Synlait Publishes Half Year Result
Synlait Milk Limited · 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand · +643 373 3000 · www.synlait.com
NZX: SML
ASX: SM1
1 April 2022
Synlait Publishes Half Year Result
Synlait Milk Limited (Synlait) today published its financial result for the six months ended 31 January
2022:
1
• NPAT up 338% to $27.9 million
2
• EBITDA up 45% to $68.4 million
3
• Revenue up 19% to $790.6 million
• Net debt down 19% to $391.8 million
• Operating cash flows up 269% to $117.3 million
• Capital expenditure down 37% to $46.0 million
Synlait Chair Dr John Penno commented: “This is a strong result that reinforces the focus and hard
work undertaken to get Synlait back on track after a challenging 18 months.”
“Having been part of Synlait from the outset, I saw it as extremely important to help lead the company
through its recent challenges and set it up for future success. While the job is not yet done, we have
made some big steps in the right direction as we reset our leadership and rebuild our profitability and
balance sheet.”
Synlait CEO Grant Watson commented: “Today comes as I reach two and a half months at Synlait. The
result validates that momentum is building, but to return Synlait to strong, sustainable growth we need
a greater level of focus and accountability right across the organisation. Improving our systems, tools
and processes will improve our ability to execute with excellence. This is a significant opportunity and
will be our focus for the second half.”
Full year 2022 guidance update
Synlait still expects its Net Profit After Tax result to return to robust profitability in FY22 based on:
• Tighter management of its Ingredient business;
• Improved infant base powder volumes;
• A growing contribution from its Lactoferrin and Consumer Foods businesses; and
• Retained cost savings.
FY22 also includes a one-off gain on sale of $17.1 million from the sale and leaseback of the land and
building at Synlait Auckland, which was realised in the first half. Note $11.9 million (non-taxable) of this
gain was recognised in H1 22 and the balance will be released to the P&L over the life of the 10-year
lease in accordance with relevant lease accounting standards.
Synlait does not expect its profitability to grow at the same rate in the second half of FY22 due to
several external factors which could impact performance. These include:
1
Comparisons are to the six months ended 31 January 2021 unless stated otherwise.
2
Adjusted NPAT up 128% to $14.5 million, excludes Synlait Auckland gain sale and leaseback and related items.
3
Adjusted EBITDA up 20% to $56.5 million, excludes Synlait Auckland gain on sale and leaseback and related items.
Synlait Milk Limited · 1028 Heslerton Road, RD13 Rakaia, Canterbury, New Zealand · +643 373 3000 · www.synlait.com
• The impact of Omicron and broader labour shortages in New Zealand on Synlait’s workforce,
which remains unknown. This could impact Synlait’s ability to operate at normal production
levels in the short-term.
• Ongoing disruptions to global supply chains due to COVID-19 and geopolitical issues which
could impact Synlait’s ability to procure raw materials and export products.
• Dairy commodity prices continuing to rise due to strong global demand outrunning restricted
supply, which could potentially create downside risk in FY22, and equally an opposite upside
opportunity in FY23, due to lagged priced contracts with large multinational customers.
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.
As previously communicated, Synlait’s performance will build into FY23 as production for its new
multinational customer at Synlait Pokeno ramps up and its Consumer Foods business continues to
grow.
Board and Management still expect that by the end of FY23 the recovery plan will have seen Synlait
return to similar levels of profitability, operating cash flows, and debt ratios as per the years leading
into FY21.
For more information contact:
Hannah Lynch
Corporate Affairs Manager
P: +64 21 252 8990
E: hannah.lynch@synlait.com
---
SYNLAIT MILK HALF YEAR RESULT
CHAIR AND CEO REVIEW
For the six months ended
31 January 2022
`
19%
REVENUE
$
790.6M
338% 128%
N PATADJUSTED NPAT*
$
27. 9M
$
14.5M
19%
NET DEBT
$
391.8M
269%
OPERATING CASH FLOWS
$
117.3M
37%
CAPITAL EXPENDITURE
$
46.0M
45% 20%
EBITDAADJUSTED EBITDA*
$
68.4M
$
56.5M
KEY FINANCIAL METRICS
All comparisons are to H1 21 which has been restated for a change in accounting policy.
* Excluding Synlait Auckland gain on sale and leaseback and related items.
27%
FORECAST BASE MILK PRICE
FOR 2021/2022 SEASON
$
9.60kgMS
PAGE 02 SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW
SIX MONTHS IN REVIEW
A LETTER FROM OUR CHAIR
Synlait Chair Dr John Penno and CEO Grant Watson
Dear Shareholders
I have written to you many times,
but this is my first as Chair. It was an
enormous privilege to take on this
role in January when we appointed
Grant Watson as CEO. Having been
part of Synlait from the outset, I have
seen it as extremely important to help
lead the company through its recent
challenges and set it up for future
success. While the job is not done yet,
you will see from this result that we
have made some big steps in the right
direction as we reset management
and governance and rebuild our
profitability and balance sheet.
Turning Synlait around
In the first six months of this financial
year (H1 22) significant steps were
taken to reset and rebuild Synlait.
While we cannot relax just yet,
our plan to return Synlait to robust
profitability is on track.
Here are some highlights from our
recovery plan:
• Synlait’s cost structure review
and the organisational reset
is complete. Most cost saving
benefits were realised in
operations and are reflected in
improved gross profitability. We are
on-track to achieve the $7 million
in savings the organisational reset
promised, with $5.2 million realised
in H1 22. A lot of hard work has
gone on under the leadership of
our new CFO Robert Stowell to
implement these changes. We are
very aware of how challenging
and stressful this process was on
our staff, particularly those whose
roles were disestablished. Our
decisions were not made lightly,
and I thank the entire team for their
professionalism, understanding
and commitment to Synlait
throughout the process.
• A significantly improved net debt
position (down 19% to $391.8
million) is perhaps our biggest H1
22 achievement and will provide
shareholders with comfort that
our recovery plan is on-track. Our
improved operating cash flows
(up 269% to $117.3m) and net debt
position benefitted from stronger
profit, greater focus on working
capital management, and the sale
of the land and buildings at Synlait
Auckland. Work will continue in
the second half with an ongoing
focus on rebalancing inventory
levels through improved sales
performance, while working to
minimise the impact of shipping
delays that have been facing all
exporting companies. We will
also continue focusing on our
operational costs and capital
expenditure.
SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW PAGE 03
• In our early years, Synlait built its
profitability and credentials in the
global dairy industry by operating
our Ingredients business to the
highest standards. By establishing
an Ingredients business unit as
part of the organisational reset, its
performance has already improved
with revenues up 54% to $423.7
million driven by commodity prices,
sales volume, product mix, and
attainment of product premiums.
Within a context of strong
commodity prices, the business
has benefitted from a greater focus
on sales phasing and pricing, along
with an improved cost structure
and FX position. The team is
actively developing sales strategies
and has increased engagement
with our multinational customers to
build repeatable, predictable, and
profitable business for the
long-term.
• We are halfway through the on-
boarding of Synlait Pokeno’s new
multinational customer which will
enable us to produce nutritional
adult and paediatric plant-based
products for the Asia Pacific region.
The first base powder and finished
good trials are complete, and
commercial production is on-track
to start late 2022. Our dedicated
Nutritionals team is building new
base powder relationships with
multinational customers and
Chinese domestic players as the
global market rebuilds. Several
initiatives and trials are underway.
• Dairyworks’ ambition to be the
second biggest player in the New
Zealand consumer dairy food
category is gaining traction. It
launched its own-branded milk and
cream range in the Foodservice
channel in H1 22. Category
extension also continues for its
Protein Fit yoghurt range which
has achieved national distribution
and can be found in 300 New
Zealand stores.
As a backdrop to this progress we
are experiencing extremely high dairy
commodity prices which will lead to
a record milk price for our farmers
this year. An improved focus on our
Ingredients business means that after
starting from a weak sales position
late last season, we have been able
to consistently take advantage of
sales conditions, particularly the
strong relative pricing of Skim Milk
Powder. The turnaround in our
Ingredients business and flexibility
within our product mix has meant
that very high dairy prices have had
no impact on our ability to pay a
competitive milk price.
Grant Watson’s appointment as CEO
was made in light of the challenges
Synlait faced in the last 12 to 18 months.
Grant has made an excellent start
in his role and brings a very strong
commercial focus to the next stage of
our recovery plan. His discipline when it
comes to execution is relentless. We are
already seeing increased accountability
filter through to our internal planning
processes, resource allocation, and
accountability frameworks. Grant is
clearly identifying and articulating what
needs to be done to return Synlait to
robust profitability.
Governance changes
As well as aligning structure to strategy
and appointing Grant as CEO, you,
as shareholders, approved several
Governance changes at our Annual
Meeting which have now been
implemented.
Our Chair, Graeme Milne ONZM,
retired from the Board at the Annual
Meeting after 17 years. To enable me
to step into the Chair role and deliver
a well-managed leadership transition
with Grant, a constitution change was
required so that the Board Chair could
be a Non-Independent Director. The
Annual Meeting resolution passed with
overwhelming shareholder support,
thank you. I am not an Independent
Chair. I have had a long history with
the company holding several roles
including, co-founder, CEO and director.
The Board and I firmly believe that
having an Independent Chair is best
practice, and we hope my tenure will
be for a short period as a permanent,
independent successor is found.
Filling Graeme’s place as an
Independent Director is Paul McGilvary
who started in January and brings
strong dairy sector experience to
Synlait. Notably, Paul was the CEO of
HortResearch (now Plant and Food)
and then CEO of Tatua Dairy Company,
before establishing his governance
career.
Qikai Lu (Albert) and Min Ben have
stepped down as the Bright Dairy
Holding Limited appointed Directors
on the Synlait Board. On behalf of all
Directors, thank you to Albert and Min
for their contribution and commitment
to Synlait. Albert and Min are replaced
by Min Chen (Joyce) and Dr Gui Min
(Gracie). Joyce joined Bright Dairy
in 2007 and has been Chief Internal
Auditor since 2016. Gracie is Director of
Marketing of the Nutrition Section and
has a Ph.D. in pharmacology.
SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW PAGE 04
Finally, Graeme’s 17-year tenure with
Synlait needs to be acknowledged.
Graeme joined Synlait when we were
a dairy farm and shared our vision of
building a world-class manufacturing
company in Dunsandel. Graeme had
an enormous influence on the strategy
and direction of Synlait as our plans
came together – and we literally
built Dunsandel from the ground up.
Right from the beginning he had an
unwavering commitment of time,
energy, and experience to give to
Synlait and to me personally. His calm
nature has carried us through good and
bad times. Graeme, on behalf of the
Board, leadership team and staff, thank
you for your enormous contribution to
Synlait’s growth.
