Synlait Milk beats earnings guidance in first half

Synlait Milk has reported its first-half result. Photo / Supplied

Synlait Milk’s first-half operating earnings have come in at $63.1 million – just over the company’s previously advised guidance.

The company’s guidance was for earnings before interest, taxes, depreciation, and amortisation (ebitda) of $53m to $63m for the half to January 31.

Synlait also reported a net profit after tax of $4.8m from a $96.2m net loss in the previous comparable period.

The once-cash-strapped milk processor said its net debt was $391.9m, down 29%. Revenue was $916.8m, up 16%.

The forecast base milk price for 2024-25 is $10/kg of milksolids, with additional premium payments available to suppliers without a “cease” notice, taking the total forecast average milk payment for Synlait suppliers to $10.48/kg.

Cease notices are when farmers give notice of withdrawing their milk supply.

Acting chief executive Tim Carter said: “Given the position Synlait was in 12 months ago, this return to profitability is a considerable commercial achievement.”

He said the result was delivered through a focus on getting the fundamentals right.

“We are very comfortable with our forecast milk supply for the next financial year.

“Progress made by our on-farm team means the majority of our South Island farmer suppliers are not under cease – a significant improvement from six months ago."

Chairman George Adams said: “We anticipate farmer confidence in Synlait will further increase on the back of this positive result.

“The result shows Synlait is making solid headway down its road to recovery,” Adams said.

“While we still have a lot of work to do, we know we are heading in the right direction.”

Looking ahead, Synlait said a continued focus on doing the fundamentals well would enable the company to deliver a “significant improvement” in its overall ebitda performance compared with the prior year.

“However, financial progress made in the second half of 2025 will be slower than the first half as Synlait balances several opportunities and risks related to milk stream returns and foreign exchange and delivers ongoing operational and cost improvements,” it said.

Synlait is targeting a closing net debt balance of $250m to $300m and a net senior debt-to-ebitda ratio of below 2.5 times in 2025 that it said would position the company well for its bank refinancing process in the second half.

Meanwhile, Synlait’s newly appointed chief executive, Richard Wyeth, will take up the role on May 19.

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Last year, Synlait reported an annual loss of $182.1m.

Most of the red ink comprised a $114.6m loss non-cash impairment of its long-term North Island assets, which include its processing plant at Pōkeno.

Synlait is a major supplier of infant formula to a2 Milk.

After a big a capital raise last year, China’s Bright Dairy increased its stake in Synlait to 65.25% from 39.01%.

A2 Milk, which also participated, has under 20% of the company.

Jamie Gray is an Auckland-based journalist covering the financial markets and the primary sector. He joined the Herald in 2011.