Synlait 2019 Institutional Investor Day presentation

2019 Investor Day
PG 1
Synlait Milk Limited

I

DISCLAIMER
• 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 not an offer or an invitation,
recommendation or inducement to acquire, buy, sell or hold
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.
• 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 Listing Rules, or the ASX
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
or 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 any applicable
legislation; or (ii) the accounting principles or standards
generally accepted in New Zealand or any other jurisdiction,
or with International Financial Reporting Standards. 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.
PG 2
Synlait Milk Limited

I

• Farm tour (9.00am - 10.30am)
• Plant tour – Liquid Milk / Blending and Canning (10.30am - 12.00pm)
• Lunch (12.00pm - 12.30pm)
• Management Presentations (12.30pm - 3.00pm)
- Strategic Update – Leon Clement (Chief Executive Officer)
- Supply Chain – Rob Stowell (General Manager, Supply Chain)
- Manufacturing Excellence – Antony Moess (General Manager, Manufacturing)
- Quality and Regulatory – Suzan Horst (Director Quality, Regulatory and Laboratory Services)
- Business Development and Innovation – Martijn Jager (Director Sales and Business Development)
- Sustainable Value Chain – Hamish Reid (Director Sustainability and Brand)
- Closing Remarks – Graeme Milne (Chairman)
• Return to Christchurch (3.00pm)
AGENDA
PG 3
Synlait Milk Limited

I

STRATEGIC
U PDATE
LEON CLEMENT
CHIEF EXECUTIVE OFFICER
PG 4PG 4
Synlait Milk Limited

I

LEADERSHIP
Our Leadership Team are highly
skilled and committed to our vision
and purpose.
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
Martijn Jager
DIRECTOR, SALES AND BUSINESS
DEVELOPMENT
Deborah Marris
DIRECTOR, LEGAL, RISK AND
GOVERNANCE
Rob Stowell
GENERAL MANAGER,
SUPPLY CHAIN
PG 5
Synlait Milk Limited

I

We are a young, pioneering New Zealand-based
company that is shifting perceptions and driving
value through new thinking, and a new attitude.
We harness New Zealand’s natural assets, and
combine expert farming with state-of-the-art
processing to produce a range of nutritional milk
products for our global customers.
All figures in NZ$, market capitalisation as at 22 July 2019.
$879.0m
FY18 REVENUE ↑ 26% CAGR SINCE FY09
$74.6m
FY18 NPAT ↑ 89% ON FY17
$1.7b
MARKET CAPITALISATION
PG 6
Synlait Milk Limited

I

PG 7
DOING MILK DIFFERENTLY
FOR A HEALTHIER WORLD
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.
OUR PURPOSE
PG 7
Synlait Milk Limited

I

DOING MILK
DIFFERENTLY
• Significant opportunity with category size and growth:
- Total size of global IN market = US$54.3 billion
(1)
- China growth: 16% CAGR over 10 years
- NZ exports have tripled in the past three years
• Synlait is the largest exporter of high value infant
nutrition in New Zealand ~45% share of exports
• We are investing in our unique, differentiated and
integrated value chain (circa $400m new capacity
and capability under development in 2019)
Our success has been driven by thinking
differently. We are investing in our
integrated value chain to strengthen our
position as New Zealand’s largest exporter
of high value infant nutrition.
1
Source: Euromonitor, 2018
PG 8
Synlait Milk Limited

I

FOR A
HEALTHIER
WORLD
We are mobilising around being the best
for the world. Through our sustainable
innovation platforms, we’re changing our
company, transforming our industry and
setting up a positive legacy for future
generations.
• This is the problem of our age and we’re a big part of it
• We are committed to changing our company and
inspiring positive change:
- Reducing greenhouse gas emissions on and off farm
- Eliminating water degradation
- Incentivising farmers to improve practices and
eliminate unsustainable feed supplies
- Installation of New Zealand’s first large scale
electrode boiler
• And leading the way for transparency in our industry:
- B-Corp certification in 2019
- Committed to Science Based Targets Initiative (SBTI)
- CDP reporting of climate impact
PG 9
Synlait Milk Limited