Our ongoing response to COVID-19
proves successful
It has been a challenging period for
our people. Our Auckland and Pokeno
teams spent the majority of H1 22 in
lockdown as the COVID-19 Delta variant
circulated in our largest city. Now all our
teams across New Zealand have been
impacted by Omicron.
Synlait’s goal throughout this pandemic
has been to keep our people safe, keep
their families safe, keep our facilities
running, and keep COVID-19 away – not
just for us, but for all New Zealanders,
and our friends in the global community.
New Zealand’s COVID-19 situation
became very real, very quickly and we
are extremely proud of how our people
responded to keep each other safe. Our
workforce is fully vaccinated and our
daily rapid antigen testing programme
has detected dozens of presumptive
results, which has ensured that our
people and facilities remain safe.
It has been a challenging first half,
particularly with the added complexity
of Omicron. Thank you to our Synlait
team for their continued patience,
commitment, and determination as we
work with Grant and the leadership
team to turn this business around.
I look forward to continuing to meet
with you in my new role as Chair.
I am committed to delivering a well-
managed leadership transition with
Grant and continuing to support our
recovery plan. I hope today’s result
demonstrates we are on-track to
provide you with a significantly stronger
balance sheet and robust profitability
by the end of this financial year.
Stay safe and well.
Dr John Penno
Chair
Synlait has mandated that all staff, contractors and
visitors must be fully vaccinated against COVID-19
to enter our facilities. As an additional precaution
all staff are currently undergoing daily rapid
antigen testing on entry to our sites. Here a staff
member is tested by our health and safety team on
arrival at work.
SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW PAGE 05
CEO Grant Watson outside the milk
reception bay at our Dunsandel facility
FIRST IMPRESSIONS
FROM OUR NEW CEO
Tēnā koe shareholders
It is an absolute privilege to have
joined Synlait as CEO. I have watched
Synlait’s journey for years. One thing I
have always appreciated about Synlait
is that it is well positioned – it has both
scale and agility. The opportunity to be
your CEO was too good to turn down.
This is an amazing role in an innovative,
entrepreneurial business with world
class sustainability credentials.
My first 10 weeks have been a
whirlwind of learning. In my first report
to you, our shareholders, I will introduce
myself, share my first impressions,
and communicate my priorities for the
second half of this financial year.
About me
I joined the Synlait team from Miraka,
a Taupō based dairy company
where I was CEO. Miraka is owned
predominantly by two Māori whānau
who came together to build the world’s
first dairy-processing plant powered by
geothermal energy. My time at Miraka
gave me an appreciation for Māori
culture and business, and for their
highly sustainable farming practices.
Prior to Miraka, I spent 10 years at
Fonterra. I held several roles including
Director of Global Foodservice,
Managing Director of Tip Top, and
Director of Route and Foodservice
(Fonterra Brands New Zealand).
I started my career at McDonald’s New
Zealand where my first role was instore
making Big Macs. During my 18 years
with the business, I worked my way up
through the organisation to become
Chief Operating Officer.
SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW PAGE 06
3. Rebuilding our team and
internal culture following a
period of constant change and
reorganisation. We need to
ensure our people feel engaged,
committed, and reenergised
to successfully build our
business back up and return it to
sustainable profitable growth.
4. Reviewing our strategy to ensure
it has sufficient clarity and focus
to deliver the second year of our
recovery plan.
Since joining the team I have spent
time with our staff, farmer suppliers,
and customers. I look forward to
hearing your perspectives on Synlait as
we connect over the coming months.
Nāku iti nei, nā.
Grant Watson
CEO
Throughout my career I have held
several governance and directorship
roles and been involved in smaller
entrepreneurial businesses.
I have inherited an enormous legacy
from John Penno and the Board. I
believe my appointment represents a
step change in our journey as Synlait
enters 2022 with significant change
and challenge behind it. I am excited to
take the experiences from my career
to shape and grow Synlait for the
better. My vision is for Synlait to be a
world class organisation enabled by
a culture of innovation, accountability,
sustainability, and a true sense of
purpose.
FIRST IMPRESSIONS
1. Synlait has amazing DNA
Our innovative and disruptive
culture along with our strong
sustainability credentials is what
sets us apart. Our team’s desire to
do things differently is infectious
and evident everywhere.
2. Momentum is building
Today’s result validates that
momentum is building. We are six
months into a two year recovery
plan. Our team is driving the plan
forward with pace.
3. Greater focus and accountability
is required to get to the next level
To deliver on our enormous
potential and return Synlait to
strong, sustainable growth we
need a greater level of focus
and accountability right across
the organisation. Improving our
systems, tools, and processes will
improve our ability to execute with
excellence – this is a significant
opportunity.
4. Our people make
Synlait what it is today
We have a fantastic base of
loyal farmer suppliers who
remain committed to delivering
excellence through Lead With
Pride™. We continue to strengthen
our relationships with current
customers and build connections
with future ones. Of course, we
cannot do what we do without our
staff. Our team has been through
a challenging couple of years,
and I am impressed with their
commitment and loyalty to Synlait.
KEY PRIORITIES
1. The successful delivery of critical
projects. These include:
• Successful renewal of our
SAMR license for Chinese
labelled a2 Platinum® Infant
Formula to ensure our
access to the China market is
retained.
• Successful implementation of
our new Enterprise Resource
Planning system on 1 August.
• Ensure readiness to
successfully commence
commercial production
for Synlait Pokeno’s new
multinational customer.
2. Navigating Omicron’s impact on
our people and supply chains,
and ultimately deliver on the
goal Synlait set at the start of this
pandemic, which was to keep our
people safe, keep their families
safe, keep our facilities running,
and meet the needs of our farmer
suppliers and customers.
SYNLAIT MILK HALF YEAR RESULT CHAIR AND CEO REVIEW PAGE 07
---
CONDENSED INTERIM
FINANCIAL STATEMENTS
For the six months ended
31 January 2022
A birds eye view of Synlait’s 600m long
rail siding hard stand where up to 30
wagons can be loaded with containers
filled from Dry Store 4.
Directors’ responsibility statement 03
Condensed interim financial statements 04
Income statement 04
Statement of comprehensive income 05
Statement of changes in equity 06
Statement of financial position 07
Statement of cash flows 08
Notes to the condensed interim financial statements 09
01 Reporting entity 09
02 Basis of preparation of interim financial report 10
03 Segment reporting 13
04 Other Income 15
05 Expenses 16
06 Reconciliation of profit after income tax to
net cash inflow from operating activities 17
07 Trade and other receivables 17
08 Inventories 18
09 Property, plant and equipment 18
10 Intangible assets 19
11 Loans and borrowings 19
12 Other non-current liabilities 20
13 Share capital 20
14 Related party transactions 20
15 Contingencies 22
16 Commitments 22
17 Events occurring after the reporting period 22
Interim review report 23
CONTENTS
CONDENSED INTERIM FINANCIAL STATEMENTS 2022
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, Eighty Nine Richard Pearse Drive Limited, Synlait
Business Consulting (Shanghai) Limited, Dairyworks Limited, Dairyworks (Australia) Pty Limited, and Synlait Milk (Dunsandel
Farms) Limited (together “the Group”) as set out on pages 4 to 22 for the six months ended 31 January 2022.
The Directors are responsible for ensuring that the condensed interim financial statements present fairly the financial position
of the Group as at 31 January 2022 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 condensed interim financial statements
with the Financial Markets Conduct Act 2013.
For and on behalf of the Board.
Dr John Penno
Chair
31 March 2022
Simon Robertson
Independent Director
31 March 2022
DIRECTORS’ RESPONSIBILITY STATEMENT
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnaudited
(restated)
Audited
Notes$’000$’000$’000
Revenue790,591664,1821,367,349
Cost of sales5(721,502)(604,529)(1,300,042)
Gross profit69,08959,65367,307
Other income415,4261,6113,870
Share of (loss)/profit from associates-(33)(33)
Sales and distribution expenses5(18,144)(18,738)(36,791)
Administrative and operating expenses5(24,963)(22,908)(52,018)
Earnings/(loss) before net finance costs and income tax41,40819,585(17,665)
Finance expenses(9,876)(10,720)(20,488)
Finance income1093044
Loss on derecognition of financial assets(567)(436)(1,045)
Net finance costs(10,334)(11,126)(21,489)
Profit/(loss) before income tax31,0748,459(39,154)
Income tax expense2(3,169)(2,086)10,703
Net profit/(loss) after tax for the period27,9056,373(28,451)
Earnings per shareCentsCentsCents
Basic earnings per share (cents)12.773.23(13.77)
Diluted earnings per share (cents)12.743.22(13.77)
INCOME STATEMENT
For the six months ended 31 January 2022
Comparative numbers have been restated due to a change in accounting policy. Refer to note 2 for further detail.
The accompanying notes form part of and are to be read in conjunction with these financial statements.
CONDENSED INTERIM FINANCIAL STATEMENTS 2022PAGE 03 & 04
The accompanying notes form part of and are to be read in conjunction with these financial statements.
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnaudited
(restated)
Audited
$’000$’000$’000
Profit/(loss) for the period27,9056,373(28,451)
Items that may be reclassified subsequently to profit and loss
Effective portion of changes in fair value of cash flow hedges(65,389)30,306(6,330)
Exchange differences on translation of foreign operations27210
Income tax on other comprehensive income18,309(8,486)1,772
Total items that may be reclassified subsequently to profit and loss(47,053)21,822(4,548)
Other comprehensive (deficit)/income for the period, net of tax(47,053)21,822(4,548)
Total comprehensive (deficit)/income for the period(19,148)28,195(32,999)
STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 January 2022
Share
Capital
Employee
benefits
reserve
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total
Equity
Notes$’000$’000$’000$’000$’000$’000
Equity as at 1 August 2020 (Audited)268,5441,32212,647(12)323,983606,484
Change in accounting policy2----(1,978)(1,978)
Restated equity at the start of the period268,5441,32212,647(12)322,005604,506
Profit/(loss) for the period (restated)----6,3736,373
Other comprehensive income
Effective portion of changes in fair value of cash flow hedges--30,306--30,306
Exchange differences on translation of foreign operations---2-2
Income tax on other comprehensive income--(8,486)--(8,486)
Total other comprehensive income--21,8202-21,822
Total comprehensive income--21,82026,37328,195
Issue of new shares196,082----196,082
Employee benefits reserve148(637)---(489)
Restated equity as at 31 January 2021 (Unaudited)464,77468534,467(10)328,378828,294
Equity as at 1 August 2021 (Audited)464,7746988,089(2)293,555767,114
Profit/(loss) for the period----27,90527,905
Other comprehensive income
Effective portion of changes in fair value of cash flow hedges--(65,389)--(65,389)
Exchange differences on translation of foreign operations---27-27
Income tax on other comprehensive income--18,309--18,309
Total other comprehensive income--(47,080)27-(47,053)
Total comprehensive income--(47,080)2727,905(19,148)
Issue of new shares------
Employee benefits reserve-(2)---(2)
Equity as at 31 January 2022 (Unaudited)464,774696(38,991)25321,460747,964
STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 January 2022
Comparative numbers have been restated due to a change in accounting policy. Refer to note 2 for further detail.
