Synlait publishes HY26 result and recovery roadmap

=== IR PAGE TRANSCRIPT: Synlait HY26 Conference Call Transcript 23 March 2026 ===

TRANSCRIPTION
Company: Synlait Milk
Date: 23 March 2026
Duration: 24 minutes
Reservation Number: 10053072

[START OF TRANSCRIPT]
Hannah Lynch: Good morning everybody and welcome to Synlait Limited's Half Year Results
Conference Call. My name is Hannah Lynch and I'm the Head of Milk Supply
Strategy and Corporate Affairs. I'll hand over shortly to our CEO, Richard Wyeth
and our CFO, Andy Liu, who will provide a short overview of today's results.
We'll then open the line for Q&A. If you've got any follow-ups following today's
call, please do feel free to reach out to me directly. Otherwise, over to you
Richard.
Richard Wyeth: Thank you, Hannah. Welcome everyone to our half year results investor
presentation. I have two words to describe this result: frustratingly
disappointing. At a macro level, the result has been impacted by three core
issues: the need to adjust our manufacturing plant to meet advanced nutrition
requirements, lower returns from our ingredients business, and a decision on
tax assets.
Points one and two delivered a dairy processor's perfect storm and we will go
into that shortly. The third point is simply that Synlait has taken a conservative
approach in not recognising further deferred tax assets arising from unused tax
losses beyond those recorded at 31 July, 2025.
Our headline results are a reported EBITDA loss of $34.7 million, an overall net
loss after tax of $80.6 million, and an 88% increase in debt to $472.1 million.
The good news is that, those numbers do not reflect Synlait's future.
Today, we are presenting you with our roadmap to recovery: Stabilise, Simplify
and Scale, which is designed to return the company to success. It begins next
week with a sale of our North Island assets, which is on track for 1st of April.
That will deliver a smaller, stronger and simpler Synlait.

Moving to Slide 3 gives you a closer look at this recovery plan; it has three
interconnected horizons that will deliver at pace. The first horizon, stabilise, will
position Synlait for future growth through delivering operational stability that
meets customer expectations, strengthens financial resilience and builds
greater optimality.
Our second horizon; Simplify, is where we action transformation through
aligning priorities, sharpening our capability and growing high margin products
from our existing assets to lift profitability. Our third horizon; Scale, will see
growth accelerated with the expansion of markets, channels and customers,
and the execution of future growth opportunities.
Moving to Slide 4 provides an overview of Synlait's strategic direction. Stabilise,
Simplify and Scale is where we're going and how we're going to get there. Our
big six focus areas remain: Operational Stability, Quality Performance,
Customer Satisfaction, Financial Resilience, Strengthening Culture and
Financial Performance. We are making progress in each of these areas and I
will share some of that shortly.
Synlait Safe and Synlait Care are fundamental to our success; we do not
compromise on safety, food safety or quality. The Synlait Spirit is our relatively
new value set that is strategically designed to deliver behavior that will move
the business forward. These are now embedded in our performance framework.
Onto Slide 5. Here you can see that horizon one, stabilise, is already activated
across Synlait. There is a long list of actions that have been delivered to uplift
our operational stability and we are making progress. We've taken some big
steps forward in the quality space with a new quality strategy, food safety and
quality policy and company-wide quality commitment called Synlait Care.
The combined result has been an uplift in key quality metrics. The focus now is
on deepening our operational talent, so we can further uplift our operational
stability. There has also been significant progress in our revenue team with
some reshaping to remove costs from the business. This has included closing
the Palmerston North office which will lead to over $2 million in savings per
annum.
Time now to look at the result in more detail. On Slide 6, you'll see our headline
results. So you are aware, the results in the investor presentation include the