I

HEART
OUR PURPOSE
HEAD
OUR AMBITION
HANDS
OUR STRATEGY
DOING MILK
DIFFERENTLY FOR A
HEALTHIER WORLD
PG 10
Synlait Milk Limited

I

2b in revenue
Doubling ourbusiness
1b to 2b in 5years
OUR AMBITION = OUR FORMULA FOR SUCCESS
PG 11
Synlait Milk Limited

I

Net +ve impact on
planet andcommunities
+ve place to growwith
100%engagement
OUR AMBITION = OUR FORMULA FOR SUCCESS
PG 12
Synlait Milk Limited

I

Zeroinjuries
Zerodefects
Zerolosses
OUR AMBITION = OUR FORMULA FOR SUCCESS
PG 13
Synlait Milk Limited

I

OUR STRATEGY
DOING MILK
DIFFERENTLY
Infant
Nutrition
Everyday
Dairy
Sports
Nutrition
FoodserviceNext
Big Thing
OUR GROWTH STRATEGY
FOR A HEALTHIER WORLD
Build a
Healthier
Synlait
Net Positive
for the Planet
World Class
Value Chain
OUR ENABLING STRATEGY
PG 14
Synlait Milk Limited

I

OUR GROWTH STRATEGY
Everyday
Dairy
Next
Big Thing
Sports
Nutrition
BRAND
PROTEIN
CONSUMER
Ingredient Sales
Infant
Nutrition
SKIM
Foodservice
FAT
CAPTURE MORE
OF THE VALUE
MAXIMISE OUR
BUCKET OF MILK
OPTIMISE ASSETS
PG 15
Synlait Milk Limited

I

OUR GROWTH STRATEGY
Sports
Nutrition
Everyday
Dairy
Infant
Nutrition
Foodservice
Next
Big Thing
WANT
TO DO
WANT
TO DO
CAN DOMUST DOCAN DO
PG 16
Synlait Milk Limited

I

FOR A HEALTHIER WORLD
Build a
Healthier
Synlait
Net Positive
for the Planet
World Class
Value Chain
OUR ENABLING STRATEGY
OUR STRATEGY
DOING MILK
DIFFERENTLY
Infant
Nutrition
Everyday
Dairy
Sports
Nutrition
FoodserviceNext
Big Thing
OUR GROWTH STRATEGY
PG 17
Synlait Milk Limited

I

WHAT MAKES US DIFFERENT
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
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
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
PACKAGING
- Ownership of brand
registrations
- Two state-of-the-art
canning lines
CUSTOMERS
- Our brand partners market, promote,
and distribute their products
CONSUMERFULL LOGISTICS SERVICES
- Integrated onsite storage & logistics
- Export shipping & airfreight capability
- Tailored to customer requirements
RAW MATERIALS
PROCUREMENT
- Source high quality ingredients
& packaging
- Agile and risk based approach based
on customer needs
- Robust supplier Quality Management
PG 18
Synlait Milk Limited

I

OUR CURRENT DIFFERENTIATORS
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
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
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
PACKAGING
- Ownership of brand
registrations
- Two state-of-the-art
canning lines
CUSTOMERS
- Our brand partners market, promote,
and distribute their products
CONSUMERFULL LOGISTICS SERVICES
- Integrated onsite storage & logistics
- Export shipping & airfreight capability
- Tailored to customer requirements
RAW MATERIALS
PROCUREMENT
- Source high quality ingredients
& packaging
- Agile and risk based approach based
on customer needs
- Robust supplier Quality Management
1
23
PG 19
Synlait Milk Limited

I

OUR FUTURE DIFFERENTIATORS
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
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
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
PACKAGING
- Ownership of brand
registrations
- Two state-of-the-art
canning lines
CUSTOMERS
- Our brand partners market, promote,
and distribute their products
CONSUMERFULL LOGISTICS SERVICES
- Integrated onsite storage & logistics
- Export shipping & airfreight capability
- Tailored to customer requirements
RAW MATERIALS
PROCUREMENT
- Source high quality ingredients
& packaging
- Agile and risk based approach based
on customer needs
- Robust supplier Quality Management
4
5
SUSTAINABILITY
PG 20
Synlait Milk Limited

