Synlait Contemplates Sale of North Island Assets Amidst Financial Challenges
Source: The DairyNews
Synlait, a Canterbury-based milk processor, finds itself compelled to undergo a strategic review of its North Island assets, including its newly established plant in Pokeno and blending and canning facility in Auckland, following a disappointing half-year financial performance.
The company has been granted an extension by its banking syndicate, deferring the $130 million prepayment due on March 28 to no later than July 15, 2024. Additionally, an extra $30 million in short-term funding has been approved until June 27. Bright Dairy of China, Synlait's largest shareholder, has extended support, expressing readiness to participate in future equity raises and to extend a loan upon Synlait's request.
With Synlait shares placed on a trading halt, the company's revenue for the six months ending January 31, 2024, increased by 3% to $794 million. However, earnings before interest, taxes, depreciation, and amortization (EBITDA) amounted to only $19.9 million, resulting in a net loss after tax of $96.2 million, with adjusted net loss after tax at $17.4 million. Net debt rose by 8% to $559 million, and gross profit declined by 47% to $43.6 million.
Synlait is now contemplating the potential sale of its North Island assets to explore the most lucrative ownership structure, aiming to maximize shareholder value. The strategic review is anticipated to span several months, with no assurance of final transactions.
Simultaneously, the company is considering an equity raise to alleviate its debt burden, given its trading position at a significant discount compared to its net tangible asset value. CEO Grant Watson acknowledges the challenging period but remains committed to restructuring Synlait to achieve strategic goals while reducing debt levels. Watson highlights Synlait's focus on Advanced Nutrition and Foodservice sectors, backed by a robust asset base and strong shareholder and banking support.
Regarding the sale of its Dairyworks cheese plant, Synlait is in ongoing discussions with potential buyers, yet no definitive agreement has been reached. The board is adamant about securing the best possible outcome for shareholders, recognizing the value of the business.
With Synlait shares placed on a trading halt, the company's revenue for the six months ending January 31, 2024, increased by 3% to $794 million. However, earnings before interest, taxes, depreciation, and amortization (EBITDA) amounted to only $19.9 million, resulting in a net loss after tax of $96.2 million, with adjusted net loss after tax at $17.4 million. Net debt rose by 8% to $559 million, and gross profit declined by 47% to $43.6 million.
Synlait is now contemplating the potential sale of its North Island assets to explore the most lucrative ownership structure, aiming to maximize shareholder value. The strategic review is anticipated to span several months, with no assurance of final transactions.
Simultaneously, the company is considering an equity raise to alleviate its debt burden, given its trading position at a significant discount compared to its net tangible asset value. CEO Grant Watson acknowledges the challenging period but remains committed to restructuring Synlait to achieve strategic goals while reducing debt levels. Watson highlights Synlait's focus on Advanced Nutrition and Foodservice sectors, backed by a robust asset base and strong shareholder and banking support.
Regarding the sale of its Dairyworks cheese plant, Synlait is in ongoing discussions with potential buyers, yet no definitive agreement has been reached. The board is adamant about securing the best possible outcome for shareholders, recognizing the value of the business.
