Synlait Milk Ltd. · NZX:SML
Synlait Milk — FY2022 Earnings Presentation
35 slides from Synlait Milk's earnings presentation, Sep 27, 2022
Slide 1: Synlait Milk Full Year Results Investor Presentation
SYNLAIT MILK FULL YEAR RESULTS INVESTOR PRESENTATION For the 12 months ended 31 July 2022 Doing Milk Differently For A Healthier World
Slide 2: Key Takeaways From Today
KEY TAKEAWAYS FROM TODAY Balance sheet returned to normal metrics Return to robust profitability on track – (net debt to EBITDA ratio of 2.6x) enabled EBITDA up $91.8m to $129.1m. by strong operating cashflows and inventory reduction. Review of Synlait strategy and Executive SAP successfully impleme
Slide 3: Financial Performance
FINANCIAL PERFORMANCE Rob Stowell Chief Financial Officer More than 100 Synlait Support Champions have been on the ground daily to support the transition to SAP. With key system and process knowledge, Support Champions have been the first point of call for staff to ask questions and get quick resolu
Slide 4: Key Financial Metrics
KEY FINANCIAL METRICS 21% $214.5M $ 1.66 B $ 232.9 M REVENUE¹ OPERATING CASH FLOW $91.8M $79.8M 33% $ 129.1 M $ 117.2 M $ 96.3 M EBITDA ADJUSTED EBITDA² CAPITAL EXPENDITURE³ $67.0M $62.4M 29% $ 38.5 M $ 34.0 M $ 341.9 M NPAT ADJUSTED NPAT² NET DEBT 23% 23% 79% 77% $ 9.59 kgMS $ 9.30 kgMS 2.6 X 2.9 X
Slide 5: Financial Performance: Improved FY22 EBITDA
SYNLAIT’S IMPROVED FY22 EBITDA ($ millions) 169.6 FINANCIAL PERFORMANCE 138.6 150.8 27.7 47.6 129.1 25.6 A return to robust profitability is on track. Synlait has good momentum heading into FY23. 66.5 37.3 Ingredients Consumer Foods 113.0 123.1 122.0 • Better sales phasing, product mix and premium •
Slide 6: Revenue and Sales Volumes
REVENUE AND SALES VOLUMES Sales volume (MT) Synlait delivered its largest annual sales revenue and volume on record. Total reported revenue increased 21%, driven by higher sales pricing pushed by commodity prices and sound management of product mix differentials and FX. Volume increased by 3%. Ingre
Slide 7: Production and Inventory Volumes
PRODUCTION AND INVENTORY VOLUMES Production volume (MT) Production decreased 4% due to favourable product mix changes and less milk processed. Closing inventories down 40%. