Synlait Milk Ltd. · NZX:SML
Synlait Milk — HY24 Earnings Presentation
34 slides from Synlait Milk's earnings presentation, Apr 2, 2024
Slide 1: Half Year Results Investor Presentation
HALF YEAR RESULTS INVESTOR PRESENTATION For the six months ended 31 January 2024
Slide 2: Key Takeaways From Today
KEY TAKEAWAYS FROM TODAY RESET WELL PROGRESSED MATERIAL UNCERTAINTIES EXIST 1 PAGE 3 2 PAGE 22 3 PAGE 26 • Siginficant loan repayments will fall due DELEVERAGING PLAN TO ADDRESS BUSINESS RECOVERY PLAN STRENGTHENED LEADERSHIP over the next 12 months. $514m of debt MATERIAL UNCERTAINTIES WELL PROGRESS
Slide 3: Deleveraging Plan in Place
DELEVERAGING PLAN IN PLACE Synlait has a clear deleveraging plan to reduce total debt to a sustainable level. 1 North Island assets strategic review commenced 2 Equity raise 3 Dairyworks sale process ongoing Balance sheet options narrowed • Synlait will undertake a strategic review of its world-clas
Slide 4: Stronger Site Contribution Needed Underpinning North Island Assets Strategic Review
STRONGER SITE CONTRIBUTION NEEDED UNDERPINNING NORTH ISLAND ASSETS STRATEGIC REVIEW Revenue* Production Volume* FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 North Island South Island North Island South Island * Revenue and production volume in the graphs represent
Slide 5: Key Financial Metrics
KEY FINANCIAL METRICS Half Year Adjusted NPAT ($17.4) million, in line with guidance. 3% $26.5M $ 793.5 M ( $ 98.1 M ) TOTAL GROUP REVENUE OPERATING CASHFLOW 48% 17.5 M $101.0M $31.7M ( $ 96.2 M ) ( $ 17.4 M ) $ TOTAL GROUP NPAT ADJUSTED/UNDERLYING TOTAL CAPITAL EXPENDITURE² GROUP NPAT 1 $31.6M $26.
Slide 6: Financial Performance
FINANCIAL PERFORMANCE Robert Stowell Chief Financial Officer
Slide 7: HY24 Significantly Impacted by Three Non-Cash Accounting Adjustments
HY24 WAS SIGNIFICANTLY IMPACTED BY THREE NON-CASH ACCOUNTING ADJUSTMENTS 1 SYNLAIT IMPAIRMENT 2 DAIRYWORKS FAIR VALUE WRITE DOWN 3 PRODUCT COSTING IMPROVEMENTS Synlait has recognised an impairment A $31.1 million adjustment was recorded A significant change in the basis charge of $50.3 million, whic
Slide 8: Synlait's HY24 Result
SYNLAIT’S HY24 RESULT Adjusted NPAT movement ($ millions) 14.3 On an adjusted basis, the half-year result was impacted by a less favourable market environment for the ingredients business, unfavourable FX, lower Advanced Nutrition volumes, and higher inventory write-downs, operational expenditure, a
Slide 9: Ingredients Performance
INGREDIENTS PERFORMANCE Volumes (MT) Ingredients sales volumes returned to normal levels after ERP stabilisation challenges impacted HY23 volumes. Profitability was down due to less favourable market conditions and FX, reduced lead bucket advantage, and higher volumes of downgrade product and operat
Slide 10: Advanced Nutrition Performance
ADVANCED NUTRITION PERFORMANCE Volumes (MT) Volumes and profitability have been phased towards the second half. Margins are down on lower lactoferrin volumes and a softening lactoferrin market, higher operational costs, and unfavourable FX performance. Sales Performance Manufacturing Performance Rev
Slide 11: Consumer Foods Performance
CONSUMER FOODS PERFORMANCE Volumes (MT) Performance was largely consistent with a slight volume increase offset by lower prices and costs rising at a faster rate than revenues. Sales Performance Manufacturing Performance Revenue flat half-on-half (HY24: $165m, HY23: $164m) Production volumes up 9% (
Slide 12: Foodservice Performance
FOODSERVICE PERFORMANCE Volumes (MT) The first six months of commercial production of UHT cream is complete. While higher than expected start-up costs have impacted financial performance, Synlait expects future volume growth to drive profitability. Sales Performance Manufacturing Performance • Reven
Slide 13: SG&A and Manufacturing Costs
