities in place with ANZ
and BNZ.
1. Working capital facility (multi-currency) –facility limit of $225 million
and reviewed annually
2. Revolving credit facility (Facility A) –facility limit of $150 million,
amortising $30 million on 1 August 2020 and maturing 31 July 2021
3. Revolving credit facility (Facility B) – facility limit of $100 million
maturing on 31 July 2023
We were compliant with our bank covenants at all times during HY19.
PG 31
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20132014201520162017202320222021202020192018
INFANT NUTRITION MARKET UPDATE
Globally, the Infant Nutrition market continues to grow strongly, with
the global market forecast growth at 6% p.a. between FY19 and FY23
(1)
• Asia Pacific, Australasia, Middle East, and Africa are expected to be
the fastest growing regions
(1)
Supportive factors driving the Infant Nutrition market include:
• Consumer demand for more premium brands
• Food safety, naturalness and provenance
• Growing middle class in Asia
1)
Euromonitor
Infant Nutrition
Global Infant Formula demand (US$ millions)
1
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
_
Asia PacificAustralasiaEastern EuropeLatin AmericaMiddle East & AfricaNorth AmericaWestern Europe
PG 32
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INGREDIENTS MARKET UPDATE
INGREDIENTS
Despite global economic uncertainties, there’s been continued demand
for New Zealand dairy ingredients, complemented by constrained milk
production in other dairy exporting nations this season due to drought
- With EU Intervention stock levels diminished, skim milk powder GDT
prices have had a rally, on average 12% higher than HY18
- Meanwhile anhydrous milk fat and whole milk powder prices have
lagged HY18 by 22% and 7% respectively
LACTOFERRIN
Demand for lactoferrin is driven by increasing use in infant formula,
particularly in China and the U.S. following the successful launch of
high lactoferrin-content infant formula products
- Synlait has ability to export to the U.S. market as our lactoferrin holds
FDA GRAS registration for use as an ingredient in infant formula,
enabling further market opportunities
A demand and supply imbalance is driving a global strengthening
in lactoferrin prices
- Demand for lactoferrin, a form of protein, is built on its attractive
anti-microbial, anti-inflammatory and immune-enhancing properties
- Approximately 50% of the world lactoferrin demand is used for
infant formula applications, with other applications including food
supplements, other dairy products, and pharmaceuticals
- The issuance of the Chinese national standard (GB) for lactoferrin,
determining a high purity and lower moisture content requirement
for the product, reduced global supply with some suppliers not
possessing the technical capability to meet the requirements
Synlait remains well placed to deliver to increasing global demand,
with significant expertise in lactoferrin production
Ingredients
PG 33
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ASSET BASE AND SHAREHOLDER BASE
LocationFacilityCapacity (MT)CommissioningOutput
DunsandelBlending and Canning35,000Jul-14Infant formula
AucklandBlending and Canning35,000 Nov-17Infant formula
DunsandelWetmix Kitchen 140,000Sep-11Infant formula base powder
Dunsandel Wetmix Kitchen 2 40,000Nov-17Infant formula base powder
DunsandelDryer 140,000Aug-08Infant grade WMP and SMP
DunsandelDryer 240,000Sep-11Infant formula base powder, IF grade WMP and SMP
DunsandelDryer 340,000Sep-15Infant formula base powder, IF grade WMP and SMP
DunsandelSMD2,000Jul-09Specialty milk powders
DunsandelAMF 20,000Sep-08AMF
DunsandelLactoferrin plant20Apr-14Lactoferrin
DunsandelLactoferrin expansion20Nov-18Lactoferrin
In progressFacilityCapacity (MT)CommissioningOutput
PokenoWetmix 3 & Dryer 445,000 Spring-19Infant formula base powder, IF grade WMP and SMP
DunsandelLiquid dairy packing110mLMar-19Milk, cream, long-life dairy, other blended dairy products
TemukaCheese12,000Aug-19Cheese
Shareholder base anchored by key customers
- Some of Synlait’s biggest customers, namely The a2
Milk Company (17.4%), Bright Dairy (39.0%) and Munchkin
(2.8%), are large shareholders in Synlait