Comparative numbers have been restated due to a change in accounting policy. Refer to note 2 for further detail.
PAGE 05 & 06
The accompanying notes form part of and are to be read in conjunction with these 0nancial statements.
CONDENSED INTERIM FINANCIAL STATEMENTS 2022
The accompanying notes form part of and are to be read in conjunction with these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 31 January 2022
STATEMENT OF CASH FLOWS
For the six months ended 31 January 2022
31 January 202231 January 202131 July 2021
UnauditedUnaudited
(restated)
Audited
Notes$’000$’000$’000
ASSETS
Cash and cash equivalents40,6399,13316,020
Trade and other receivables7106,209123,656109,139
Intangible assets105,0935,2903,712
Goods and services tax refundable10,6939,3404,461
Income accruals and prepayments7,1237,56114,297
Inventories8335,609406,404270,943
Derivative financial instruments2,78063,49830,943
Current tax receivables1,736-1,743
Other current assets-2,5002,500
Total current assets509,882627,382453,758
Non-current assets
Property, plant and equipment91,018,1811,007,1491,027,149
Intangible assets1076,94946,52359,631
Goodwill64,18964,18964,189
Other investments110110110
Derivative financial instruments-96953
Right-of-use assets18,41915,58314,018
Total non-current assets1,177,8481,134,5231,165,150
Total assets1,687,7301,761,9051,618,908
LIABILITIES
Trade and other payables383,985324,843264,826
Loans and borrowings1191,853214,19933,333
Current tax liabilities-22,714-
Derivative financial instruments38,6188,90310,770
Lease liabilities3,7093,1263,243
Total current liabilities518,165573,785312,172
Non-current liabilities
Loans and borrowings11338,144276,956459,584
Derivative financial instruments18,2993,5528,830
Deferred tax liabilities44,21665,89159,433
Lease liabilities18,43913,42711,775
Other non-current liabilities122,503--
Total non-current liabilities421,601359,826539,622
Total liabilities939,766933,611851,794
Net assets747,964828,294767,114
Equity
Share capital13464,774464,774464,774
Reserves(38,270)35,1428,785
Retained earnings321,460328,378293,555
Total equity attributable to equity holders of the Group747,964828,294767,114
Total equity and liabilities1,687,7301,761,9051,618,908
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnaudited
(restated)
Audited
Notes$’000$’000$’000
Cash flows from operating activities
Cash receipts from customers810,327611,3491,327,444
Cash paid for milk purchased(390,154)(320,097)(653,132)
Cash paid to other creditors and employees(296,780)(357,879)(652,402)
Net movement in goods and services tax(6,232)(2,940)1,937
Income tax payments892(7,979)
Net cash inflow/(outflow) from operating activities6117,250(69,565)15,868
Cash flows from investing activities
Interest received1093044
Acquisition of property, plant and equipment(25,896)(62,126)(116,163)
Proceeds from sale of property, plant and equipment30,1783,4671,102
Acquisition of intangible assets(20,110)(11,364)(24,205)
Proceeds from sale of intangible assets--2,450
Net cash outflow from investing activities(15,719)(69,993)(136,772)
Cash flows from financing activities
Repayment of borrowings11(39,420)(65,000)(50,000)
Net movement in working capital facility11(23,570)26,36312,586
Interest paid(12,524)(11,786)(23,108)
Repayment of lease liabilities(1,919)(2,808)(4,499)
Receipt of cash from issue of shares13-196,081196,082
Net cash (outflow)/inflow from financing activities(77,433)142,850131,061
Net increase in cash and cash equivalents24,0983,29210,157
Cash and cash equivalents at the beginning of the period16,0205,8875,887
Effects of exchange rate changes on cash and cash equivalents521(46)(24)
Cash and cash equivalents at end of the period40,6399,13316,020
Comparative numbers have been restated due to a change in accounting policy. Refer to note 2 for further detail.
Comparative numbers have been restated due to a change in accounting policy. Refer to note 2 for further detail.
PAGE 07 & 08
The accompanying notes form part of and are to be read in conjunction with these financial statements.
CONDENSED INTERIM FINANCIAL STATEMENTS 2022
The condensed interim financial statements presented consolidate the financial results of the Group, including Synlait Milk
Limited and its subsidiaries Synlait Milk Finance Limited, The New Zealand Dairy Company Limited, Eighty Nine Richard
Pearse Drive Limited, Synlait Business Consulting (Shanghai) Limited, Dairyworks Limited, Dairyworks (Australia) Pty
Limited, and Synlait Milk (Dunsandel Farms) 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.
The 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 interim financial statements of the Group are measured using the currency of the primary
economic environment in which each entity operates (‘the functional currency’). The financial statements are presented
in New Zealand Dollars ($), which is the functional currency of the parent and are rounded to the nearest thousand
($’000).
Going concern
In preparing these financial statements, the Directors have assessed the Group’s ability to continue as a going concern.
In making this assessment, the Directors have considered the level of debt and facilities the Group had available at
31 January 2022, the Group’s renegotiation of financing arrangements in July 2021, the Group’s return to profitability
and improved operating cash flows in the current period, and the Group’s forecast financial results for the 18 months
subsequent to the date of issue of these financial statements.
The Group’s current liabilities exceed its current assets by $8.3m as a result of the working capital facility being classified
as a current liability at 31 January 2022. The facility is renegotiated annually.
While uncertainties continue to exist as a result of the COVID-19 pandemic, the Directors consider that the Group is a
going concern.
New accounting standards, interpretations, and amendments adopted during the period
IFRS 9, IAS 39, IFRS 7, IFRS 4, Insurance contracts and IFRS 16 leases - Interest Rate Benchmark Reform, Phase 2
In August 2020, the IASB issued amendments to Financial Instruments (IFRS 9), Financial Instruments: Recognition and
Measurement (IAS 39), Financial Instruments: Disclosures (IFRS 7), Insurance Contracts (IFRS 4) and Leases (IFRS 16) as
a result of Phase 2 of the IASB’s Interest Rate Benchmark Reform project. The amendments address issues arising in
connection with reform of benchmark interest rates including the replacement of one benchmark rate with an alternative
one. The amendments were effective for the Group from 1 August 2021.
As at 31 January 2022, these amendments did not affect the Group’s financial statements as it has not yet transitioned
any agreements that are exposed to Inter-bank Offered Rates (IBOR) to an alternative benchmark interest rate. The
replacement of the rate is not expected to result in a significant change in the Group’s interest rate risk management
strategy or interest rate risk. The Group continues to monitor developments on alternative benchmark interest rates and
expect to transition to alternative rates as widespread market practice is established.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six months ended 31 January 2022
01. REPORTING ENTITY
02. BASIS OF PREPARATION OF INTERIM FINANCIAL REPORT
PAGE 09 & 10CONDENSED INTERIM FINANCIAL STATEMENTS 2022
Change in computer software capitalisation policy as a result of the IFRIC agenda decision on cloud software
(software as a service or “SaaS”) implementation costs.
In April 2021 IFRIC released an agenda decision in contradiction of the Group’s historical policy of capitalising cloud
software implementation costs. The agenda decision disallows the capitalisation of costs for the implementation of
cloud software except for costs relating to the development of customised software code where the customer maintains
control of the code and its future benefits.
The Group has historically capitalised implementation phase costs and subsequently depreciated the costs over the
life of the underlying software service contract (over a period not exceeding 4 years). During the year ended 31 July
2021, the Group made the decision to align its accounting policy with the IFRIC agenda decision and retrospectively
derecognise cloud software implementation costs which had been recognised as intangible assets. The Group has also
made the decision to disallow future capitalisation of cloud software costs except for those instances where the Group
maintains control of any custom software code and has the ability to restrict others’ access to those benefits.
For the avoidance of doubt, the Group’s current implementation of SAP is not within the scope of the agenda decision
as the underlying license is perpetual, on-premise, and the Group has control over the infrastructure on which SAP runs.
For further information, please refer to the Group’s annual report for the year ended 31 July 2021.
The change in accounting policy has had the following impacts on the prior years presented in these financial
statements:
Material events during the period
Sale and leaseback of Auckland land and building
On 4 October 2021, the Group completed the sale and leaseback of its Auckland land and building located at 89
Richard Pearse Drive which had a book value of $12.6m at the time of sale. Total proceeds were $30.1m resulting in a
tax exempt gain on sale of $17.1m (net of transaction costs of $0.4m) of which $11.9m was recognised in other income in
the current period. The measurement requirements of NZ IFRS 16 require the unrecognised $5.2m portion of the gain to
be allocated to the right of use asset, reflecting the proportion of the previous carrying amount of the land and building
that relates to the right of use retained, and to be amortised over the life of the lease. The leaseback gave rise to a
right of use asset of $6.2m (including future site restoration costs of $2.5m), a lease liability of $8.9m, and a deferred
tax asset of $1.5m. As a result of the gain on sale being exempt from tax, the Group’s effective tax rate of 10.0% in the
period was significantly lower in comparison to previous periods (31 January 2021: 24.7%, 31 July 2021: 28.7%).
COVID-19 and emergence of Omicron variant
Current global economic conditions continue to be highly volatile due to the COVID-19 pandemic, which was declared
in March 2020. During the period, the highly transmissible Omicron variant of COVID-19 emerged as the dominant strain
of COVID-19 globally and within New Zealand. The Omicron variant is expected to significantly impact day to day life
in New Zealand in the second half of FY22. As a result, management is constantly working to ensure contingency and
risk mitigation plans are in place to reduce the impact of COVID-19 to the Group’s operations which include but are
not limited to: vaccine mandates, mandatory rapid antigen testing at all operational sites, availability of non-operations
staff and management to fill staff shortages, safety stock of key raw materials and packaging inventories, establishment
of continuity plans with key suppliers, enhanced hygiene practices and use of personal protective equipment, and
mandatory employee distancing.