SG&A AND MANUFACTURING COSTS SG&A and ERP cost movement ($ millions) 1.7 1.4 SG&A costs reduced $5.0m driven by the resolution of ERP stabilisation challenges, which impacted HY23. 63.9 0.7 Manufacturing costs, which increased $13.7m, continued to be a challenging area driven by higher energy (1.5)
Slide 14: Cash Flow and Net Debt
CASH FLOW AND NET DEBT Net debt movement ($ millions) 2.6 559.0 17.5 27.3 Net debt ended at $559.0, or $145.5m higher than FY23, due to seasonal inventory build, challenging 98.1 operational performance, and higher financing costs. 413.5 Operating Cash Flows Financing Costs Operating cash flows impr
Slide 15: Debt Facilities and Banking Covenants
DEBT FACILITIES AND BANKING COVENANTS Synlait’s banking syndicate remains supportive through what has been a challenging period of financial performance and divestment of assets, as reflected in recent amendments to key financial covenants and extension of the prepayment of at least $130m from no la
Slide 16: Business Update
BUSINESS UPDATE Grant Watson Chief Executive Officer
Slide 17: Advanced Nutrition
ADVANCED NUTRITION Leadership Business Development FY24 and FY25 Strategic Priorities • New Chief Revenue Officer (CRO) role has been • Dairy/non-dairy hybrid nutrition products now being exported established. Naiche Nogueira, previously the Director of to a range of Asia Pacific markets in various
Slide 18: Foodservice
FOODSERVICE Business Development FY24 and FY25 Strategic Priorities • Joyhana China sales volumes delivering against growth expectations. This partnership with Sinodis Grow market share and distribution has achieved strong market recognition in China. in China and South East Asia. • Global food comp
Slide 19: Ingredients
INGREDIENTS Leadership FY24 and FY25 Strategic Priorities • Ingredients business now reports to Chief Revenue The ingredient strategy is unchanged and is delivering Officer (see page 17 for further detail). to plan. It remains focused on: Optimising product mix, delivering premiums Business Developm
Slide 20: Consumer
CONSUMER Dairyworks Sale Ongoing Business Development – Business Development – • Synlait remains in discussions Local International with purchasers, but no sale has • Focus has been on sustainable • New customer opportunities for been completed or is assured. packaging development for snacking, slic
Slide 21: On-Farm Excellence and Sustainability
ON-FARM EXCELLENCE AND SUSTAINABILITY On-Farm Excellence Update Sustainability Update Strategy Lead With Pride™ incentive changes B Corporation™ recertification • Retention of our high-quality milk • The Lead With Pride™ incentive Synlait achieved B Corporation™ supply remains a critical priority. c
Slide 22: Forward-Looking Business Recovery Plan Is Well Progressed
FORWARD-LOOKING BUSINESS RECOVERY PLAN IS WELL PROGRESSED It has been a challenging half-year for Synlait as it continues to reset the company to better achieve strategic objectives, while working on a plan to significantly reduce elevated debt levels. The forward-looking business recovery plan is p
Slide 23: Deleveraging and Cash Flow Improvements
1 DELEVERAGING AND CASH FLOW IMPROVEMENTS CLEAR WORKING CAPITAL DELEVERAGING AND CAPEX PLAN IN PLACE IMPROVEMENTS • Banking syndicate remains • Continued reduction in inventory, supportive, and amendments to particularly in base powders, raw banking facilities have been recently materials, and packa
Slide 24: Accelerating Volume Growth
2 ACCELERATING VOLUME GROWTH GROW ADVANCED GROW FOODSERVICE ACCELERATE NUTRITION VOLUMES VOLUMES CHINA GROWTH • Grow Early Life and Adult • Accelerate growth of UHT cream • Leverage strong and committed Nutrition businesses in China through product innovation. partnership with Bright Dairy and South
Slide 25: Optimising Performance
3 OPTIMISING PERFORMANCE IMPROVE IMPROVE QUALITY OPTIMISE COST REDUCTION MANUFACTURING PERFORMANCE SUPPLY CHAIN INITIATIVES PERFORMANCE • SKU rationalisation and more • Continued reduction in product • Further process and system • Reduce labour and consultancy efficient production. turnaround time.