North Island operations, unless otherwise stated. The financial statements
include both continuing and discontinued operations with appropriate
classification and disclosure. Therefore, there will be difference in the figures
presented.
In summary though, today we are reporting an EBITDA loss of $34.7 million
with underlying EBITDA of $4.1 million, a net loss after tax of $80.6 million with
an underlying net loss after tax of $27.3 million, net debt of $472.1 million which
is increased by 88%, revenue of $949 million and increase of $32.3 million.
Operating cash flow is a net outflow of $183.4 million and total group gross
profit of $3.1 million, a decrease of $83.9 million.
The only numbers we're celebrating unfortunately in this pack is the milk price
which is great news for farmers. Synlait's forecast base milk price for the '25-'26
season is $9.50, seen to go to $9.70 based on this morning's news, with
additional premium payments taking a total forecast milk price to $10.10 in the
future.
Now moving on to Slide 7. Now the important thing in Slide 7 it gives you an
overview of the series of challenges and tells the story as to how we got into
this position. It is important to us that you understand what has contributed to
this poor result.
Most importantly we want to show you that we had little optionality as to how to
deal with these challenges. We began the season with the need to rebuild our
advanced nutrition inventory as a result of manufacturing challenges
experienced in Dunsandel, which were reported to the market in July 2025.
That advanced nutrition shortfall required catch-up production, so we adjusted
our manufacturing plan to enable that.
The revised plan meant that we had surplus raw milk particularly over the peak
season. When we looked through the numbers it became clearly evident that
the only option was to sell that milk through peak.
As we progressed through the half, some of those milk sales didn't go to plan
and we had milk directed back to Dunsandel which meant our teams had to
pause the catch-up on advanced nutrition and process it into whole milk
powder.

Whole milk powder is the only ingredient that can be made at short notice
without creating significant downtime on the dryer, up to 48 hours to change. To
create the perfect storm whole milk powder prices decreased sharply at the end
of 2025, which impacted the returns on that ingredient portfolio.
This was one of the most frustrating seasons I've experienced in my 18 years in
the industry. We faced multiple headwinds and had very little choice as to how
we could deal with them. At each juncture we carefully costed and analysed the
options even with the benefit of hindsight there is very little, we would have
done differently that would have improved this result. Suffice to say ensuring
Synlait has better commercial optionality is a core focus for the future.
Before we move on it is worth noting that Synlait is still rebuilding customer
inventory and we expect an insurance claim will help recover a portion of the
losses we've seen through this period in relation to those FY25 manufacturing
challenges.
I'll now hand over to our CFO, Andy Liu.
Andy Liu: Thanks Richard and good morning, everyone. I will focus on how the
challenges of the last six months showed up in the P&L, cash flow and balance
sheet and what that tells us as we move into the reset phase. I won't go back
over the operational story. I will focus on the margin movement, the working
capital impact and the actions already reflected in the numbers.
Start by breaking down the P&L impact on Slide 9. From a financial perspective
the HY26 result was driven mainly by margin and product mix effects with
several one-off and non-recurring items. In advanced nutrition margin was
pressured by lower throughput efficiency and higher unit costs, while operating
under tighter controls.
The largest impact was in ingredients where capacity constraints during catch-
up production led to a less favourable mix with more whole milk powder
produced at a time of weak global pricing.
That compressed contribution and limited fixed cost recovery. By contrast
consumer and also food service performed strongly delivering both volume
growth and margin improvement. Food service saw ongoing margin
improvement from FY25 reflecting pricing increase and cost reduction
initiatives.

On SG&A cost it is remaining well controlled. We've been disciplined on
overhead while continuing to invest selectively where it supports growth and
recovery. This gives us a more efficient cost basis as the business stabilised.
Importantly HY26 includes several non-recurring items including $33.2 million of
tactical raw milk sale losses, $1.4 million of last financial year manufacturing
related costs, $3.2 million one-off milk incentives, as well as $2.7 million North
Island discontinued operations. After adjusting for these, we put underlying
number which reflects the better understanding for the business.
Now turn to Slide 10 and walk through how this translated into revenue and
gross profit in a bit more detail. I would like to start with nutrition because it's
very important context. Historically, nutrition has been one of Synlait's largest
profit contributors. It has delivered strong margin over many years and remains
a core part of the portfolio. That's why the HY26 nutrition performance was
disappointing.
A combination of manufacturing disruption, tighter operating controls, and the
need of rebuild inventory reduced throughput efficiency, as well as increased
unit cost during the half. These factors weighted on margins and created a flow-
on effect across the business.
Outside of nutrition, consumer and foodservice continued to perform well.
Consumer revenue increased 51% and foodservice revenue increased 48%,
supported by pricing actions, cost disciplines, and continued momentum in key
markets. The decline in ingredients revenue was deliberate. Volumes were
reduced to release capacity and support the nutrition recovery, which led to
lower volume and a less favourable product mix in a short term.
Overall, Group revenue increased to $949 million, confirming customer demand
remained strong through the period, where we saw pressures was in gross
profit, which stepped down significantly reflecting recovery phase constraints
and reduced flexibility, rather than structural margin deteriorations. As nutrition
stabilises, the underlying strength of the portfolio becomes clearer.
Now move to Slide 11 and cover the North Island from a finance perspective.
The North Island assets are structurally earning negative. While HY26 showing
a temporary improvement from one-off utilisation during the inventory rebuild,
losses persist at both EBIT and EBITDA level and the assets remains capital