Ongoing uncertainty around the risk of a resurgence and new variants of COVID-19 and related magnitude, duration
and severity could affect the significant estimates and judgements used in the preparation of the condensed interim
financial statements. Management continues to assess the impact of COVID-19 on all aspects of the Group’s operations,
supply chain, foreign and domestic regulatory requirements, and financial performance and position, in particular the
carrying value of receivables and inventory, the impact of key customer demand on revenue, the timing of receivables
collection on cashflows, impairment of assets such as goodwill and intangibles, and any impact from currency volatility
on the Group portfolio of derivatives.
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 based on 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 curves, annual foreign exchange conversion rate and other conversion costs.
31 January 202131 January 202031 January 201931 January 2018
$’000$’000$’000$’000
Increase in software expense(452)(694)(532)-
Decrease in depreciation expense450237--
Decrease in tax expense1128149-
Decrease in profit for the year(1)(329)(383)-
Decrease in intangible assets(2,737)(1,955)(653)-
Decrease in deferred tax liability759547183-
Decrease in retained earnings1,9781,408470-
Decrease in basic and diluted earnings per share ($)0.000(0.002)(0.002)0.000
There are no other standards, interpretations, or amendments that are not yet effective and expected to have a material
impact on the Group in the current or future reporting periods and on foreseeable future transactions. Except for the
above noted change in software capitalisation policy, there have been no other significant changes in accounting
policies during the current period and 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 2021.
Certain comparatives have been restated to conform to current year presentation.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(CONTINUED)
PAGE 11 & 12CONDENSED INTERIM FINANCIAL STATEMENTS 2022
(a) Reportable segments
The Group identifies the following segments:
• Manufacture and sale of fresh milk and milk powder related products (Nutritionals, ingredients, fresh milk)
• Manufacture and sale of cheese and other products (Cheese, butter, yoghurt)
The accounting policies of the Group have been consistently applied to the operating segments. Net Profit After Tax
(NPAT) is the measure reported to the chief operating decision-maker for the purposes of resource allocation and
assessment of performance for the Group. A consistent measure has been used for the purpose of reporting the
performance of each operating segment. Inter-segment pricing is determined on an arm’s length basis.
(b) Description of segments
The following is an analysis of the Group’s revenue and results by reportable segment:
03. SEGMENT REPORTING
31 January 202231 January 202231 January 202231 January 2022
UnauditedUnauditedUnauditedUnaudited
$’000$’000$’000$’000
Nutritionals,
ingredients,
fresh milk
Cheese,
butter,
yoghurt
EliminationsTotal
External revenue663,756126,835-790,591
Inter-segment revenue from sale of goods445-(445)-
Revenue from sale of goods664,201126,835(445)790,591
Net profit/(loss) after tax for the period26,7831,122-27,905
31 January 202231 January 202231 January 202231 January 2022
UnauditedUnauditedUnauditedUnaudited
$’000$’000$’000$’000
Nutritionals,
ingredients,
fresh milk
Cheese,
butter,
yoghurt
EliminationsTotal
Finance income1054-109
Finance expense(8,322)(1,554)-(9,876)
Depreciation and amortisation(24,140)(2,893)-(27,033)
Income tax expense(2,669)(500)-(3,169)
Total assets1,495,742191,988-1,687,730
Total liabilities(848,392)(91,374)-(939,766)
Total net assets647,350100,614-747,964
31 January 202131 January 202131 January 202131 January 2021
Unaudited
(restated)
$’000
Unaudited
(restated)
$’000
Unaudited
(restated)
$’000
Unaudited
(restated)
$’000
Nutritionals,
ingredients,
fresh milk
Cheese,
butter,
yoghurt
EliminationsTotal
External revenue551,625112,557-664,182
Inter-segment revenue from sale of goods10,097-(10,097)-
Revenue from sale of goods561,722112,557(10,097)664,182
Net profit/(loss) after tax for the period4,5211,852-6,373
Finance income426-30
Finance expense(8,961)(1,759)-(10,720)
Depreciation and amortisation(24,517)(3,142)-(27,659)
Income tax expense(1,368)(718)-(2,086)
Total assets1,586,718175,187-1,761,905
Total liabilities(859,237)(74,374)-(933,611)
Total net assets727,481100,813-828,294
31 July 202131 July 202131 July 202131 July 2021
Audited
$’000
Audited
$’000
Audited
$’000
Audited
$’000
Nutritionals,
ingredients,
fresh milk
Cheese,
butter,
yoghurt
EliminationsTotal
External revenue1,138,302229,047-1,367,349
Inter-segment revenue from sale of goods12,785-(12,785)-
Revenue from sale of goods1,151,087229,047(12,785)1,367,349
Net profit/(loss) after tax for the period(28,802)351-(28,451)
Finance income1430-44
Finance expense(16,876)(3,612)-(20,488)
Depreciation and amortisation(48,855)(6,117)-(54,972)
Income tax benefit/(expense)10,985(282)-10,703
Total assets1,406,236212,672-1,618,908
Total liabilities(738,433)(113,361)-(851,794)
Total net assets667,80399,311-767,114
The following is an analysis of other financial information by reportable segment:
PAGE 13 & 14CONDENSED INTERIM FINANCIAL STATEMENTS 2022
(c) Geographical revenue
The Group operates in one principal geographical area being New Zealand. Although the Group sells to many different
countries, it is understood that a significant portion of both infant nutritional and ingredients sales are ultimately
consumed in China.
The proportion of sales revenue by geographical area is summarised below:
All Group non-current assets are located in New Zealand, other than $0.5m (31 January 2021: $0.6m, 31 July 2021:
$0.5m) located in China.
(d) Other profit and loss disclosures
Revenues of approximately 39% (31 January 2021: 50%, 31 July 2021: 42%) are derived from the top three external
customers.
03. SEGMENT REPORTING (CONTINUED)
04. OTHER INCOME
05. EXPENSES
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnauditedAudited
China20%13%14%
Rest of Asia24%24%24%
Middle East and Africa5%5%5%
New Zealand41%51%47%
Australia9%5%8%
Rest of World1%2%2%
Total100%100%100%
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnaudited
(restated)
Audited
Notes$’000$’000$’000
The following items of expenditure are included in cost of sales
Depreciation and amortisation22,84722,60745,638
Employee benefit expense36,23841,00180,926
KiwiSaver contributions9301,0591,941
(Decrease)/increase in inventory provision8(6,164)(585)6,257
Increase/(decrease) in onerous contracts provision84481,2351,777
The following items of expenditure are included in sales and distribution
Depreciation and amortisation2,4113,2025,579
Employee benefit expense8,2098,24616,177
KiwiSaver contributions237196419
The following items of expenditure are included in administrative and
operating
Depreciation and amortisation1,7751,8503,755
Employee benefit expense12,37210,47125,201
KiwiSaver contributions306282604
Directors’ fees414414829
Share based payments expense64673(610)
Impairment of intangibles-530530
Other income includes a one time $11.9m gain on sale relating to the sale and leaseback of the Group’s land and
building located at 89 Richard Pearse Drive in Auckland. The gain was exempt from income tax. Refer to note 2 for
further detail.
PAGE 15 & 16CONDENSED INTERIM FINANCIAL STATEMENTS 2022
06. RECONCILIATION OF PROFIT AFTER INCOME TAX
TO NET CASH INFLOW FROM OPERATING ACTIVITIES
08. INVENTORIES
07. TRADE AND OTHER RECEIVABLES
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnaudited
(restated)
Audited
$’000$’000$’000
Profit/(loss) for the period27,9056,373(28,451)
Non-cash and non-operating items:
Depreciation and amortisation of non-current assets25,09824,64450,236
Depreciation of right-of-use assets1,9353,0154,736
(Gain)/loss on sale of property, plant and equipment(12,005)27100
Impairment of property, plant and equipment and intangible assets-5302,242
Share of loss from associate-3333
Non-cash share based payments expense(2)(673)(476)
Interest costs classified as financing cash flow9,87610,72020,488
Interest received classified as investing cash flow(109)(30)(44)
Loss on derecognition of financial assets5674361,045
Deferred tax3,0913,9367,329
Loss/(gain) on derivative financial instruments144(4,044)(64)
Unrealised foreign exchange (gain)/loss(521)4624
Movements in working capital:
Decrease/(increase) in trade and other receivables2,170(59,973)(45,323)
Decrease/(increase) in income accruals and prepayments7,1744,843(1,893)
Increase in inventories(64,666)(137,021)(1,561)
(Increase)/decrease in goods and services tax refundable(6,232)(2,942)1,937
Decrease in other current assets2,500--
Increase in trade and other payables120,31882,36231,814
Increase/(decrease) in current tax liabilities7(1,847)(26,304)
Net cash inflow from operating activities117,250(69,565)15,868
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnauditedAudited
$’000$’000$’000
Raw materials at costs82,13982,58074,390
Raw materials at net realisable value253--
Work in progress at cost49,312100,36682,647
Work in progress at net realisable value2363551,593
Finished goods at cost157,913182,27382,495
Finished goods at net realisable value45,75640,83029,818
Total inventories335,609406,404270,943
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.
Raw material inventories at $82.4m (15,159 MT) (31 January 2021: $82.6m, 16,667 MT; 31 July 2021: $74.4m, 13,733 MT)
have decreased marginally.
Work in progress inventories at $49.5m (6,451 MT) have decreased (31 January 2021: $100.7m, 16,053 MT; 31 July 2021:
$84.2m, 12,896 MT) due to lower levels of our core infant formula base powders and the drawdown of bulk cheese
inventories on hand.
Finished goods have decreased to $203.7m (37,293 MT) (31 January 2021: $223.1m, 47,585 MT; 31 July 2021: $112.3m,
21,424 MT). The decrease is due to an active programme to rebalance inventory levels across the Group.
The cost of inventories recognised as an expense during the period was $685.6m (31 January 2021: $567.9m; 31 July
2021: $1,212.4m). The cost of inventories recognised as an expense includes $5.2m (31 January 2021: $4.6m; 31 July
2021: $10.1m) in respect of write downs of inventory to net realisable value.
The total inventory condition provision at reporting date was $2.2m, of which $1.4m related to finished goods, $0.4m
to work in progress, and $0.4m to raw materials (31 January 2021: $1.6m, $0.9m for finished goods, $0.5m for work in
progress, and $0.2m for raw materials; 31 July 2021: $8.3m, $3.6m for finished goods, $4.0m for work in progress, and
$0.7m for raw materials). The slight increase is the result of new product developments which are initially at a higher risk
of being produced out of spec.
In addition, the total onerous contracts provision as at reporting date was $2.4m (31 January 2021: $1.6m; 31 July 2021:
$2.1m). Onerous contracts have increased due to rising milk prices driving a higher cost to fulfill.
