Two Synlait suppliers who have handed their cessation notices to the company did so to keep their options open and to send a message to the Synlait board to lift its financial performance.
Synlait quit notices ‘an insurance tactic
Ashburton supplier Willy Leferink says news that many suppliers are leaving Synlait is not unexpected.

Suppliers of troubled company hand in their notice in droves.

Two Synlait suppliers who have handed their cessation notices to the company did so to keep their options open and to send a message to the Synlait board to lift its financial performance.

One of those farmers, Ōtorohanga supplier Michael Woodward, said doing so keeps his options open in case Synlait sells its Pōkeno factory.

“Our intention is to stay with the company, but if the worst case happens because we are supplying the North Island factory if it changes hands, we just want to make sure we still align with the values of whoever potentially purchases that operation.

“Putting in our notice gives us the chance of a two-year opt-out.”

Synlait announced on June 4 that a large majority of its suppliers had handed in cessation notices.

If Synlait retains ownership of the factory, Woodward said, he will stay with the company.

He said he had heard that others who have had handed in their notice are similarly doing so as an ‘insurance policy’.

This is being done by suppliers across both islands, he said.

The company indicated in April that the sale of the factory is a possibility as it looks at options to reduce $300 million in debt.

Woodward backed Bright Dairy’s $130m loan offer, which will require shareholder approval, saying it is the best option unless the money could be raised privately in New Zealand.

“I would like to think that it’s a short-term measure until they do get that balance sheet back into line. It’s nice to know that one of the major investors is there to make sure that business as usual continues.

“From an on-farm point of view, there’s no change in operations, we’re feeling no pressure from them – they have put out a really strong advance [rate] for next season – which they needed to because we have been behind – and we appreciate that and the milk price they have put up this season matches Fonterra’s price.”

Woodward said there is still support for Synlait among its suppliers, and that many of its financial problems are a result of decisions made by the previous management team.

Ashburton supplier and former Federated Farmers board member Willy Leferink said news that many suppliers are leaving was not unexpected. He agreed that many are also handing in their notice to keep their options open.

“It’s a tough going when you’re on the back foot – and when you’re trying to sell stuff when you’re on the back foot, the vultures are out.”

Many suppliers in Mid Canterbury are also considering walking away.

“I don’t know anybody from my circle that hasn’t put in their notice,” Leferink said.

He said suppliers have had hard conversations with both management and the board, where the supplier’s position has been made clear.

“If they want to get their suppliers back, they need to do better than what they do now.”

Leferink said Synlait burned through a lot of trust and goodwill in its supplier base over the past season due to its payout not matching Fonterra’s and the financial struggles that resulted from that.

There is a lot of disappointment among suppliers.

Asked what went wrong with the company, Leferink said: “They built a factory in the wrong place at the wrong time.”

It also underestimated the decline in birth rates in China, which reduced demand for infant formula, he said.

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