Synlait’s state-of-the-art asset base includes purpose-
built infant formula facilities, highly automated everyday
dairy manufacturing facilities, and a flexible ingredients
plant capable of producing standard and specialised dairy
ingredients
- Synlait is the largest infant nutrition manufacturer in the
Southern Hemisphere
- Synlait possesses a geographically diverse and high-spec
asset base
- Synlait’s modern manufacturing facilities have an average
age of only 5.5 years, which is declining with new assets
coming on-line
PG 34
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GLOBAL MARKET REACH
Synlait manufactures a broad range of nutritional dairy products
for the global market
- Synlait’s customers have global reach, selling across five
continents
- Approximately 70% of Synlait’s sales are to customers outside
New Zealand
- To date Synlait has remained a B2B business
- Synlait has previously announced it will consider branded
consumer product positions in categories that do not compete
with our existing customers
- Note that the majority of our New Zealand and Australia sales
revenue relates to canned infant formula. A significant portion
of this product is ultimately purchased by consumers in the
China market
HY19 sales revenue by geographical area
11% China
28% Rest of Asia
8% Middle East and Africa
29% New Zealand
22% Australia
3% Rest of world
PG 35
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Graeme Milne
CHAIR (INDEPENDENT)
John Penno
BOARD APPOINTED DIRECTOR
Hon. Ruth Richardson
BRIGHT DAIRY APPOINTED DIRECTOR
Bill Roest
DIRECTOR (INDEPENDENT)
Sam Knowles
DIRECTOR (INDEPENDENT)
Sihang Yang
BRIGHT DAIRY APPOINTED DIRECTOR
Qikai (Albert) Lu
BRIGHT DAIRY APPOINTED DIRECTOR
Min Ben
BRIGHT DAIRY APPOINTED DIRECTOR
BOARD OF DIRECTORS
Our Board of Directors are committed to
building a world-class nutritional business
and the enhancement of shareholder value.
PG 36
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LEADERSHIP
OUR LEADERSHIP TEAM ARE HIGHLY SKILLED
AND COMMITTED TO OUR VISION OF BECOMING
THE WORLD’S MOST INNOVATIVE AND TRUSTED
DAIRY COMPANY.
Leon Clement
CHIEF EXECUTIVE OFFICER
Dr. Suzan Horst
DIRECTOR, QUALITY REGULATORY
AND LABORATORY SERVICES
Callam Weetman
GENERAL MANAGER, SALES
Chris France
DIRECTOR, STRATEGY AND
TRANSFORMATION
Hamish Reid
DIRECTOR, SUSTAINABILITY
AND BRAND
Roger Schwarzenbach
GENERAL MANAGER, INNOVATION
AND TECHNICAL SERVICES
Nigel Greenwood
CHIEF FINANCIAL OFFICER
Antony Moess
GENERAL MANAGER, MANUFACTURING
Boyd Williams
DIRECTOR, PEOPLE, CULTURE
AND PERFORMANCE
Matthew Foster
GENERAL MANAGER,
STRATEGIC PROJECTS
Neil Betteridge
DIRECTOR, OPERATIONS
Martijn Jager
DIRECTOR, SALES AND BUSINESS
DEVELOPMENT
Deborah Marris
DIRECTOR, LEGAL, RISK AND
GOVERNANCE
Rob Stowell
GENERAL MANAGER, SUPPLY CHAIN
PG 37
Synlait Milk Limited Half Year Report 2019
I
INVESTORS
Chris Simcock, Investor Relations
+64 27 325 0654
Chris.Simcock@synlait.com
MEDIA
Jessica Thorn, Senior Communications Advisor
+64 3 373 3353
Jessica.Thorn@synlait.com
Synlait Milk Limited Half Year Report 2019
I
PG 38
---
NZX APPENDIX 1
SYNLAIT MILK LIMITED HALF YEAR
RESULTS
FOR THE SIX MONTHS ENDING 31 JANUARY 2019
Reporting Period: 6 months to 31 January 2019
Previous Reporting Period: 6 months to 31 January 2018
Results for announcement to the market:
Amount ($000) Percentage Change
Revenue from ordinary activities $470,950 7%
Profit (loss) from ordinary activities after tax
attributable to security holders
$37,318 -10%
Profit (loss) attributable to security holders $37,318 -10%
Interim / final dividend Amount per security Imputed amount per security
No dividend is proposed $nil $nil
Dividend Record Date: Not Applicable
Dividend Payment Date: Not Applicable
Comments: Please refer to Synlait Milk Limited Interim Report 2019 released on 20
March 2019
Page │2
PRELIMINARY HALF YEAR REPORT
ANNOUNCEMENT
SYNLAIT MILK LIMITED
HALF YEAR ENDED 31 JANUARY 2019 (REFERRED TO IN THIS REPORT AS THE
"CURRENT HALF YEAR")
1.1 Details of the reporting period and the previous reporting period
The reporting period is for the half year ended 31 January 2019 with the comparative period being for
the half year ended 31 January 2018.