Infant base powder inventories of $43.7m (5,648 MT) (31 January 2021: $73.8m, 12,516 MT; 31 July 2021: $67.7m, 10,720
MT) have been reclassified from finished goods to work in progress.
09. PROPERTY, PLANT AND EQUIPMENT
During the six months ended 31 January 2022, $27.0m has been added to capital work in progress relating primarily
to the Pokeno plant modification project. During this period, $5.1m of historical work in progress relating primarily
to routine capital expenditure has been transferred to fixed assets. $12.6m of property, plant, and equipment was
derecognised in relation to the sale and leaseback of the Group’s Auckland land and buildings. Refer to note 2 for
further detail.
PAGE 17 & 18CONDENSED INTERIM FINANCIAL STATEMENTS 2022
11. LOANS AND BORROWINGS
10. INTANGIBLE ASSETS
12. OTHER NON-CURRENT LIABILITIES
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.
During the six months ended 31 January 2022, $16.9m has been added to intangible work in progress relating primarily
to the SAP ERP implementation project. During this period, $0.5m of historical work in progress relating primarily to
routine capital expenditure has been transferred to intangible assets. In addition, $3.2m of New Zealand Units were
acquired during the period.
Other non-current liabilities comprises entirely of a future site restoration obligation relating to the leaseback of the
Auckland land and building.
The Group is subject to capital requirements imposed by its bank through covenants agreed as part of the lending
facility arrangements. The Group met all externally imposed capital requirements for the six months ended 31 January
2022 and 31 January 2021. The Group had the interest cover ratio, the total debt to EBITDA ratio and senior debt to
EBITDA ratio covenants as at 31 July 2021 waived, however met all other externally imposed capital requirements.
Retail bonds
Borrowings under the retail bond programme are supported by a Master Trust Deed and supplemented by the Series
Supplement entered into between the Group and the New Zealand Guardian Trust Company Limited. The retail bonds
are unsecured and subordinated and mature on 17 December 2024. At 31 January 2022, the retail bond had a fair value
of NZD $175.2m (31 January 2021: $184.4m 31 July 2021: NZD $175.0m), based on NZX Debt Market valuation.
The following summarises banking covenants effective for the year ending 31 July 2022:
1. Total shareholder funds of no less than $600.0m at all times.
2. Working capital ratio of no less than 1.5x at all times.
3. Interest cover ratio of no less than 3.0x on and from 31 July 2022.
4. Leverage ratio of no greater than 4.5x for the 31 July 2022 reporting date, increasing to no greater than 4.0x
on and from 31 July 2023.
5. Senior leverage ratio of no greater than 3.0x on and from 31 July 2022.
The bank loans and working capital facility within the Group 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 NZD $100m maturing 1 October 2023, with NZD $29.6m amortising
31 March 2022, NZD $3.7m amortising 31 July 2022, and NZD $33.3m amortising 31 July 2023. The amounts due to
amortise on 31 March 2022 and 31 July 2022 were not drawn at 31 January 2022.
• A secured revolving credit facility (Facility B) of NZD $50m maturing 1 October 2023.
• A secured revolving credit facility (Facility C) of NZD $50m maturing 1 October 2023.
• A secured working capital facility of NZD $250m maturing 1 October 2022 which temporarily increased by
NZD $80m to NZD $330m in September 2021 and stepped back down to NZD $250m in February 2022.
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnauditedAudited
$’000$’000$’000
Current liabilities
Working capital facility (syndicated) NZD21,80077,900-
Working capital facility (syndicated) USD70,05351,299-
Revolving credit facility-85,00033,333
91,853214,19933,333
Non-current liabilities
Working capital facility (syndicated) NZD--60,495
Working capital facility (syndicated) USD--54,928
Revolving credit facility160,580100,000166,667
Loan facility fees(413)(373)(153)
Subordinated bonds180,000180,000180,000
Bond facility fees(2,023)(2,671)(2,353)
338,144276,956459,584
Total loans and borrowings429,997491,155492,917
13. SHARE CAPITAL
The Group had 218,581,661 ordinary shares on issue as at 31 January 2022 (31 January 2021: 218,581,661, 31 July 2021:
218,581,661). There were no shares granted in the period (31 January 2021: 39,274,753: 31 July 2021: 39,274,753).
14. RELATED PARTY TRANSACTIONS
Parent entity
Bright Dairy Holding Limited hold 39.01% of the shares issued by Synlait Milk Limited (31 January 2021: 39.01%; 31 July
2021: 39.01%). Bright Dairy Holding Limited is a subsidiary of Bright Food (Group) Co. Limited, a State-Owned Enterprise
domiciled in the Peoples Republic of China.
PAGE 19 & 20CONDENSED INTERIM FINANCIAL STATEMENTS 2022
14. RELATED PARTY TRANSACTIONS (CONTINUED)
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. New Hope Innovation (Hong Kong) Trading
Company Limited is the Hong Kong operations of the Chinese dairy group, New Hope Dairy Limited, and is a related
entity of Sichuan New Hope Nutritionals and is engaged in the import and export of dairy foods. Main products include
whole milk powder, skim milk powder and whey powder.
In May 2017 the Group 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 Limited was constructing a blending and canning plant
in Auckland, which was subsequently sold to Synlait Milk Limited. The New Zealand Dairy Company Limited is now
a non-trading entity. Eighty Nine Richard Pearse Drive Limited owned the land and buildings at which the Auckland
blending and canning plant was constructed. Eighty Nine Richard Pearse Drive Limited has since sold its land and
building to an independent third party and is now being leased back by the Group’s parent company, Synlait Milk
Limited (refer to note 2 for further detail).
In May 2019, Synlait Business Consulting (Shanghai) Limited was incorporated. The wholly owned foreign entity started
operations from 1 August 2019 and the principal activity of the entity is to provide services to assist Synlait to market
products in China.
On 1 April 2020, the Group acquired 100% of the share capital in Dairyworks Limited. Dairyworks Limited specialises
in the processing, packaging, and marketing of dairy products, including cheese, butter, and milk powder. Dairyworks
Limited owns an Australian subsidiary, Dairyworks (Australia) Pty Limited. Refer to the Group’s 31 July 2020 financial
statements for additional information regarding the acquisition of Dairyworks Limited.
On 3 August 2020, Synlait Milk (Dunsandel Farms) Limited was incorporated for the purpose of holding the Group’s
future farming operation which is expected to commence in the second half of FY22.
(b) Outstanding balances
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnauditedAudited
$’000$’000$’000
Purchase of goods and services
Bright Dairy and Food Co Ltd - Directors fees156133267
New Hope Innovation (Hong Kong) - Sale of milk powder products582--
Sales of goods and services
Bright Dairy and Food Co Ltd - Sale of milk powder products27,1255,53110,175
Sichuan New Hope Nutritional Food Co. Ltd - Sale of milk powder products408--
New Hope Innovation (Hong Kong) - Sale of milk powder products508091,268
Period endedPeriod endedYear ended
31 January 202231 January 202131 July 2021
UnauditedUnauditedAudited
$’000$’000$’000
Current receivables (payables)
Bright Dairy and Food Co Ltd - Sale of milk powder products-3,5643,040
Bright Dairy and Food Co Ltd - Reimbursement of costs(892)(625)(758)
Sichuan New Hope Nutritionals Ltd - Sale of milk powder products(65)(65)-
Sichuan New Hope Nutritionals Ltd - Other costs683269559
New Hope Innovation (Hong Kong) - Sale of milk powder products(108)253272
15. CONTINGENCIES
16. COMMITMENTS
17. EVENTS OCCURRING AFTER THE REPORTING PERIOD
As at 31 January 2022 the Group had no contingent liabilities or assets (31 January 2021: $nil, 31 July 2021 $nil).
The Group has committed expenditure as at 31 January 2022 for the construction of Pokeno plant modifications of
$19.1m (31 January 2021: $42.0m, 31 July 2021: $16.1m) and the SAP implementation project of $1.3m (31 January 2021:
$11.7m, 31 July 2021: $6.7m). The Group expects to commit approximately $15.6m of additional expenditure to the
completion of the SAP implementation project.
There were no events occurring subsequent to 31 January 2022 which require adjustment to or disclosure in the
financial statements.
(a) Transactions with other related parties
PAGE 21 & 22CONDENSED INTERIM FINANCIAL STATEMENTS 2022
INDEPENDENT AUDITOR’S REVIEW REPORT TO
THE SHAREHOLDERS OF SYNLAIT MILK LIMITED
Our conclusion
We have reviewed the condensed interim financial statements of Synlait Milk Limited (the Company) and its subsidiaries (the
Group), which comprise the statement of financial position as at 31 January 2022, and the income statement, the statement of
comprehensive income, the statement of changes in equity and the statement of cash flows for the six month period ended on that
date, and significant accounting policies and other explanatory information.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed interim
financial statements of the Group do not present fairly, in all material respects, the financial position of the Group as at 31 January
2022, and its financial performance and cash flows for the six month period then ended, in accordance with International
Accounting Standard 34 Interim Financial Reporting (IAS 34) and New Zealand Equivalent to International Accounting Standard 34
Interim Financial Reporting (NZ IAS 34).
Basis for conclusion
We conducted our review in accordance with the New Zealand Standard on Review Engagements 2410 (Revised) Review of
Financial Statements Performed by the Independent Auditor of the Entity (NZ SRE 2410 (Revised)). Our responsibility is further
described in the Auditor’s responsibility for the review of the financial statements section of our report.
We are independent of the Group in accordance with the relevant ethical requirements in New Zealand relating to the audit of the
annual financial statements, and we have fulfilled our other ethical responsibilities in accordance with these ethical requirements.
In addition to our role as auditor, our firm carried out other services for the Group in the areas of unusual transaction analysis and
historic performance analysis. The provision of these other services has not impaired our independence.
Directors responsibility for the financial statements
The Directors of the Company are responsible on behalf of the Company for the preparation and fair presentation of these
condensed interim financial statements in accordance with IAS 34 and NZ IAS 34 and for such internal control as the Directors
determine is necessary to enable the preparation and fair presentation of the condensed interim financial statements that are free
from material misstatement, whether due to fraud or error.
Auditor’s responsibility for the review of the financial statements
Our responsibility is to express a conclusion on the condensed interim financial statements based on our review. NZ SRE 2410
(Revised) requires us to conclude whether anything has come to our attention that causes us to believe that the condensed interim
financial statements, taken as a whole, are not prepared in all material respects, in accordance with IAS 34 and NZ IAS 34.
A review of condensed interim financial statements in accordance with NZ SRE 2410 (Revised) is a limited assurance engagement.
We perform 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 and International Standards on
Auditing (New Zealand) and consequently does not enable us to obtain assurance that we might identify in an audit. Accordingly,
we do not express an audit opinion on these condensed interim financial statements.