I

HEART
OUR PURPOSE
HEAD
OUR AMBITION
HANDS
OUR STRATEGY
DOING MILK
DIFFERENTLY FOR A
HEALTHIER WORLD
PG 21
Synlait Milk Limited

I

TRACK RECORD OF SUCCESSFUL ASSET BUILDS
Net operating assetsNet debt / EBITDA
After a period of consolidation, our
strong balance sheet has facilitated
our second major growth phase.
We are currently investing over
$400m into our major growth
projects. Executing these projects,
in preparation for our next phase of
growth, has been our key focus over
the last 18 months.
Synlait achieved a 22.7% net return on
capital employed (pre-tax) in FY18.
Net Operating Assets and Gearing
FY09FY10
NZ$ millionsNet Debt / EBITDA
FY11FY12FY13FY14FY15FY16FY17FY18
600
500
400
300
200
100
-
12.0x
10.0x
8.0x
6.0x
4.0x
2.0x
.0x
93.9
96.6
81.6
186.5
267.0
311.8
323.2
455.2
423.5
493.3
-3.7%3.8%0.0%7.8%12.9%11.8%7.3%14.5%14.8%22.7%Return on capital employed (pre-tax)
PG 22
Synlait Milk Limited

I

POKENO UPDATE
• In February 2018 Synlait announced the conditional purchase of 28 hectares of land in Pokeno to
establish its second nutritional powder manufacturing site.
• In November 2018 the High Court removed covenants over the land which would hinder Synlait’s

development of the land. Synlait then took ownership of the land.
• In May 2019 the Court of Appeal overturned the High Court decision to remove historic covenants.
• In June 2019 Synlait filed for leave to appeal to the Supreme Court as part of the ongoing legal

process to keep our options open.
• It is important to recognise:

- These covenants are privately held to protect quarrying interests on the land adjacent to our site.
- Our development is completely consistent with the industrial zoning for the site and the surrounding area,
which includes other industrial developments and infant nutrition facilities.
• We are in continued conversations with all parties and we remain confident of a positive outcome.
• Plans for the Pokeno site haven’t changed and we continue to work towards the existing project

timetable including the build, commissioning and production.
PG 23
Synlait Milk Limited

I

SUPPLY CHAIN
ROB STOWELL
GENERAL MANAGER, SUPPLY CHAIN
PG 24PG 24
Synlait Milk Limited

I

CONTINUOUS IMPROVEMENT STREAM - IBP OLIVER WIGHT CLASS A ACCREDITATION
PLAN
Proven ability to build our value chain ahead of customer
demand curve and optimise our manufacturing assets
• Investments ahead of the curve in:
- Categories and customer strategy
- Differentiated milk supply
- Strong supply partners
- Manufacturing plant
- Logistics and shipping networks
• Optimisation and utilisation of our manufacturing assets
is a key competitive advantage i.e. Infant Formula
production and milk trading processing
• IBP (Integrated Business Planning) key to planning
and execution of our business
- Owned by CEO and SLT
- Monthly cycle
- Cross functional
- Three-year horizon linked to strategy
- Driving alignment, agility and maturity
Historical Production and Milk Supply
Production volume CAGR: 17%
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
80
70
60
50
40
30
20
10
0
MTkgMS (millions)
FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18
Production VolumekgMS processed (000’s)
PG 25
Synlait Milk Limited

