Synlait Annual Meeting 2021

Synlait Milk Limited · 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand · +643 373 3000 · www.synlait.com





NZX: SML
ASX: SM1


1 December 2021

Synlait Annual Meeting 2021

Please see attached presentation which will be delivered to shareholders by Synlait Chair, Graeme
Milne, and CEO, John Penno, at the company’s Annual Meeting commencing at 1.00pm today online.

To access the meeting please go to: www.meetnow.global/nz


More details about joining the meeting can be found in the Notice of Meeting.

A replay of the Annual Meeting will be available at the link below following the meeting:

https://www.synlait.com/investors/


For more information contact:
Hannah Lynch
Corporate Affairs Manager
P: +64 21 252 8990
E: hannah.lynch@synlait.com

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WELCOME TO
SYNLAIT’S ANNUAL MEETING
1 December 2021

VOTING ONLINE
• Voting is now open.
• To vote, click on the vote tab, and select
your preferred option. Once your vote has
been cast a tick will appear.
• You can vote for all resolutions at once or
by each resolution.
• There is no submit or send button, your
selection is automatically recorded, it can
be changed up until the time voting closes.
PAGE 02SYNLAIT ANNUAL MEETING 2021

ASKING A
QUESTION ONLINE
• To ask a question click on the Q&A icon.
• Click on the box, type your question, and
press submit.
• Your question will be asked at the
appropriate part of the meeting.
• Please ensure questions are succinct,
clear and relevant to the meeting.
• Questions submitted ahead of the meeting
will be answered during general business.
PAGE 03SYNLAIT ANNUAL MEETING 2021

NEED HELP?
• Check the virtual meeting guide on Synlait’s
website.
• Call the Computershare team on +64 9 488 8777
• Use the Q&A tab to message a Computershare
representative.
PAGE 04SYNLAIT ANNUAL MEETING 2021

CHAIR ADDRESS
Graeme Milne ONZM
PAGE 05SYNLAIT ANNUAL MEETING 2021

TODAY’S AGENDA
• Chair Address
• CFO Address
• CEO Address
• Resolutions and Voting
• Other Business
PAGE 06SYNLAIT ANNUAL MEETING 2021

INTRODUCING MIN CHEN
Bright Dairy Appointed Director
• Min Chen to replace Min Ben as a Bright Dairy
Appointed Director, effective today.
• Min joined Bright Dairy in 2007 as senior
Finance Manager, responsible for budget
planning, data analysis and business evaluation.
• Since 2016, she has been Chief Internal Auditor
of Bright Dairy, reporting to the company’s
Audit Committee Chair and Board of Directors.
PAGE 07SYNLAIT ANNUAL MEETING 2021

FY21 PROVED TO BE VERY
CHALLENGING FOR SYNLAIT
• After nine straight years of profitability we were disappointed
to post our largest ever financial loss of $(28.5) million.
• The shape of Synlait changed dramatically in December
following The a2 Milk Company’s large forecast volume
reduction, which meant inventory levels and demand outlook
had to be reset – a classic bullwhip effect.
• The switch to ingredients production was sudden and
happened as global commodity markets firmed, and shipping
delays intensified, making it harder to find new customers
and achieve the usual ingredient premiums.
• While our diversification strategy was underway, this sudden
change unfortunately reaffirmed our over reliance on one
product, one customer, and one market.
• $200 million of equity raised in November 2020 was
considered prudent and proved to be the case.
PEAK MILKSHOULDER SEASON
December 2020
Downgrade
FY20FY21
VOLUMES
Synlait Production
Output
Customer
Projected Demand
Customer
Demand
INDICATIVE ONLY
?
The Bull-Whip Effect
PAGE 08SYNLAIT ANNUAL MEETING 2021