Who we report to
This report is made solely to the Company’s Shareholders, as a body. Our review work has been undertaken so that we might state
to the Company’s Shareholders those matters which we are required to state to them in our 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 Shareholders, as a body,
for our review procedures, for this report, or for the conclusion we have formed.
The engagement partner on the review resulting in this independent auditor’s review report is Elizabeth Adriana (Adri) Smit.
For and on behalf of:
Chartered Accountants
Christchurch
31 March 2022
REPORT ON THE CONDENSED INTERIM FINANCIAL STATEMENTS
PricewaterhouseCoopers, PwC Centre, 60 Cashel Street, PO Box 13244, Christchurch 8141, New Zealand
T: +64 3 374 3000, pwc.co.nzPwC
PAGE 23 & 24CONDENSED INTERIM FINANCIAL STATEMENTS 2022
---
HALF YEAR RESULTS
INVESTOR PRESENTATION
For the six months ended
31 January 2022
FINANCIAL
PERFORMANCE
Robert Stowell
Chief Financial Officer
A birds eye view of Synlait’s 600m long rail siding hard stand where
up to 30 wagons can be loaded with containers filled from Dry Store 4.
PAGE 2HALF YEAR RESULTS INVESTOR PRESENTATION 2022
`
19%
REVENUE
$
790.6M
37%
CAPITAL EXPENDITURE
$
46.0M
338% 128%
N PATADJUSTED NPAT*
$
27. 9M
$
14.5M
19%
NET DEBT
$
391.8M
269%
OPERATING CASH FLOWS
$
117.3M
45% 20%
EBITDAADJUSTED EBITDA*
$
68.4M
$
56.5M
All comparisons are to H1 21 which has been restated for a change in accounting policy.
* Excluding Synlait Auckland gain on sale and leaseback and related items.
KEY FINANCIAL METRICS
27%
FORECAST BASE MILK PRICE
FOR 2021/2022 SEASON
$
9.60kgMS
PAGE 3HALF YEAR RESULTS INVESTOR PRESENTATION 2022
BUSINESS REVIEW ACTIONS
PROGRESSED IN FIRST HALF
Significant progress made to create more value and support a return to sustainable
profitability, however there is still work to do and opportunities to unlock:
Working capital management
• Cashflow initatives implemented.
• Improved sales phasing and inventory reductions.
• Sale and leaseback of Synlait Auckland completed.
Ingredients
• Team structure reviewed, new appointments made.
• Sales strategy and policy reviewed.
• Key projects progressing to plan.
Nutritionals
• Team structure reviewed, new appointments made.
• Sales strategy and priorities reviewed.
• Key projects progressing to plan.
Beverages & Cream
• New executive appointed and reorganisation
completed.
• Synlait Swappa Bottle pilot off to a good start.
• UHT product launch date delayed.
Operations
• New Executive appointed and reorganisation
completed.
• Slow progress on key metrics due to reorganisation,
COVID-19, and supply chain challenges.
Consumer Foods
• Focused on growth and operational performance.
• Inventory management and working capital going well.
• Talbot Forest Cheese investment to deliver
acceptable return.
Capital projects management
• Tighter control, CAPEX down on FY21.
• ERP implementation $20 million over budget.
• CAPEX increase for Synlait Pokeno’s new customer.
Cost structure review
• Cost structure review completed.
• Organisational reset completed.
• Both delivered savings ahead of budget.
Value created in H1 22
PAGE 4HALF YEAR RESULTS INVESTOR PRESENTATION 2022
REVENUE AND
SALES VOLUMES
Ingredients
Increase in sales revenue (H1 22: $423.7m
vs H1 21: $275.0m) driven by:
• Higher sales volumes (H1 22: 72,028
MT vs H1 21: 56,971 MT).
• Higher dairy commodity prices and
strong FX position.
Nutritionals
Decrease in sales revenue (H1 22: $174.8m
vs H1 21: $223.7m) driven by:
• Lower sales volumes (H1 22: 13,774 MT
vs H1 21: 19,679 MT) due to ongoing
rebalancing of inventory levels by The
a2 Milk Company.
• Lactoferrin performance consistent with
H1 21 in a firm market (H1 22: 8.4 MT vs
H1 21: 9.4 MT).
Revenue up 19% ($126.4m), driven by ingredients volumes and commodity
price increases. This is Synlait’s largest H1 volume and revenue on record.
Beverages & Cream
Lower than expected increase in sales
revenue (H1 22: $22.0m vs H1 21: $18.5m)
driven by:
• Flat sales volumes (H1 22: 16,043 MT
vs H1 21: 16,151 MT).
• Sales prices bolstered by higher dairy
commodity prices.
• Performance below expectations
due to the need for ongoing product
formulation refinement.
Consumer Foods
Increase in sales revenue (H1 22: $126.8m
vs H1 21: $112.6m) driven by:
• Higher dairy commodity prices.
• Flat sales volumes (H1 22: 14,342 MT
vs H1 21: 14,119 MT).
Total*
Total*
Nutritionals
Nutritionals
Ingredients
Ingredients
Consumer
Foods
Consumer
Foods
Beverages
& Cream
Beverages
& Cream
Sales volume (MT)
Revenue ($ millions)
86,273
106,920
116,187
517.1
629.8
747.3
45,673
56,971
72,028
237.9
275.0
423.7
23,657
19,679
13,774
251.6
223.7
174.8
15,886
16,151
16,043
19.6
18.5
22.0
1,057
14,119
14,342
8.0
112.6
126.8
H1 20
H1 21
H1 22
H1 20
H1 21
H1 22
* Totals exclude raw milk and cream sales, freight recoveries, and other revenue items which are not attributable to
business units.
PAGE 5HALF YEAR RESULTS INVESTOR PRESENTATION 2022
PRODUCTION AND
INVENTORY VOLUMES
Ingredients
Decrease in production (H1 22: 87,812 MT vs
H1 21: 95,151) driven by less milk processed
(down 4.1%):
• Milk supply adversely impacted by weather.
• Sales of raw cream increased to maximise
Skim Milk Powder sales due to dairy
commodity prices.
• Scheduled milk sales at Synlait Pokeno
to accommodate modifications for new
multinational customer.
Nutritionals
Decrease in production (H1 22: 8,475 MT vs
H1 21: 9,188 MT) driven by:
• Careful working capital management,
i.e. running down infant base powders.
• Maximised throughput of ingredients during
peak of milk season to increase capacity.
Production reduced 9% (10,371MT), driven mainly by less milk processed
and product mix changes. Closing inventories down 29% on H1 21.
Beverages & Creams
• Production flat half-on-half (H1 22:
16,096MT vs H1 21: 16,078MT).
Consumer Foods
• Decrease in production (H1 22: 10,699
MT vs H1 21: 13,018 MT) due to temporary
shut of Talbot Forest Cheese.
Closing inventory volumes
Inventory volumes significantly down due to:
• Active programme to sell down
ingredients products. Pleasingly, there
was a 20% improvement on H1 21 despite
global shipping challenges.
• Rebalancing of infant base powders.
Nutritional inventories down 53%.
Production volume (MT)
112,012
133,435
123,082
66,701
95,151
87,812
27,454
9,188
8,475
15,951
16,078
16,096
1,906
13,018
10,699
* Totals exclude amounts not attributable to business units.
** Nutritional inventories include nutritional base powders. Consumer Foods inventories include bulk and maturation cheese.
These are classified as work in process and raw materials in the Group’s financial statements.
Closing inventory volume (MT)
50,539
66,805
47,271
29,497
43,241
34,656
18,647
15,378
7,259
724
403
472
1,671
7,783
4,884
Total*
Total*
Nutritionals
Nutritionals
Ingredients
Ingredients
Consumer
Foods
Consumer
Foods
Beverages
& Cream
Beverages
& Cream
H1 20
H1 21
H1 22
H1 20
H1 21
H1 22
PAGE 6HALF YEAR RESULTS INVESTOR PRESENTATION 2022
GROSS MARGIN
PERFORMANCE
Ingredients
Gross margin (H1 22: $34.7M vs H1 21:
$19.0M) higher due to:
• Improved focus on sales pricing and
phasing.
• Improved cost structure as a result of
recent cost savings initiatives.
• Improved FX position.
Nutritionals
Gross margin (H1 22: $25.6M vs H1 21:
$31.7M) lower due to:
• Lower sales of infant formula due
to The a2 Milk Company’s ongoing
rebalancing of inventories.
• This was off set by the consistent
performance of the lactoferrin business,
improved FX and recent cost savings.
Reported gross margin improved 16% ($9.4m) due to significant recovery of the
Ingredients business cost reductions and resilience of the Lactoferrin business.
Beverages & Creams
Gross margin (H1 22: $-0.3m vs H1 21: $-1.7m)
higher due to:
• Lower cost structure from recent cost
savings initiatives.
• Ongoing product formulation refinement.
Consumer Foods
Gross margin (H1 22: $8.1m vs H1 21: $10.1m)
lower due to:
• Continued impact of over supply in butter
market not prevalent in H1 21.
• Significant sales of high-cost cheese
manufactured at Talbot Forest Cheese;
these cheeses have been consumed so
will not impact H2 22.
Gross profit ($ millions)
Gross profit ($/MT)
967.4
552.9
586.9
366.0
333.6
482.3
2,915.4
1,612.4
1,861.1
5.9
(104.2)
(17.5)
(2,192.4)
712.9
564.4
83.5
5 9.1
68.1
16.7
19.0
34.7
69.0
31.7
25.6
0.1
(1.7)
(0.3)
(2.3)
1 0.1
8 .1
* Totals exclude amounts not attributable to business units.
Total*
Total*
Nutritionals
Nutritionals
Ingredients
Ingredients
Consumer
Foods
Consumer
Foods
Beverages
& Cream
Beverages
& Cream
H1 20
H1 21
H1 22
H1 20
H1 21
H1 22
PAGE 7HALF YEAR RESULTS INVESTOR PRESENTATION 2022
OPERATING COST
PERFORMANCE
• Majority of benefits from cost savings
initiatives were realised in operations
and are reflected in improved gross
profitability.
• As a result, manufacturing employee
and other related costs included in
cost of sales down $5.2m compared to
H1 21. Initially targeted $7m for full year.
• SG&A costs are higher than H1 21 due to:
• Non-capital ERP implementation costs
and accounting policy change for small
cloud software projects.
• Executive recruitment and higher
short-term contract labour costs due to
organisational reset.
Cost structure reviewed; on-track to achieve at least $7m in organisational reset savings
in FY22. SG&A costs mainly impacted by higher software and short-term contractor costs.
