The half-year loss range was based on Synlait’s initial consolidated result, which was subject to further review and may be subject to further adjustments as the company prepared its half-year financial statements for release on March 25, it said.
“The HY24 result remains subject to review procedures by Synlait’s auditor, and the range excludes any additional adjustments, including accruals, provisions, and impairments, which are still being assessed,” the company said.
The previously announced guidance said that Synlait expected its half-year net profit to be down from the first half of 2023, mainly due to increased financing costs and changes in margin.
Last September 2023, Synlait said its earnings before interest, taxes, depreciation, and amortisation (EBITDA) performance were expected to improve in the full year 2024, compared to 2023.
“Synlait’s expectation is now that the full year 2024 EBITDA result is expected to be broadly flat or down on 2023,” it said.
“The board and management are actively working on the need to deleverage Synlait’s balance sheet as a priority.”
On top of Synlait’s March debt repayment, it has $180m in NZX-listed bonds, which fall due on December 17 this year.
The bonds last traded at a yield of 25 per cent.
The company’s shares last traded at 73c, down 10c from Friday’s close, having fallen by 76 per cent over the past 12 months.
Synlait is under 20 per cent owned by a2 Milk and 39 per cent owned by China’s Bright Dairy.
Forsyth Barr senior analyst Matt Montgomerie said the release was another negative surprise after a string of earnings downgrades from the company.
“Today was worse again, versus what we had expected.”
Synlait has extensive manufacturing assets at Pōkeno, at the end of Auckland’s Southern Motorway, and Dunsandel, in Canterbury.
Montgomerie said Synlait’s earnings release was a reminder of the under-utilised nature of its asset base and the issues that arise when there is a high fixed cost base in a business.
“On top of that, the balance sheet remains an issue and they are clearly seeing increased interest costs coming through.
“The balance sheet overhang will remain with the company not really providing any new information, apart from that they will update the market at the end of March.
“I may have expected at least a comment one way or the other on Dairyworks to give the market or investors a bit more of a steer as to the next steps, but it looks as though they will have to wait.”
Under-use of Pōkeno was one of the things dragging on Synlait’s profitability.
“The stock is clearly under pressure and people are unclear and uncertain around the next steps on the balance sheet,” Montgomerie said.
“So without any comment, the market will continue to speculate on the next steps and the market will naturally gravitate more towards an equity raising at a likely deep discount to the share price, or an alternative asset sale such as Dunsandel or Pōkeno.”
Separately, Synlait last week said Liu Ruibing (Ryan) had resigned as financial officer of Bright Dairy Holding Ltd for personal reasons and had subsequently stood down as a Bright Dairy-appointed director of Synlait Milk.
Bright Dairy has a 39.0 per cent shareholding in Synlait.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