1.2 Information prescribed by NZX
Refer above to “Results for announcement to the market”.
1.3 The following information, which may be presented in whatever way the Issuer
considers, is the most clear and helpful to users e.g. combined with notes to
the financial statements or set out separately.
(a) A Statement of Financial Performance
Refer to the financial statements.
(b) A Statement of Financial Position
Refer to the financial statements.
(c) A Statement of Cash Flows
Refer to the financial statements.
(d) Details of individual and total dividends or distributions and dividend or distribution payments.
The details must include the date on which each dividend or distribution is payable and (if
known) the amount per security of foreign sourced dividends or distributions.
(e) Details of any dividend or distribution reinvestment plans in operation and the last date for the
receipt of an election notice for participation in any dividend or distribution reinvestment plan.
The company has no dividend reinvestment plan.
(f) A Statement of Movements in Equity
Refer to the financial statements.
(g) Net tangible assets per security with the comparative figure for the previous corresponding
period
Interim/Final Dividend Amount per security Imputed amount per security
No dividend is proposed $nil $nil
NZ cents per share Current half year Previous half year (restated)
Ordinary Shares $254 229
Page │3
(h) Details of entities over which control has been gained or lost during the period
Parts (i) to (iii) Entities over which control has been lost:
Nil.
Parts (i) to (iii) Entities over which control has been gained:
Nil.
(i) Details of associates and joint ventures:
(i) Entity name: New Hope Nutritionals.
(ii) Holding: On 30 January 2015, the company acquired 25% of the shares of New Hope
Nutritionals.
(iii) Aggregate share of profit/(losses): The company’s share of profit/(losses) in New Hope
Nutritionals is ($579,919) for the current half year (2018: $189,088).
(j) Any other significant information needed by an investor to make an informed assessment of the
entity’s financial performance and financial position
Refer to the Synlait Milk Limited 2019 Interim Report, the Interim Report Presentation Pack and
the media release, all released 20 March 2019.
(k) Commentary on the Results
(i) and (ii)
Measurement Current Year Previous Year (restated)
Basic earnings per share Cents per share 20.82 23.05
Diluted earnings per share Cents per share 20.82 23.05
Interim dividend on Ordinary
Shares
$000s - -
Final dividend on Ordinary
Shares
$000s - -
(iii) Significant feature of operating performance:
Refer to the media release.
(iv)
Segmental results:
Synlait Milk currently operates in one industry, being the manufacture and sale of milk powder
and milk powder related products. The Board makes resource allocation decisions based on
expected cash flows and results of the Company’s operations as a whole and the Group
therefore has one segment.
(v)
Discussion of trends in performance:
Refer to the media release.
(l) Audit of financial statements
This report is based on financial statements which have been reviewed. The review opinion
follows the financial statements and contains no qualifications.
(m) Major changes in trends in the business subsequent to the end of the financial year
Refer to the media release.
Page │4
(n) Unrealised gains resulting from the revaluation of assets of the parent, any subsidiaries or any
associated company
Nil for the half year ended 31 January 2019 (January 2018: $nil).
3.1 Basis of preparation
These financial statements have been prepared in accordance with New Zealand generally accepted
accounting practice (NZ GAAP). They comply with New Zealand equivalents to International Financial
Reporting Standards (NZ IFRS), and other applicable New Zealand Financial Reporting Standards, as
appropriate for profit‑oriented entities. They also comply with International Financial Reporting
Standards.
3.2 Accounting policies
Refer to Significant accounting policies in the annual financial statements for the year ended 31 July
2018.
3.3 Changes in accounting policies
Refer to changes in accounting policies in the interim financial statements for the period ended 31
January 2019.
3.4 Audit Report
The financial statements have not been audited. They have been the subject of review by the auditors
pursuant to the Statement of Review Engagement Standards RS 1 issued by the External Reporting
Board and contain no qualifications.
3.5 Additional information
Not applicable.
This half year report was approved by the Board of Directors on 19 March 2019.
Graeme Milne
Chairman
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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