WE HAVE RESET AND ARE
READY FOR WHAT COMES NEXT
During the last quarter of FY21 we carried out a comprehensive
analysis of our performance and developed a plan to rebuild.
We concluded five things:
Our strategy remains fit for purpose, however, execution clearly needs to improve.
We have aligned structure to strategy, appointed a CEO,
and are proposing Governance changes to shareholders today.
We have reset our banking arrangements.
We have made changes to release cash from inventory and improve working
capital management.
We have built a plan to return to robust profitability over FY22 and FY23.
1
3
4
5
2
PAGE 09SYNLAIT ANNUAL MEETING 2021

CFO ADDRESS
Robert Stowell
PAGE 10SYNLAIT ANNUAL MEETING 2021

OBVIOUSLY FY21 WAS A DISAPPOINTING RESULT
65M
REVENUE
$
1.4B
103M
9%
$0.52 kgMS
85%
N PAT
NET DEBT
TOTAL AVERAGE MILK PRICE
OPERATING CASH FLOW
$
(28.5)M
$
479.4M
$
7.82kgMS
$
15.9M
132M
EBITDA
$
3 7. 3M
Key Performance Metrics
PAGE 11SYNLAIT ANNUAL MEETING 2021

A COMPREHENSIVE REVIEW AND SET OF ACTIONS HAVE
BEEN PUT IN PLACE FOR FY22 TO IMPROVE PERFORMANCE
• While the key impact in FY21 was The a2 Milk Company’s consumer-
packaged infant formula volume reduction – pleasing progress is
being made in a range of other areas.
• Key actions implemented:
• Ingredients Business
• Nutritional Business
• Beverages & Cream Business
• Consumer Foods Business
• People Structures
FY22FY22
PROFITABILITY
NET DEBT
• Working Capital Management
• Treasury Management
• Operations Management
• Cost Management
• Capital Projects
PAGE 12SYNLAIT ANNUAL MEETING 2021

CEO ADDRESS
Dr. John Penno
PAGE 13SYNLAIT ANNUAL MEETING 2021

OUR STRATEGY REMAINS FIT FOR PURPOSE
$2 billion in revenue
Zero injuries
Zero defects
Zero losses
A Healthier
Synlait
Consumer
Foods
Ingredients
Nutritionals
Beverages
and Cream
2
+
ZERO
World Class
Value Chain
Net +ve impact on
planet and communities
+ve place to grow with
100% engagement
Net Positive
for the Planet
DOING MILK
DIFFERENTLY FOR A
HEALTHIER WORLD
DOING MILK DIFFERENTLY
FOR A HEALTHIER WORLD
HEART OUR PURPOSEHEAD OUR AMBITIONHANDS OUR STRATEGY
PAGE 14SYNLAIT ANNUAL MEETING 2021

ALIGNING STRUCTURE TO STRATEGY
Marketing, Sales and
Business Development
Chief Financial OfficerOperations
Marketing and Business
Development
Sales and Business
Development
Dedicated Finance
Manager
Dedicated Finance
Manager
Dedicated Finance
Manager
Sales and Business
Development
Deborah Marris
Director – Legal, Risk
and Governance
Boyd Williams
Director – People
and Culture
Robert Stowell
Chief Financial
Officer
Nigel Macdonald
Director –
Operations
Suzan Horst
Quality, Regulatory and
Laboratory Services
Martijn Jager
Director – Nutritional
and Ingredients
Hamish Reid
Director – Sustainability,
Brand, Beverages and Cream
Tim Carter
Dairyworks Chief
Executive Officer
Chris France
Director – Strategy and
Business Transformation
Business teams with P&L responsibility
Business teams with P&L responsibility
Business teams with P&L responsibility
DAIRYWORKS
INGREDIENT PRODUCTS
NUTRITIONAL PRODUCTS
Grant Watson
Chief Executive Officer
Quality ManagementSynlait Dunsandel: D3,
wetmix, lactoferrin, whey
and blending and canning
Synlait Pokeno
Synlait Auckland
Synlait Dunsandel:
D1, D2 and AMF
Talbot Forest Cheese
Synlait Dunsandel:
DLP1
Quality Management
Quality Management
BEVERAGES AND CREAM PRODUCTS
PAGE 15SYNLAIT ANNUAL MEETING 2021