I

SOURCE
Our differentiated milk supply and procurement functions give
Synlait a big edge and enable us to manufacture specialty
products with a higher value, starting behind the farm gate
• Expanded Procurement and Milk Supply teams managing rapid
growth and change in the industry
• We partner with the best suppliers who can grow with us and
have similar values
• Lead With Pride
TM
(LWP)
- Implemented in 2013 to financially reward suppliers who
achieve dairy farming best practice
- Enables our world-leading customers to differentiate
their products through our authentic approach to Dairy
Best Practice across four pillars: People, Animal Welfare,
Environment, Milk Quality
- Financial incentives increased in FY19
- 43 new LWP farms this year, taking total Certified to 93
- Momentum - expect 70 new Certified farms during FY20
- Big focus on environmental sustainability and technology
on-farm across the team
CONTINUOUS IMPROVEMENT STREAM - SOURCING MATURITY TRANSFORMATION AND LEAD WITH PRIDE
TM
PG 26
Synlait Milk Limited

I

SOURCE
The successful Pokeno milk supply set-up was our
first important step into the North Island market
• Volume in-line with targets
• 56 farms and ~11m kgMS contracted
• High quality farmers
• Farms must be Lead With Pride
TM
Certified
within three years
• a2 milk pool development supportive
of future growth
POKENO
Shaded area: 150km milk collection radius
PG 27
Synlait Milk Limited

I

DELIVER
FY18 sales revenue by geographical area. 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 customers in the China market.
SALES BY GEOGRAPHIC REGION
9
%
Middle East
& Africa
32
%
Asia
3
%
Other
56
%
Australia &
New Zealand
Our customers are demanding shorter lead-times,
greater product security and traceability
• Strategy is to create sticky relationships with
customers through a single point of contact
for logistics services including:
- Modern Warehousing (SES)
- Export Documentation
- Palletisation (ANZ/ASIA)
- Containerisation Services
- Shipping Services
• Plans to radically simplify our logistics networks
are well underway in FY19 and this will have
significant cost benefits in FY21
• DIFOTIS is one of our key supply chain metrics
and has performed well at 98% in FY19
• Big focus on inventory management in FY20.
Tighter targets and improved customer terms
CONTINUOUS IMPROVEMENT STREAM - SHORTER LEADTIMES, INVENTORY MANAGEMENT, TRACEABILITY
PG 28
Synlait Milk Limited

I

MANUFACTURING
EXCELLENCE
ANTONY MOESS
GENERAL MANAGER, MANUFACTURING

PG 29PG 29
Synlait Milk Limited

I

MAKE
Integrated Work Systems (IWS) driving manufacturing
efficiencies which allowed 12.4% more milk to be processed
off the same asset base in H1 FY19
- 5% increase in dryer availability 2018/2019
- 5% increase in dryer speed 2018/2019
- Canning line at Dunsandel has experienced a 95% reduction
in stops, translating to a 22% increase in throughput over an
18 month period
• Milk segregation continues through plants
• Quality control at all points
• Synlait operates world class facilities
- Large scale and efficient
- Infant powder manufacturing from fresh milk
- Optimised milk curve for flexible assets
- Fast commodities / slower infant rates = balanced milk year
CONTINUOUS IMPROVEMENT STREAM - INTEGRATED WORK SYSTEMS
PG 30
Synlait Milk Limited

I

ASSET CONSTRUCTION
~$1 billion of assets built / purchased
over 12 years
• IBP process drives capital plan
- New opportunities
- Risk management
- Category diversity
- Volume growth
- Technology innovations
• Execution at speed and with
excellence
• High confidence in our standards
and design thinking
HIGH SPECIFICATION
SPRAY DRYERS
INGREDIENTS
CHEESELONG LIFE LIQUID
AND CULTURED
FRESH MILK
WETMIX KITCHENS
LACTOFERRIN
ADVANCED LIQUID
+ CHEESE
CONSUMER PACKAGING
CONTRACTED FARMS
Infant Nutrition
Ingredients
Everyday Dairy
EXCELLENCE ACROSS A RANGE OF MANUFACTURING PROCESSES AND ASSETS
PG 31
Synlait Milk Limited

