Company foresees continuing return to the fold of farmers under cessation notices.
Synlait has returned to profitability in its half-year result, with earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $63.1 million.
Its net profit after tax was $4.8m for the six months ended January 31, 2025.
Its forecast base milk price for the 2024/2025 season is $10/kg MS with additional premium payments available to suppliers without a cessation notice, taking the total forecast average milk payment for Synlait suppliers to $10.48/kg MS.
Acting chief executive Tim Carter called it a considerable commercial achievement, given the position the company was in 12 months ago.
In July last year, its shareholders backed a $130m loan from its Chinese major shareholder, Bright Dairy, to allow it to repay loans to its bank.
Carter said the majority of its South Island farmer suppliers are not under cessation notices – a significant improvement from six months ago.
“Given today’s return to profitability, we expect the number of cease withdrawals will increase further ahead of 31 March 2025, which is the final date for farmers to remove their cease if they wish to access all of the new, secured milk premiums.
“Only a minimal number of farmers have confirmed they are exercising their option to leave Synlait for an alternative processor.”
Chair George Adams said the result shows Synlait is making solid headway down its road to recovery.
“While we still have a lot of work to do, we know we are heading in the right direction. The focus now is to consistently deliver – every day, every week, every month, every quarter and every year.”
Despite the result, there is still a lot of work to do, the company said.
Financial progress made in the second half of FY25 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.
The company is targeting a closing net debt balance of $250-$300m. Net debt includes cash, bank debt, transaction costs, and the shareholder loan from Bright Dairy. It is also targeting a ratio of net senior debt (cash, bank debt, and lease liabilities) to EBITDA of below 2.5 times in the 2025 financial year, positioning the company well for its bank refinancing process in the second half.
It highlighted three areas it will focus on in the second half of the financial year: showcasing Synlait’s on-farm offering to ensure Synlait is Canterbury farmers’ processor of choice, delivering for existing and new customers, and further uplifting operational and cost efficiency.
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