An efficient and focused business that manufactures high-quality
whole and skim milk powder and milk fat products from a differentiated
milk supply for leading multinationals and large Chinese customers.
INGREDIENTS
Our FY22 focus is to:
Separate out this business to enable a renewed focus on
facility utilisation, manufacturing efficiencies and supply chain
management, and generate a cost structure on par with
Synlait’s competitors.
Prioritise sales strategies to be an optimum blend of long-term
relationships with multinational customers, delivering premium
pricing for high specification products, and a sufficient spot
business to optimise product mix as market pricing fluctuates.
1
2
PAGE 16SYNLAIT ANNUAL MEETING 2021

A whole of supply chain solution for large-scale, world-
class, multinational brand owners of formulated nutritional
powders and specialised nutritional ingredients.
NUTRITIONALS
Our FY22 focus is to:
Develop and maintain relationships with large multinational and
Chinese customers by leveraging our current capability and assets.
Grow this business to high levels of utilisation over the next three
years. This will be driven by:
• Some recovery in The a2 Milk Company’s consumer-packaged
infant formula volumes;
• New volumes from Synlait Pokeno’s multinational customer once
commercial production commences;
• The rebuild of Synlait’s infant base powder business, as new
demand emerges from large Chinese manufacturers as their market
share growth exceeds their own manufacturing capacity; and
• Synlait’s global lactoferrin business.
1
2
PAGE 17SYNLAIT ANNUAL MEETING 2021

A growing business focused on product development to manufacture
high specification, long-life consumer-packaged beverages,
foodservice cream products, and ready to feed infant formula.
BEVERAGES AND CREAM
Our FY22 focus is to:
Develop this new high-value, future-focused product suite aimed at the
China, Australia and New Zealand markets.
Strategy based on a strongly held view that China will move away from
powdered products to fresh or long-life milk products packaged at the
source and shipped to market ready for distribution and sale.
Taking the same approach as with our lactoferrin busines as capability
investment already made in Dunsandel’s Liquids Facility and the Research
and Development Team based at Massey University in Palmerston North.
Strong product pipeline developing:
• Launched – Synlait Swappa Bottle and Dairyworks fresh milk range
for Foodservice.
• Progressing – UHT whipping cream and ambient drinking yoghurt.
1
2
3
4
PAGE 18SYNLAIT ANNUAL MEETING 2021

A manufacturer of consumer fresh milk, cheese, butter,
and yoghurt products under our own and/or private label brands.
CONSUMER FOODS
DAIRYWORKS
Our FY22 focus is to:
Grow Dairyworks to become the second biggest player in New
Zealand’s consumer dairy food category.
Top line growth to be delivered across:
• Exports to China and Australia.
• Expansion of New Zealand Foodservice business.
• Continued product innovation.
Roll out lean manufacturing as operational efficiency and cost control
remains a key focus.
Investment in whey facility at Synlait Dunsandel to standardise cheese
milk for delivery to Talbot Forest Cheese reducing yield losses.
1
2
3
4
PAGE 19SYNLAIT ANNUAL MEETING 2021

WE REMAIN CONFIDENT
IN OUR FY22 GUIDANCE
Synlait expects its Net Profit After Tax result to return
to robust profitability in FY22 based on:
• A return to normal trading conditions and tighter
management of its Ingredients business;
• Improved infant base powder volumes;
• A growing contribution from its Beverages and
Cream and Consumer Foods business units; and
targeted and significant cost savings from Synlait,
Dairyworks and Talbot Forest Cheese.
FY22 will also include a one-off gain on sale of
approximately $17 million from the sale and leaseback
of the land and building at Synlait Auckland.
Synlait’s performance will build into FY23 as its new
multinational customer at Synlait Pokeno ramps up, and its
Beverages and Cream and Consumer Foods businesses
continue to grow.
Planned reductions in inventory at Synlait and Dairyworks
will generate operating cashflows in excess of earnings.
These strong cashflows will enable Synlait to complete
its capital expenditure programme and reduce debt to
comfortable levels over the next two years.
By the end of FY23, we expect the recovery plan will have
seen Synlait return to similar levels of profitability, operating
cash flows, and debt ratios as the years leading into FY21.
PAGE 20SYNLAIT ANNUAL MEETING 2021