I

EXPLORING NEW CATEGORIES WITH EVERYDAY DAIRY EXPANSION
Liquid Milk Plant
• Construction executed at speed and on time
• Supply commenced in early April 2019
• 10-year minimum term contract as exclusive supplier
of private label product range
• World class facility with flexibility
• Evaluating other high-returning,
fast-growing pasteurised and long-life dairy beverages
Talbot Forest Cheese
• The Talbot Forest Cheese (TFC) production strategy will
assist the Synlait Dunsandel plant in managing the impact
of the seasonal milk curve
• During peak milk, maximising milk processing at TFC will
enable more nutritional products to be manufactured at
Dunsandel, reducing milk sales to external parties
• Some cheese plant by-products (such as cream) will also be
processed back into the AMF plant to utilise spare capacity
PG 32
Synlait Milk Limited

I

POKENO
• Third 10 MT/hour dryer from TetraPak for consistency of product
• Staff recruited and now training at Dunsandel
• Still targeting first milk in early September
• Project remains on budget
• Excited to be part of Pokeno community and the region
• Large site gives us potential to continue to grow in the future
PG 33
Synlait Milk Limited

I

QUALITY AND
R E GU L ATO RY
DR. SUZAN HORST
DIRECTOR, QUALITY REGULATORY
AND LABORATORY SERVICES
PG 34
Synlait Milk Limited

I

• Creating value for consumers and customers by offering an attractive range of
high quality and safe dairy products
• Combining agility in innovation and execution, with reliable high quality and safety
• Ensure that all products in-market are safe and compliant
• Provide cutting edge knowledge and experience on quality and regulatory,

which is key to opening and maintaining market access
• We feed the most vulnerable and smallest consumers. Food safety and quality is
what earns us our market position and that’s why it is front and centre in all we do
SYNLAIT QUALITY PURPOSE
PG 35
Synlait Milk Limited

I

QUALITY BY DESIGN
You cannot inspect quality into a product, it has to be ‘built in’
• ‘Built in’ quality is even more important for fresh liquid products
• End product testing is important for compliance and trust, but
Right First Time manufacturing is key for customer satisfaction
• RMP (Risk Management Programme) spans on-farm practices,
milk collection, material sourcing and manufacturing processes
through to laboratory testing, warehousing and logistics
- All externally audited every three months
• Third party certificates such as China Dairy HACCP and
FSSC22000 help us to keep our system up to standard
Everyone owns quality
‘BUILT IN’
Product Safety and Quality
END PRODUCT TESTING
For Compliance and Trust
RIGHT FIRST TIME
Manufacturing
PG 36
Synlait Milk Limited

I

QUALITY
The key areas that we focus on every day at every site:
• Compliance – NZ regulations, China GB regulations, China OMAR
and customer specific requirements
• Meeting the expectations of our customers and consumers
• Ensuring the hygienic status of the manufacturing plant
• Supporting all operations from receipt of raw materials through
manufacturing and releasing finished product to the customer
• Releasing finished product, raw materials and other incoming
and outgoing items
• Internal and external audit programmes to ensure compliance
• Validation of processes and systems
• Change Control programme for the sites
• Quality is made by people, not by paper
• The Quality team guides and supports the organisation
PG 37
Synlait Milk Limited

I

IN-HOUSE LABORATORY
We perform over 500.000 tests a year, on raw materials,
final products, during processing and on the manufacturing
environment (hygiene swabbing)
• Synlait has a dedicated chemistry laboratory,
a microbiology laboratory, and in-process laboratories
inside each dryer and in the liquid factory which are
ISO 17025 certified and AINZ accredited
• These laboratories allow us to complete 70% of our
product testing requirements on-site
- We outsource 30% of our tests to a limited number of
external laboratories to mitigate risks and maximise
expertise
• Our own laboratory gives us greater control and visibility
around our products and we benefit from having
substantial technical competence on-site
PG 38
Synlait Milk Limited