intensive. Divesting the North Island therefore eliminates an ongoing EBITDA
drag, lifts group margin mechanically, and simplifies capital allocation. This is a
permanent structural change, not a clinical adjustment.
Next Slide, cash flow and leverage. Operating cash flow was an outflow of $183
million roughly, driven mainly by weaker operating performance and a working
capital build, particularly high ingredients inventory. Financing costs improved,
reduced $13.2 million, reflecting refinancing benefits, lower base rates, and the
lower cost R&D funding aligned with our R&D earnings.
Net debt closed at $472.1 million, elevated ahead of the North Island sale,
which is expected to reduce bank debt on completion. In short, HY26 reflects
largely non-recurring impacts and recovery phase constraints. The North Island
sale will remove the key structural issue and balance sheet actions imminent.
Our focus now is cash, margins, and disciplined capital allocation.
Thank you, I will now hand you back to Richard for an update on business unit
performance.
Richard Wyeth: Thanks, Andy. I'll start with talking to Slide 14 and updating you on the
performance of the Advanced Nutrition business. This remains an important
category for Synlait and we're poised to activate new customer partnership as
the a2 Milk Company transitions their English-label a2 Platinum production in-
house.
It has been a challenging period for the infant formula sector globally due to the
world publicised ARA issue and we've had to implement enhanced ARA testing
which is extending release times and impacting our working capital. We've also
actively managed our supply chain impacts through this.
We have strengthened our business development team and moved from a key
account manager to a customer-centric culture. We have trials underway for a
new customer in the Middle East and new products in development utilising our
existing assets.
Focus areas for the rest of the year include market validation for a new white
label supplement range and targeting the Asia Pacific region. Our bigger,
better, faster project to expand our customer offering and streamline
onboarding is underway and continued business development for our
Nutrabase range.

Moving now to Slide 15 for a look at our ingredients business unit. I'm delighted
to report that Synlait's milk supply has now been certified as grass-fed by MPI,
providing a valuable competitive advantage for us. We've also covered how this
business unit's performance in the half year was impacted by our inability to
chase positive stream returns.
Looking ahead our focus areas are on achieving stability in the supply and
product mix while also expanding customers and markets to improve
optionality. Some good news on Slide 16, our UHT cream business has
achieved profitability and is well positioned to double volume growth in the
FY27.
The cream has continued to perform strongly in China and Southeast Asia and
our margins have lifted due to a lower input cost and price increases in those
key markets. We expanded our Shanghai office this half and further formalised
a plan for FY27 to support that growth.
Focus areas for the immediate future include accelerating market penetration
and volume growth across China and Southeast Asia, maintaining strong
margin by close monitoring of competitor pricing, supporting our customers'
marketing and engagement and advancing new product development including
a cleaner label recipe.
Onto Slide 17 the highlight for this part of the presentation, you can see another
strong half for Dairyworks. Key highlights include a re-entry into private label
butter driving an increase in butter volume, export volumes growing off the back
of new customer development in selected markets. We have had strong growth
in the Australia business through Woolworths and Costco and Dairyworks is
also working to strengthen ties with Vietnam currently.
Priorities for the second half include working on a partnership with Bright Dairy
to test launch a range of Dairyworks products into China. We've got continued
increase investment in advertising and promotion and more recently the launch
of US butter into food stuffs which has been successful.
Moving now onto Slide 18; an update on the activity on farm, in terms of on-
farm excellence and sustainability. We've got 82% of our farmers are now Lead
with Pride certified, meaning they are achieving best practice in dairy. Our on