• Storage costs for warehousing
lower compared to H1 21 due to
completion of Dry Store 4 in FY21.
• Distribution costs higher due
to increased freight costs and
volumes shipped.
• Depreciation lower due to:
• Reduced software cost base
due to FY21 derecognition of
cloud software costs.
• Reduced building lease
depreciation due to completion
of Dry Store 4.
H1 20H1 21H2 20H1 22H2 21
SG&A movement ($ millions)
SG&A costs ($ millions)
H1 21
41.6
37.6
44.6
41.6
4 7.1
43.1
1 .1
1.0
1.0
(0.7)
(0.9)
43.1
Information
Services
Employee
Costs
StorageDepreciationH1 22Distribution
IncreaseDecreaseTotal
PAGE 8HALF YEAR RESULTS INVESTOR PRESENTATION 2022
CASH FLOW
AND NET DEBT
• Improved operating cash flows and net
debt position due to:
• Better working capital management
including a sell-down of inventory
levels across the Group.
• Improved profitability – beginning to
see realised benefits from cost savings
workstreams.
• The balance sheet remains on-track to
return to normal metrics within two years.
Synlait is targeting a net debt to EBITDA
ratio of 3.5x to 4.0x in FY22.
• Synlait expects all its banking
arrangements to remain within limits
throughout FY22.
Net debt reduced as inventory was sold down and profitability lifted.
Synlait remains comfortably within its banking arrangements and is
focused on getting back to normal metrics in FY23.
• Lower investing cash outflows also
contributed to net debt reduction. Decrease
driven by:
• Proceeds from sale of Synlait Auckland’s
land and building ($30.1m).
• Completion of Dry Store 4 and Rail Siding
in FY21.
• Only two major projects currently
underway (ERP and Synlait Pokeno):
• ERP implementation spend in H1
22 was $16.0m (total spend to date
$43.9m) with ~$16.9m to be incurred
over H2 22 and H1 23.
• Synlait Pokeno modifications spend in
H1 22 was $18.2m (total spend to date
$52.7m) with ~$34.3m to be incurred
before completion in FY23.
• Operational and residual growth
capex spend in H1 22 was $11.8m, with
~$27.8m to be incurred over H2 22.
Net cash from operating activities ($ millions)
Net debt ($ millions)
447.4
526.9
485.1
479.4
391.8
2020
103.8
92.3
15.8
85.4
(69.6)
117.3
117.3
20222021
11.5
H1H2
H1 20H1 21H2 20H1 22H2 21
PAGE 9HALF YEAR RESULTS INVESTOR PRESENTATION 2022
BUSINESS
PERFORMANCE
Grant Watson
Chief Executive Officer
Synlait has mandated that all staff, contractors and visitors must
be fully vaccinated against COVID-19 to enter our facilities. As an
additional precaution all staff are currently undergoing daily rapid
antigen testing on entry to our sites. Here a staff member is tested by
our health and safety team on arrival at work.
PAGE 10HALF YEAR RESULTS INVESTOR PRESENTATION 2022
FIRST IMPRESSIONS
FROM OUR NEW CEO
1. Synlait has amazing DNA
• Innovative and disruptive culture, and strong sustainability credentials set Synlait apart.
• Desire to do things differently is infectious and evident everywhere.
2. Momentum is building
• Today’s result validates that momentum is building.
• Six months into a two year recovery, the plan is being driven forward with pace.
3. Greater focus and accountability is required to get to the next level
• To deliver on Synlait’s enormous potential and return to strong, sustainable growth,
a greater level of focus and accountability is needed across the organisation.
• Improving systems, tools, and processes will increase Synlait’s ability to execute with
excellence – this is a significant opportunity.
4. People make Synlait what it is today
• Farmer suppliers remain committed to delivering excellence through Lead With Pride™.
• Continue to strengthen current customer relationships and build connections with
future ones.
• This cannot be achieved without Synlait’s staff who remain committed and loyal after
a challenging few years.
Penny and Mark Brown and their boys are proud
Lead With Pride™ Gold|Plus certified farmer suppliers
to Synlait Pokeno.
PAGE 11HALF YEAR RESULTS INVESTOR PRESENTATION 2022
BUSINESS UPDATE
INGREDIENTS
Separating out the Ingredients business as part of the
organisational reset has seen:
• An increased focus on discipline and execution of the
sales strategy.
• Improved processes as Synlait works to extract more
from its value chain.
• Increased engagement with multinational customers to
drive sustainable, profitable growth.
Made With Better Milk
• Active discussions underway with Synlait’s current
multinational customers in the ingredients space about
how Made With Better Milk can help meet their climate
and sustainability targets.
• Sales and marketing strategies continue to be prioritised.
Tankers collect milk from Synlait’s Lead With Pride™ certified
farmer suppliers for Made With Better Milk products.
PAGE 12HALF YEAR RESULTS INVESTOR PRESENTATION 2022
BUSINESS UPDATE
NUTRITIONALS
The a2 Milk Company
• Renewing the State Administration for Market Regulation
(SAMR) licence for Chinese labelled a2 Platinum® Infant
Formula is a critical project:
• Dossier submitted to SAMR and technical review
expected to be complete by end of April.
• Onsite audit to be conducted by Ministry for Primary
Industries (MPI) on behalf of SAMR likely in June/July.
• Re-registration decision expected by end of 2022.
Nutritional Base Powders
• Initiatives and trials underway with several multinationals
and China domestic players as global market reset.
• Product portfolio development has expanded to include all
life stage nutritional powders (paediatric to adult).
Lactoferrin
• Use of lactoferrin growing in other nutritional segments
(i.e. vitamins and minerals supplements).
• Majority of China infant formula re-registrations include
higher lactoferrin dosages to improve product quality.
• Pricing remains firm given current market dynamics.
Synlait Pokeno’s new multinational customer
• First base powder and finished goods trials complete.
• Main build at Synlait Pokeno complete, despite COVID-19
related restrictions. Packaging build on track.
• No change to previously communicated CAPEX spend or
volume expectations.
• Commercial production remains on track to start late 2022.
Milk silos at Synlait Dunsandel.
PAGE 13HALF YEAR RESULTS INVESTOR PRESENTATION 2022
BUSINESS UPDATE
BEVERAGES & CREAM
Synlait continues to develop customer and product innovation
pipelines. Delay in product coming to market a significant
focus for management.
Synlait Swappa Bottle
• First own-branded consumer foods product launched at
two Christchurch New World supermarkets in October
2021 as part of pilot programme. Rates of sale and return
of bottles exceeded business case expectations.
• Received enquiries to sell Swappa Bottle across
New Zealand. Reviewing the business case for expanded
distribution.
UHT cream
• Continue to amend formulation and specifications
to service the needs of a significant European
multinational customer.
Consumer beverage strategy
• Product propositions being developed in line with
strategy.
At Synlait’s Research and Development Centre in Palmerston North
a technician measures the viscosity of drinking yoghurt,
a product currently under development.
PAGE 14HALF YEAR RESULTS INVESTOR PRESENTATION 2022
BUSINESS UPDATE
CONSUMER FOODS (DAIRYWORKS)
H1 22 demonstrated continued progress in Dairyworks strategy ‘Moving From Cheese to Dairy’
and its ambition to be the second biggest player in the New Zealand consumer category:
• Foodservice growth strategy launched with Dairyworks branded milk and cream range.
Partnered with Bidfresh for South Island/Wellington distribution.
• Category extension continues. National distribution for Protein Fit yoghurt range achieved
(300 stores). Next yoghurt range to launch in July.
• Business development discussions continue in key export markets (Australia and China) to
expand global distribution. Commercial terms on track to be completed H2 22, first sales
realised H1 23.
• Dairyworks warehouse and distribution centre build completed. Enabled consolidation of
bulk/finished goods in one location.
• Operational cost control and optimisation focus saw material cost reductions. This was
offset by increased input costs due to inflation. Cash remains a focus, $14m inventory
reduction, further reductions expected in H2 22.
Dairyworks branded milk and cream was launched
into the foodservice channel in September 2021
in partnership with Bidfresh who distribute it for
Dairyworks.
PAGE 15HALF YEAR RESULTS INVESTOR PRESENTATION 2022
CREATING VALUE FROM SYNLAIT’S
SUSTAINABILITY INVESTMENT
Several large-scale projects underway:
• Synlait, Danone and AgResearch are participating in a soil
health and regenerative agriculture study on 10 farms over
five years to determine impacts of soil health changes
on production, farm resilience and the environment.
Ministry for Primary Industries’ Sustainable Food and Fibre
Futures fund committed $2.8m. Synlait and Danone jointly
contributed $1.0m.
• Boiler 2 at Synlait Dunsandel is being converted from coal
to biomass. Wood pellet campaign to start in FY23. Project
co-funded by the New Zealand Government Investment in
Decarbonising Industry (GIDI) and The a2 Milk Company.
• Electrode boiler to be upgraded to maximum capacity
and connected to entire Dunsandel facility in early FY23.
Project also co-funded by NZ GIDI fund.
Significant reduction in Greenhouse Gas
Emissions continue:
• On-farm emissions intensity per kg of milk solids reduced
5% in FY21, or 10% compared to FY18 base year when
targets were first established.
• FY21 total off-farm (scope 1 and 2) emissions remained
stable compared to FY20.
• Scope 1 and 2 emissions intensity per kg of product
reduced 24% compared to FY18.
• Lead With Pride™ incentives were updated to reward
mitigation measures on-farm. A tool to assess reduction
measures was developed to calculate farmers potential
incentive payment.
Commercialisation of Synlait’s sustainability
strategy progresses:
• Committed to growing high value business on the back of
Synlait’s sustainability investment. Made With Better Milk
is the programme being developed to do this.
• Active discussions with local and international customers
underway to craft product value propositions that provide
opportunities to differentiate their brands through unique
claims such as grass-fed certification, low greenhouse
gas emissions, and regenerative agriculture practices.
Mocked up packaging for Made With Better Milk whole and skim milk
powders proudly display Synlait’s B Corporation™ certification.
PAGE 16HALF YEAR RESULTS INVESTOR PRESENTATION 2022
KEY PRIORITIES FOR
THE SECOND HALF
1. Deliver critical projects:
• Successfully renew the SAMR license for Chinese labelled a2 Platinum® Infant
Formula to ensure China market access is retained.
• Successfully implement the Enterprise Resource Planning system on 1 August.
• Ensure readiness to successfully commence commercial production for Synlait
Pokeno’s new multinational customer.
2. Navigate Omicron’s impact on Synlait’s workforce and supply chains.
3. Rebuild the team and internal culture following a period of constant change and
reorganisation. Synlait needs an engaged, committed, and re-energised workforce
to successfully rebuild the business and return it to sustainable profitable growth.