I

NEW ZEALAND REGULATORY MODEL
Infant Formula is the most regulated food product
in the world – it is the only food provided to some
infants in their first months of life
• All infant formula manufacturing plants need to
be registered with the GACC (customs authority)
to assure compliance with Infant Formula and
manufacturing standards
• Because the manufacturer controls quality, the
manufacturer is registered alongside the product
in most markets. Synlait registers the brands our
B2B customers sell
• New Zealand’s MPI plays an important role by
completing relevant assessments and audits
on behalf of food safety authorities in other
countries
• GACC approval validity differentiates between
General Dairy and Infant Formula - General
Dairy does not need renewal, Infant Formula is
renewed every four years
RMP, HACCP plans, GMP
Hazard and risk-based
Demonstrating compliance
Regulated Parties
(industry)
Independent audit
Confirming compliance
Recognised
Agencies
New Zealand’s Food Safety Authority
Set standards
Provide assurances to other countries
Regulator
(Government)
SYNLAIT MILK
ASUREQUALITY
MPI
PG 39
Synlait Milk Limited

I

INTERNATIONAL REGISTRATIONS
We remain committed to our globally diversified portfolio of
Infant Nutrition brands as they undertake China / U.S. regulatory
approvals
• Regulatory team includes dedicated staff at our office in Beijing
and Shanghai who are currently working through the registrations
of our Akara and Pure Canterbury brands with SAMR
- Expect approval of Akara and Pure Canterbury in 2019
• Auckland plant has achieved GACC dairy registration and is
progressing with the GACC infant formula milk powder process
• Munchkin’s U.S. FDA registration process remains on hold
• Recent publications (eg NDRC) confirmed the direction taken
by China in the last two years of a continuous tightening of the
regulatory environment for infant nutrition importers
PG 40
Synlait Milk Limited

I

BUSINESS
DEVELOPMENT
AND INNOVATION
MARTIJN JAGER
DIRECTOR, SALES AND

BUSINESS DEVELOPMENT
PG 41
Synlait Milk Limited

I

INFANT NUTRITION
China is expected to remain one of the fastest growing
Infant Nutrition markets globally
• Continued commitment to support the a2 Milk
Company’s
TM
growth
• Investing in supply chain optimisation, new product
development, services, China-market access
• Exploring new formats, milk streams, on-farm practices,
adjacent categories and new markets
• Investment in product quality and efficiencies through
process technology, packaging and formulation
improvements
Top 10 Countries by Value Share
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
14%
12%
10%
8%
6%
4%
2%
0%
Million USDCAGR
CHINA
USA
INDONESIA
HON KONG, CHINA
VIETNAM
SAUDI ARABIA
MEXICO
PHILLIPINES
THAILAND
RUSSIA
Retail Value (USDm)2018-22e CAGR
Source ©Euromonitor International
9%
2%
3%
6%
5%
5%
6%
7%
9%
13%
Infant
Nutrition
PG 42
Synlait Milk Limited

I

FOODSERVICE
Targeted and phased approach to NPD with selected
go-to-market partners
• Large, traditional market leaders, channels and models
• Capture value share of selected channels and
applications
• Leverage Dunsandel and Palmerston North plant
and staff capability
Foodservice
China: Food Service by Type (Value) 2013-2023
20132014201520162017201820192020202120222023
Cafés/Bars
2013-2018 ACT CAGR 6.4%
2018-2023 FCST CAGR 5.1%
Full-Service RestaurantsLimited-Service Restaurants Self-Service CafeteriasStreet Stalls/Kiosks
2%
73%
23%
23%
22%
21%
21%
20%
20%
20%
19%
19%
19%
898
854
810
765
718
700
646
616609
567
514
74%
75%75%
75%
75%
75%
76%
76%
76%
76%
2%2%2%2%2%3%3%3%3%3%
PG 43
Synlait Milk Limited

I

EVERYDAY DAIRY
Attractive profitable, scalable opportunities
• FSSI liquid milk and cream contract underwrites new
capability, Talbot Forest Cheese optimises supply chain,
and Palmerston North liquid capability supports innovation
• Leverage Synlait’s full value chain, 21st century milk
proposition and disruptive partnership and business models
• Explore opportunities in Asia Pacific within everyday dairy
Everyday
Dairy
PG 44
Synlait Milk Limited