QUESTIONS

ASKING A
QUESTION ONLINE
• To ask a question click on the Q&A icon.
• Click on the box, type your question, and
press submit.
• Your question will be asked at the
appropriate part of the meeting.
• Please ensure questions are succinct,
clear and relevant to the meeting.
• Questions submitted ahead of the meeting
will be answered during general business.
PAGE 22SYNLAIT ANNUAL MEETING 2021

RESOLUTIONS
AND VOTING

YOUR 2022
BOARD STRUCTURE
• When Grant Watson starts as CEO Graeme
Milne will retire as Chair and be appointed
as a Board Advisor for one year.
• John Penno will be appointed Chair
when Graeme retires and Paul McGilvary
appointed as an Independent Director.
• Relevant Governance changes will be
voted on later today.
• Min Chen to replace Min Ben as a Bright
Dairy Appointed Director.
Min Chen
Bright Dairy
Appointed Director
Dr John Penno
Board Appointed Chair
Qikai Lu
Bright Dairy
Appointed Director
Sihang Yang
Bright Dairy
Appointed Director
Simon Robertson
Independent Director
Sam Knowles
Independent Director
Paul McGilvary
Independent Director
Hon Ruth Richardson
Bright Dairy
Appointed Director
Proposed 2022 Board Structure
PAGE 24SYNLAIT ANNUAL MEETING 2021

INTRODUCING
PAUL MCGILVARY
Independent Director
• Paul has extensive dairy sector experience.
• He is currently Deputy Chair of AsureQuality, Chair
of BVAQ Australia, and a Non-Executive Director of
Waikato Milking Systems.
• Paul previously held several executive roles
including, CEO of Tatua Co-operative Dairy
Company Limited, CEO of HortResearch, and
Managing Director, Fonterra (Europe).
• As required by the NZX Listing Rule’s the Board has
determined that Paul is an Independent Director.
PAGE 25SYNLAIT ANNUAL MEETING 2021

INTRODUCING
GRANT WATSON
Synlait’s New CEO
• Grant will join the Synlait team on 24 January 2022.
• Grant is currently CEO of dairy company, Miraka.
• Prior to Miraka, Grant spent 10 years at Fonterra
where he held several senior roles including,
Director of Global Foodservice, Acting Director of
Sales Fonterra Brands New Zealand, Managing
Director of Tip Top and Director of Route and
Foodservice Fonterra Brands New Zealand.
• Prior to Fonterra, Grant built his executive career
at McDonalds New Zealand becoming Chief
Operating Officer.
• He has also held several governance and
directorship roles for private and publicly listed
companies.
PAGE 26SYNLAIT ANNUAL MEETING 2021

Voting online
To vote, click on the vote tab, and select your preferred option.
Once your vote has been cast a tick will appear. There is no
submit or send button, your selection is automatically recorded,
although it can be changed up until the time voting closes.
Need help?
Call Computershare on +64 9 488 8777
RESOLUTION 1
AUDITOR’S APPOINTMENT
AND REMUNERATION
“That PricewaterhouseCoopers be appointed
as auditor of the Company and that the Board
be authorised to determine the auditors’ fees
and expenses for the 2022 financial year.”
PAGE 27SYNLAIT ANNUAL MEETING 2021

RESOLUTION 2
RE-ELECTION OF DIRECTOR
“That Graeme Milne ONZM be re-elected as a Director.”
Voting online
To vote, click on the vote tab, and select your preferred option.
Once your vote has been cast a tick will appear. There is no
submit or send button, your selection is automatically recorded,
although it can be changed up until the time voting closes.
Need help?
Call Computershare on +64 9 488 8777
PAGE 28SYNLAIT ANNUAL MEETING 2021