4. Review Synlait’s strategy to ensure it has sufficient clarity and focus to deliver the
second year of the recovery plan and beyond.
Warehouse activity at Synlait Pokeno.
PAGE 17HALF YEAR RESULTS INVESTOR PRESENTATION 2022
FULL YEAR 2022
GUIDANCE STATEMENT
Updated as at 1 April 2022
Synlait still expects its Net Profit After Tax result to return
to robust profitability in FY22 based on:
• Tighter management of its Ingredient business;
• Improved infant base powder volumes;
• A growing contribution from its Lactoferrin and
Consumer Foods businesses; and
• Retained cost savings.
FY22 also includes a one-off gain on sale of $17.1 million
from the sale and leaseback of the land and building at
Synlait Auckland, which was realised in the first half. Note
$11.9 million (non-taxable) of this gain was recognised in
H1 22 and the balance will be released to the P&L over
the life of the 10-year lease in accordance with relevant
lease accounting standards.
Synlait does not expect its profitability to grow at the same
rate in the second half of FY22 due to several external
factors which could impact performance. These include:
• The impact of Omicron and broader labour shortages
in New Zealand on Synlait’s workforce, which remains
unknown. This could impact Synlait’s ability to operate at
normal production levels in the short-term.
• Ongoing disruptions to global supply chains due to
COVID-19 and geopolitical issues which could impact
Synlait’s ability to procure raw materials and export
products.
• Dairy commodity prices continuing to rise due to strong
global demand outrunning restricted supply, which could
potentially create downside risk in FY22, and equally
an opposite upside opportunity in FY23, due to lagged
priced contracts with large multinational customers.
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.
As previously communicated, Synlait’s performance will
build into FY23 as production for its new multinational
customer at Synlait Pokeno ramps up and its Consumer
Foods business continues to grow.
Board and Management still expect that by the end of
FY23 the recovery plan will have seen Synlait return to
similar levels of profitability, operating cash flows, and
debt ratios as per the years leading into FY21.
PAGE 18HALF YEAR RESULTS INVESTOR PRESENTATION 2022
APPENDICES
Synlait’s striking pink and white tankers have become a common sight
on roads around Canterbury and the Waikato.
PAGE 19HALF YEAR RESULTS INVESTOR PRESENTATION 2022
H1 18H1 19H1 20H1 21H1 22
Sales volume (MT)
Nutritionals19,09021,94723,65719,67913,774
Ingredients43,27950,93045,67356,97172,028
Beverages & Cream--15,88616,15116,043
Consumer Foods--1,05714,11914,342
Subtotal62,36972,87786,273106,920116,187
Gross profit ($M)
Nutritionals59.467.969.031.725.6
Ingredients25.917.416.719.034.7
Beverages & Cream--0.1(1.7)(0.3)
Consumer Foods--(2.3)1 0.18 .1
Subtotal85.385.383.55 9.168.1
Gross profit ($/MT)
Nutritionals3,112.13,091.82,915.41,612.41,861.1
Ingredients599.1341.8366.0333.6482.3
Beverages & Cream--5.9(104.2)(17.5)
Consumer Foods--(2,192.4)712.9564.4
Subtotal1,368.21,170.0967.4552.9586.9
Revenue ($M)
Nutritionals196.6206.8251.6223.7174.8
Ingredients216.6243.7237.9275.0423.7
Beverages & Cream--19.618.522.0
Consumer Foods--8.0112.6126.8
Subtotal413.2450.5517.1629.8747.3
GROSS PROFIT
PERFORMANCE BY CATEGORY
Note: sales not attributable to business units are not included in the above table.
PAGE 20HALF YEAR RESULTS INVESTOR PRESENTATION 2022
BANKING FACILITIES,
COVENANTS AND BOND ISSUE
Synlait currently has four syndicated bank facilities in place with ANZ and BNZ:
1. Working capital facility (multi-currency) – facility limit of $250 million and reviewed annually,
which temporarily increased to $330 million in September 2021, stepped back down to
$250 million in February 2022.
2. Revolving credit facility (Facility A) - facility limit of $100 million maturing 1 October 2023,
with $29.6 million amortising 31 March 2022, $3.7 million amortising 31 July 2022, and $33.3
million amortising 31 July 2023. The amounts due to amortise on 31 March and 31 July 2022
were not drawn at 31 January 2022.
3. Revolving credit facility (Facility B) – facility limit of $50 million maturing 1 October 2023.
4. Revolving credit facility (Facility C) – facility limit of $50 million maturing 1 October 2023.
Bond issue
• $180 million of five-year unsecured subordinated fixed rate bonds listed on the NZX Debt
Market in December 2019.
Synlait has key financial covenants in place with its banking syndicate for FY22.
These are:
1. Interest cover ratio – EBITDA to interest expense of no less than 3.0x.
2. Minimum shareholders funds – no less than $600 million.
3. Working capital ratio – inventory and debtors to working capital facility outstanding of no
less than 1.5x.
4. Leverage ratio – total debt to EBITDA is no greater than 4.5x.
5. Senior leverage ratio – total debt excluding Subordinate Bond to EBITDA is no greater
than 3.0x.
PAGE 21HALF YEAR RESULTS INVESTOR PRESENTATION 2022
H1 18H1 19H1 20H1 21H2 18H2 19H2 20H2 21H1 22
H1 18H1 19H1 20H1 21H2 18H2 19H2 20H2 21H1 22
H1 18H1 19H1 20H1 21H2 18H2 19H2 20H2 21H1 22
H1 18H1 19H1 20H1 21H2 18H2 19H2 20H2 21H1 22
KEY FINANCIAL METRICS
Gross profit per MT ($)*
EBIT per MT ($)
Return on capital employed (12 month trailing)
Basic earnings per share (cents NZD)Net debt/EBITDA (12 month trailing)
Debt/(debt + equity)
1,379.1
22.1%
22.6%
17.4%
18.0%
13.1%
12.5%
8.4%
11.1%
20.9%
37.9%
39.3%
45.2%
47.2%
37.9%
38.7%
33.3%
(1.5%)
0.3%
995.3
768.3
767.4
783.3
532.3
698.5
183.2
(333.1)
356.4
23.1
18.5
20.6
24.7
14.6
27.0
3.2
(15.9)
12.8
0.4
0.8
2 .1
2.2
3.0
3 .1
3.2
12.9
6.7
1,214.8
1,170.6
960.6
1,109.0
557.9
68.4
594.6
1178.6
H1 18H1 19H1 20H1 21H2 18H2 19H2 20H2 21H1 22
H1 18H1 19H1 20H1 21H2 18H2 19H2 20H2 21H1 22
* Excludes gross profit not attributable to business units.
PAGE 22HALF YEAR RESULTS INVESTOR PRESENTATION 2022
SUMMARISED
INCOME STATEMENT
H1 20*H1 21*H1 22% Change from H1 21 to H1 22
Revenue559.3664.2790.619%
Cost of sales(476.4)(604.5)(721.5)19%
Gross profit82.959.76 9.116%
Other income0.61.615.4857%
SG&A costs(37.6)(41.7)(43.1)4%
Net finance costs(9.5)(11.1)(10.3)-7%
Income taxes(10.6)(2.1)(3.2)52%
NPAT25.86.427.9338%
Depreciation and amortisation(20.9)(27.7)(27.0)-2%
EBITDA66.847.368.445%
* Restated for a change in accounting policy relating to cloud software costs.
PAGE 23HALF YEAR RESULTS INVESTOR PRESENTATION 2022
DISCLAIMER
This presentation is intended to constitute a summary of
certain information about the Synlait Group (“Synlait”) or in
connection with its half year 2022 financial results. It should
be read in conjunction with, and subject to, the explanations
and views in documents previously released to the market
by Synlait. 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.
Any forward looking statements and projections in this
presentation 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.
Any 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.
Any past performance information in this presentation 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.
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.
PAGE 24HALF YEAR RESULTS INVESTOR PRESENTATION 2022
INVESTORS AND MEDIA
Hannah Lynch
Corporate Affairs Manager
+64 21 252 8990
hannah.lynch@synlait.com
---
Results announcement
1 April 2022
Results for announcement to the market
Name of issuer Synlait Milk Limited
Reporting Period 6 months to 31 January 2022
Previous Reporting Period 6 months to 31 January 2021
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$790,591 19 %
Total Revenue $790,591 19 %
Net profit/(loss) from
continuing operations
$27,905 338%
Total net profit/(loss) $27,905 338%
Interim/Final Dividend
Amount per Quoted Equity
Security
Not proposing to pay dividends.
Imputed amount per Quoted
Equity Security
Not applicable.
Record Date Not applicable.
Dividend Payment Date Not applicable.
Current period Pr ior comparable period
Net tangible assets per
Quoted Equity Security
$2.75 $3.26
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Refer to the accompanying documents:
1. Synlait H1 22 Announcement
2. Synlait H1 22 Chair & CEO Review
3. Synlait H1 22 Financial Statements
4. Synlait H1 22 Investor Presentation
Authority for this announcement
Name of person authorised
to make this announcement
Synlait Chair Dr John Penno
Contact person for this
announcement
Synlait Corporate Affairs Manager Hannah Lynch
Contact phone number 021 252 8990
Contact email address hannah.lynch@synlait.com
Date of release through
MAP
1/04/22
Unaudited financial statements accompany this announcement.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
Other issuers discussed similar conditions around this time
Matched by meaning across NZX announcement text, not keywords — based on our semantic index of announcement bodies.
- ATM — The a2 Milk Company Limited: 1H22 Results and Interim Report2022-02-20
“2 OPERATING AND FINANCIAL REVIEW FINANCIAL RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 2021 (NZD$) Key points 1 —Market conditions continued to be challenging with the China IMF market declining by 3.3% in value during 1H22 due mainly to the cumulative impact of a lower bir…”
- SCL — Scales Corporation Limited: 2021 Annual Results announcement2022-02-23
“Scales Corporation Limited Head Office: 52 Cashel Street | Christchurch 8013 | New Zealand Postal: PO Box 1590 | Christchurch 8140 | New Zealand Phone: +64 3 379 7720 scalescorporation.co.nz NZX & Media Release 24 February 2022 SCALES CORPORATION’S DIVERSIFIED S…”
- FSF — Fonterra Shareholders' Fund: Fonterra reports its Interim Results2022-03-16
“Margins in our Ingredients channel improved in the first half compared to the same period last year. However, the higher milk price put pressure on our margins in our Consumer and Foodservice channels, and we also felt the impact of COVID-19 in many of our markets. Lower New Z…”