farm offering is continuing to improve with enhancements to our app and we are
also currently piloting a new fixed milk price tool.
The greatest takeaway from today's results is that it does not reflect Synlait's
future. Our business is about to undergo a wholesale reset with our North
Island asset sale on track to be completed on 1 April 2026. The sale to global
healthcare leader Abbott will deliver Synlait circa $307 million which will reduce
our debt significantly.
A third-party manufacturing agreement has also been agreed with Abbott for
the production of certain base powders after the completion date of the
transaction. The transaction not only helps Synlait's balance sheet it removes a
loss-making asset from our financial performance and will deliver a simpler
Synlait.
From there our Stabilise, Simplify and Scale strategy provides a solid roadmap
to return Synlait to success. Looking ahead into the second half and as noted in
our full year results in September 2025, the company will not provide FY26
financial guidance, withdrawing guidance for the remainder of the financial year.
As we have said in our letter to shareholders today, Synlait's leadership is
committed to ensuring we look back at the next 12 to 24 months and recognise
it has been a period where Synlait under-promised and over-delivered. Today's
result does not recognise the effort that is going into the business at the
moment. I would now like to open the call up to questions.
Hannah Lynch: Thank you. If you wish to ask a question, please press star one on your
telephone and wait for your name to be announced. If you wish to cancel your
request, please press star two. And if you're on a speakerphone, please pick up
the handset to ask your question.
Your first question comes from Matt Montgomerie from Forsyth Barr. Please go
ahead.
Matt Montgomerie: Hi guys. Good morning. I might just start on sort of operationally and I guess
where we are in the context of getting back to stability. I think Richard you
made a comment around you're still rebuilding customer inventory. So maybe
I'd be keen just to understand there, how much you've got to go because

obviously you don't, you're probably not going to have the North Island to lean
back on pretty shortly.
And then also just -- how close to stabilisation are we, have you seen any signs
of improvement? I know you're not wanting to give guidance, but just I guess bit
more colour around where we are at an operational level to I guess try underpin
some confidence looking forward.
Richard Wyeth: Yes thanks Matt. All fair questions obviously won't go into specifics on the
volumes but in terms of the actual improvement. So, there's a couple of key
points. So we're at a period of time in the dairy season where we don't have the
peak milk pressure. So in terms of from a Dunsandel site perspective, very little
excuse in terms of -- we've got the capacity to run the dryers hard on advanced
nutrition so that's one positive that we didn't have in the first half results.
Secondly post the sale to Abbott we have signed up a manufacturing
agreement with them so that will assist us with additional base powder that will
help that recovery as well. And we're just working on canning at the same time.
So we've got a number of things in place contractually that create a plan that
where we will catch up. As I say a lot more comfortable now than I was -- six
months ago heading into peak.
So that's positive but we've got to deliver, right? So we're budgeting on about a
90% attainment rate which I think is, okay but there's times where over the last
six months we haven't quite achieved even 90%. So there's still a small amount
of risk but not a high amount of risk. I've got a plan that I am comfortable we
can deliver but the next four to five months is really important for us. We need
to execute that.
Matt Montgomerie: Yes. And then just on Dunsandel, there's a couple of comments in there around
activating new customers, obviously talking about Abbott here as well. Like is
there been any notable change I suppose in terms of diversifying the business,
as we look forward versus six months ago, particularly, I think there's not too
much commentary in here around I guess strategic plans from milk supply or
volume allocation point of view as we look to I guess '27, '28 and beyond for
ultimately planning for the volume shift that's impending from your biggest
customer?

Richard Wyeth: Yes thanks for that. So we've got we're working with two or three significant
offshore customers to help replace some of that English label volume that will
obviously go to the North Island. In terms of our internal measure of milk
balance to customers we're spot on. So the amount of milk we'll have going into
next year balances perfectly.
So we're not looking for new milk and we're not looking to lose any, which might
sound ironic but we're well balanced there. So that's good but I also wouldn't
discount, we're still working with a2 on a couple of good opportunities outside of
the China market too. So I mean nothing we can go into detail on, but there is
good opportunities not just with new customers, but we're still looking to work
with a2, as much as we can.
Matt Montgomerie: Yes. Thank you.
Hannah Lynch: Thank you. Once again if you wish to ask a question please press star one and
wait for your name to be announced. We'll pause a moment for any further
questions to register. Once again to ask a question please press star one.
Thank you. There are no further questions at this time. I'll now hand back to Mr.
Wyeth for closing remarks.
Richard Wyeth: Thank you everyone for attending the call. And we'll look forward to catching up
in due course.
Hannah Lynch: That does conclude our conference for today. Thank you for participating. You
may now disconnect.
[END OF TRANSCRIPT]