Selling off household brands are part of Synlait Milk reversing an “extremely challenging” year that spilled over into a $4.3 million loss for the 2022-23 season.
The Dunsandel-based milk processor lined up a sobering after-tax result for the financial year ending July, down from $38.5m the previous season.
Revenue was back 3% to $1.6 billion and earnings before interest, tax, depreciation and amortisation were down 31% to $90.7m. Debt rose 21% to $413.5m.
Chairman Simon Robertson said the company would address the balance sheet with the intended sale of Dairyworks and Temuka cheese assets.
He said they would “right-size”the cost base for current activities and near-term growth opportunities as well as deliver and build on current and future advanced nutrition and foodservice customer opportunities to lift the operational performance.
“Our financial results are challenging and not where we need them to be, but tactically, we are building the foundations for a stronger Synlait, playing to our strengths while continuing to diversify our products, markets, and customers.”
Dairyworks was bought for $112m about three years ago to accelerate its diversification strategy, since reversed.
The subsidiary supplies shoppers with almost half of its cheese, a quarter of its butter, as well as milk powder and Deep South ice cream.
Chief executive Grant Watson said factors both inside and outside of its control were behind the loss.
“Various factors contributed to our poor financial performance, including material reductions in customer demand, CO2 shortages, extreme weather events, the Covid-19 pandemic, inflationary impacts on our cost base, and costs associated with the launch and stabilisation of our enterprise resource planning (ERP) system.”
He said the company was focused on getting the basics right, lifting its performance, and returning to profitability towards a “new and exciting” era for Synlait.
Synlait was informed last month by major customer, a2 Milk Company, that it wanted to cancel an exclusive manufacturing and supply agreement for infant formula and other products.
Synlait disputes a2 Milk has the right to do this and is not expecting it to impact next year’s results.
The company, majority-owned by overseas investors including China’s Bright Dairy, announced a final base milk price of $8.22 a kilogram of milksolids for the 2022/23 season with an average top-up of 27c/kg for supply incentives.
