Synlait turns loss into a profit and sees fewer South Island suppliers slip away at the half year

Monday, 24 March 2025

Synlait reports fewer of its supplier-farmers are under a cease notice than there were last year.

Infant formula producer Synlait has turned a substantial loss into a significant profit in the current half year, posting a 105% profit bump for the last six months to the end of January.

But it has warned that the second half of the year may not be as impressive, as the company balances “several opportunities and risks related to milk stream returns and foreign exchange”.

At the end of last year, Synlait was saved from insolvency by its two major shareholders. It has gone on to make $4.8 million in net profit in the period under review, up 105% on its $96.2m loss in the previous year.

Revenue was up 16% at $916.8m, from $793.5m in the previous half-year.

Synlait acting chief executive Tim Carter says fewer farmers are expected to cancel their contacts with the company after it posted a 105% profit bump for the half-year.

The company did not declare a half-year dividend.

Acting chief executive Tim Carter said the profit recovery was a “considerable commercial achievement” compared with its financial position 12 months ago.

Carter said, “We are very comfortable with our forecast milk supply for the next financial year,” with fewer South Island farmers under a cease notice and farmgate prices forecast up to $10.48 from $10.00, with a $0.20 secured premium for Synlait suppliers.

Synlait has warned the second half of the year may not be as impressive as the first half.

“Progress made by our on-farm team means the majority of our South Island farmer suppliers are not under cease notice – a significant improvement from six months ago,” Carter said in the announcement. “We anticipate farmer confidence in Synlait will further increase on the back of this positive result.”

Under Synlait’s milk supply agreement, farmers must issue a two-year cessation notice before withdrawing their supply. That means suppliers would have to issue another cessation notice before May 31 this year to be withdrawn by the end of the 2025-26 season.

A majority of farmer suppliers issued cessation notices ahead of 31 May 2024 which gave them the option to sign with other milk processors, as a result of Synlait’s issues.

Synlait chairperson George Adams speaking in July appealing to shareholders to approve a $130 million loan to stave off liquidation.

But in this result, Carter said only a “minimal number of farmers” had confirmed they were exercising their option to leave Synlait for an alternative processor.”

China’s Bright Dairy bought the formerly beleaguered company’s majority shareholding after overwhelming debt pushed it to a capital raise in September. Its two major shareholders, NZX-listed A2 Milk and Bright Dairy, held a special meeting that month and approved $218m in new shares as well as a finance package valued at $450m.

That meant net debt was down almost 30% at $391.9 million from full-year debt of $550.7m.