I

SPORTS NUTRITION
Targeted approach to previously identified
Adult Nutrition category
• Fragmented, growing (10.4% forecast CAGR),
profitable category with scale
• Rapidly evolving to specific consumer needs
and product formats
• Opportunities to leverage Synlait’s powder
and liquid capability
• Test and learn the category to develop future
insights and partnering
Sports
Nutrition
Global Category Leaders are Consolidating their Position
Global Top 10Global OthersGlobal Top 10Global Others
20132018
Source ©Euromonitor International
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Global Sports Nutrition Market
$30.0
$25.0
$20.0
$15.0
$10.0
$5.0
$-
Retail Value USD Billions
10.4% Forecast Growth
PG 45
Synlait Milk Limited

I

NEXT BIG THING
New opportunities emerging outside the four growth pathways
• Continually monitoring early changes in consumer behavior,
science, technology, new channels, models, and investment
opportunities
• Capture position by testing and learning, before targeting scale
• Maintain focus of resources on strategic areas
Next
Big Thing
Harness our people’s creativity and give them the tools
to bring it to life in an accelerated way at Synlait
PG 46
Synlait Milk Limited

I

INNOVATION AND TECHNICAL
Scope includes new product development (farm to
consumer), new technology and process development,
sales support, operations support
• Technical team grew from 32 to 47 in FY19
• Six managers have average experience of 24 years
• Strong innovation partnerships with leading research
organisations within New Zealand and overseas
• Targeted investment of 1.5% of revenue in innovation
and technical annually
PG 47
Synlait Milk Limited

I

SYNLAIT LIQUID DEVELOPMENT CENTRE
AND PILOT PLANT PALMERSTON NORTH
• Team grew from 5 to 11 in FY19
• Synlait pilot plant ‘Syndi’ commissioned in October 2018 has
already tested 39 new products and conducted 4 trials
• Access to largest and best equipped publicly accessible pilot
plant in the Southern Hemisphere
• Based at Massey University offering access to an extensive
network of expertise
- Trained chefs, food technologists and scientists
- Extensive lab facilities covering multiple disciplines
- Palmerston North the hub of dairy R&D in New Zealand
• Synlait facilities include large office and own R&D laboratory
PG 48
Synlait Milk Limited

I

SUSTAINABLE
VALUE CHAIN
HAMISH REID
DIRECTOR, SUSTAINABILITY
AND BRAND
PG 49
Synlait Milk Limited

I

SYNLAIT ’S PIVOT
PG 50
Synlait Milk Limited

I

WE’RE TAKING A STAND
PG 51
Synlait Milk Limited

I

LIVING WELL WITHIN THE
BOUNDARIES OF OUR PLANET
PG 52
Synlait Milk Limited

I

PG 53
Synlait Milk Limited

I

DOING MILK
DIFFERENTLY FOR A
HEALTHIER WORLD
PG 54
Synlait Milk Limited

I

DOING MILK
DIFFERENTLY FOR A
HEALTHIER WORLD
ENVIRONMENT
PEOPLE
ENTERPRISE
PG 55
Synlait Milk Limited

I

Enterprise
21st century milk nutrition company.
Our heart is in NZ, our head is in
the world. Returning an economic
glow for NZ.
People
Creating opportunities for all to
thrive. A fanbase transforming
our industry; a positive legacy for
future generations.
Environment
Synlait’s net business impact is positive for
the planet. Regenerative agriculture,
manufacturing + supply chain.
DOING MILK
DIFFERENTLY FOR A
HEALTHIER WORLD
ENVIRONMENT
PEOPLE
ENTERPRISE
PG 56
Synlait Milk Limited

I

DOING MILK
DIFFERENTLY FOR A
HEALTHIER WORLD
CIRCULAR
ECONOMY
WELFARE
WATER
SUSTAINABLE
SUPPLY
TRANSPARENCY
HEALTHY
FARMING
SAFE FOOD
CLIMATE
CAPABILITY
CULTURE AND
COMMUNITY
SAFE
WORKPLACE
ENVIRONMENT
PEOPLE
ENTERPRISE
PG 57
Synlait Milk Limited