Slide 26: Strengthened Leadership Structure | Board of Directors
STRENGTHENED LEADERSHIP STRUCTURE | BOARD OF DIRECTORS The search for a new Independent Director is complete with the appointment of George Adams in March 2024. Acting Chair Independent Directors Board Appointed Director Bright Dairy Appointed Directors Paul McGilvary Paul Washer George Adams John P
Slide 27: Strengthened Leadership Structure | ELT
STRENGTHENED LEADERSHIP STRUCTURE | ELT Direct reports to the CEO reduced to increase business unit alignment, accelerate growth, and reduce costs. The key changes include: • Established a Chief Revenue Officer (CRO) role to oversee all Advanced Nutrition and Ingredients customer interactions and re
Slide 28: Full Year 2024 (FY24) Guidance Statement
FULL YEAR 2024 (FY24) GUIDANCE STATEMENT Synlait has updated its FY24 guidance. The previously announced guidance stated that EBITDA performance was expected to be broadly flat or down compared to FY23. Synlait’s FY23 EBITDA was $90.7 million. Synlait now expects the FY24 EBITDA result to be signifi
Slide 29: What to Expect From Synlait in the Second Half of FY24
WHAT TO EXPECT FROM SYNLAIT IN THE SECOND HALF OF FY24 1 DELEVERAGING AND CASHFLOW IMPROVEMENTS 2 ACCELERATING VOLUME GROWTH 3 OPTIMISING PERFORMANCE • Progression of North Island assets strategic • Grow Advanced Nutrition volumes. • Improve manufacturing performance. review, Dairyworks sale, and eq
Slide 30: Appendices
APPENDICES
Slide 31: Key Financial Metrics
KEY FINANCIAL METRICS Gross profit per MT ($)* Return on net operating assets (12 month trailing) Debt/debt + equity 1,109.0 14.6% 14.6% 983.3 960.6 47.2% 709.0 44.5% 45.2% 39.3% 594.6 8.7% 38.7% 557.9 539.3 6.1% 37.9% 33.3% 404.5 34.3% 4.0% 30.0% 2.8% 0.4% 68.4 H1 20 H2 20 H1 21 H2 21 H1 22 H2 22 H
Slide 32: Gross Profit Performance by Category
GROSS PROFIT PERFORMANCE BY CATEGORY HY20 HY21 HY22 HY23 HY24 Sales Volume (MT) Ingredients 45,673 56,971 72,028 37,234 59,661 Advanced Nutrition 23,657 19,679 13,774 17,415 15,874 Consumer 16,942 30,270 30,400 28,238 30,543 Foodservice - - - 218 1,744 Subtotal 86,272 106,920 116,202 83,105 107,822
Slide 33: Explanation and Normalisation of Product Costing
EXPLANATION AND NORMALISATION OF PRODUCT COSTING To improve comparability and consistency the following table presents gross profit by Business Unit normalised as if the new Gross profit HY20 HY21 HY22 HY23 HY24 product costing methodology had been applied consistently across all periods. As previou
Slide 34: Disclaimer
DISCLAIMER This presentation is intended to constitute a summary of certain important factors, many of which are beyond the control of Any past performance information in this presentation is given information about the Synlait Group (“Synlait”) or in connection Synlait and are subject to change wit