RESOLUTION 3
RE-ELECTION OF DIRECTOR
“That Dr John Penno be re-elected as a Director.”
Voting online
To vote, click on the vote tab, and select your preferred option.
Once your vote has been cast a tick will appear. There is no
submit or send button, your selection is automatically recorded,
although it can be changed up until the time voting closes.
Need help?
Call Computershare on +64 9 488 8777
PAGE 29SYNLAIT ANNUAL MEETING 2021

Voting online
To vote, click on the vote tab, and select your preferred option.
Once your vote has been cast a tick will appear. There is no
submit or send button, your selection is automatically recorded,
although it can be changed up until the time voting closes.
Need help?
Call Computershare on +64 9 488 8777
RESOLUTION 4
CONSTITUTION AMENDMENT
The company proposes one amendment to the
Constitution to enable the Chair of the Board to
be either an Independent Director or the Board
Appointed Director for a limited period up until the
next Annual Meeting to be held in 2022. Currently
the Chair can only be an Independent Director.
SPECIAL RESOLUTION
PAGE 30SYNLAIT ANNUAL MEETING 2021

OTHER
BUSINESS

ASKING A
QUESTION ONLINE
• To ask a question click on the Q&A icon.
• Click on the box, type your question, and
press submit.
• Your question will be asked at the
appropriate part of the meeting.
• Please ensure questions are succinct,
clear and relevant to the meeting.
• Questions submitted ahead of the meeting
will be answered during general business.
PAGE 32SYNLAIT ANNUAL MEETING 2021

PAGE 33SYNLAIT ANNUAL MEETING 2021
FAREWELL AND THANKS
TO GRAEME MILNE

THIS CONCLUDES
SYNLAIT’S ANNUAL MEETING
Thank you for attending

This presentation is given on behalf of Synlait
Milk Limited (Synlait). Information in this
presentation:
• comprises a statement or report made to or
for the purposes of a meeting of Synlait’s
shareholders and is provided for general
information purposes only, and is not an offer
or invitation for subscription, purchase, or
recommendation of securities in Synlait;
• should be read in conjunction with, and is
subject to, Synlait’s audited Annual Report
for the twelve months ended 31 July 2021,
prior annual and interim reports and Synlait’s
market releases on the NZX and ASX;
• includes forward-looking statements about
Synlait and the environment in which Synlait
operates which are subject to uncertainties
and contingencies outside of Synlait’s control.
Synlait’s actual results or performance may
differ materially from these statements;
• includes statements relating to past
performance, which should not be regarded
as a reliable indicator of future performance;
• may contain information from third parties
believed to be reliable; however, no
representations or warranties are made as
to the accuracy or completeness of such
information; and
• is current at the date of this presentation,
unless otherwise stated. Synlait is not under
any obligation to update this presentation
at any time after its release, whether as a
result of new information, future events or
otherwise.
All currency amounts are expressed in New
Zealand dollars unless otherwise stated and
figures, including percentage movements, are
subject to rounding. Similarly, unless otherwise
indicated, all references to a year in the
presentation are for the financial year ended
31 July 2021.
Synlait, its directors, employees and/or
shareholders shall have no liability whatsoever
to any person for any loss arising from this
presentation or any information supplied in
connection with it. Nothing in this presentation
constitutes financial, legal, tax or other advice.
Synlait has been designated as a “Non-
Standard” (NS) issuer by NZX due to the
nature of the company’s constitution. In
particular, Bright Dairy and Food Co Limited
(which holds its shares in Synlait through its
wholly-owned subsidiary, Bright Dairy Holding
Limited) has the right to appoint four directors
to the board of Synlait. Further details of these
director appointment rights are included on
pages 143 to 146 of Synlait’s Annual Report for
the financial year ended 31 July 2021.
For the purposes of this Disclaimer and
Important Notice, “presentation” means
this presentation, any presentation of this
presentation by Synlait and any question-and-
answer session that follows that presentation.
DISCLAIMER
PAGE 35SYNLAIT ANNUAL MEETING 2021