I

Synlait GHG Inventory FY18
912k tonnes CO2-e
83% On-Farm
12% Coal
3% Freight
2% Other
912K TONNES CO2E 1.1% OF ALL NZ
PG 58
Synlait Milk Limited

I

69% Coal
20% Freight
5% Electricity
4% Transport
2% Other
Synlait GHG Inventory FY18
(excluding farms)
157k tonnes CO2-e
PG 59
Synlait Milk Limited

I

0
10
1960
37.1 Gt CO
Global Carbon Project Data CDIAC/GCP/BP/USGS
1970
1980
1990
2000
2010
2018
20
30
40
GLOBAL FOSSIL CO EMISSIONS
BOOST TO LEAD WITH PRIDE
TM
PG 60
Synlait Milk Limited

I

INSTALLED NZ’S FIRST
E
LEC TRODE BOILER
PG 61
Synlait Milk Limited

I

CLIMATE
PG 62
Synlait Milk Limited

I

ONFARM INITIATIVES
35% PER KGMS BY 2028
2019
2018
2020
2021
2022
2023
2024
2025
2026
2027
2028
100,000
0
200,000
300,000
400,000
500,000
600,000
800,000
700,000
PG 63
Synlait Milk Limited

I

OFFFARM INITIATIVES
50% PER KG PRODUCTION BY 2028
2019
2018
2020
2021
2022
2023
2024
2025
2026
2027
2028
0
20,000
40,000
60,000
100,000
120,000
140,000
160,000
180,000
80,000
PG 64
Synlait Milk Limited

I

WATER
PG 65
Synlait Milk Limited

I

ON FARM NLOSS
45% PER KGMS BY 2028
2019
2018
2020
2021
2022
2023
2024
2025
2026
2027
2028
0
20,000
40,000
60,000
100,000
120,000
80,000
PG 66
Synlait Milk Limited

I

CULTURE & COMMUNITY
PG 67
Synlait Milk Limited

I

PG 68
Synlait Milk Limited

I

TRANSPARENCY
PG 69
Synlait Milk Limited

I

PG 70
Synlait Milk Limited

I

PG 71
Synlait Milk Limited

I

LIVING WELL WITHIN THE
BOUNDARIES OF OUR PLANET
PG 72
Synlait Milk Limited

I

CLOSING
REMARKS
GRAEME MILNE
CHAIRMAN
PG 73PG 73
Synlait Milk Limited

I

DAIRY INDUSTRY DYNAMICS
• Greenhouse Gas (GHG) footprint – on farm, transportation and processing
• Water quality and nitrate leaching
• Zero Carbon Bill and pricing of agricultural emissions
• Trends in overall New Zealand milk pool
• Dairy Industry Restructuring Act (DIRA) review
• Performance of Fonterra
• Westland sale
• New Zealand dairy industry performance vs. global competitors vs. China domestic
• China infant formula registration regulations
PG 74
Synlait Milk Limited

I

CLOSING REMARKS
• Synlait’s competitive advantage lies in its full service offering to customers
• We are a young, pioneering New Zealand-based company that is shifting perceptions and driving value
through new thinking, and a new attitude
• We harness New Zealand’s natural assets, and combine expert farming with state-of-the-art processing
to produce a range of nutritional milk products for our global customers
• As we enter the next phase of Synlait’s evolution we retain our growth company mentality
• Synlait has a track record of moving up the value chain from dairy commodity powders, to infant formula
and driving high returns on capital. We are looking to replicate this approach in new categories
• We are nearing the end of our second major growth phase with over $400m into our major growth
projects. Our focus remains deepening relationships with existing customers and building into new
categories with new customers
PG 75
Synlait Milk Limited

I

PG 76
Synlait Milk Limited

I
DOING MILK DIFFERENTLY FOR A HEALTHIER WORLD
Thank You
PG 76