A Synlait milk truck. Photo: Synlait/supplied
Synlait Milk has reported a full-year loss at the top end of its guidance range, but sees a brighter future with the shareholder support it needs to sell its North Island assets.
The infant formula producer reported a loss of $39.8 million for the year ended July, with total revenue up 12 percent of $1.83 billion.
Synlait chief executive Richard Wyeth said the second half of the year just ended had been tough with manufacturing challenges at Dunsandel plant, though its underlying profit before interest and tax was near break-even.
He said the support of its major shareholder Bright Dairy Holding offered a path forward for Synlait.
Bright confirmed it would vote in favour of a sale of the North Island assets to US-based Abbott Laboratories for $307m, as well as other resolutions at Synlait's annual meeting on 21 November.
Wyeth said proceeds of the sale to Abbott would be used to reduce debt, with net debt currently sitting at $250.7m.
"I think the sale of the North Island assets to Abbott certainly means we can reset the business going forward.
"The money coming in from this transaction will allow us to basically reduce our term debt completely. So that is a really strong foundation."
Wyeth, who had been in the jobs since May, said the focus was to develop a strategy over the next six months.
He said the company had been working closely with farmer suppliers, following a period when a lot of them issued notices to cease supply.
"The milk supply team did a great job of talking to them, and ultimately, we ended up with more supply. So we lost some farmers, but we also gained some back. So, we are up on the previous year, which is good."
Wyeth said the requirement for milk will not be as high as the company ramps up manufacturing of more advanced nutrition products, which do not require as much raw milk.
He said the company was also working with A2Milk, which planned to diversify away from Synlait as its main supplier of specialty milk.
"So we are just working with A2 very closely on an orderly transition for them - moving some of their product away from us.
"And during the last 12 months, we've been certainly looking at new customers as well. We've actually onboarded a number of new advanced nutrition customers."
He said Abbott's purchase of the North Island business could also present opportunities.
"It's likely the Abbott group will manufacture their own products now going forward in the North Island, but the relationship with them obviously has become quite strong over the period of the transaction,
"So yeah, we'll continue to work with them, and if opportunities come forward, we'll certainly take those."
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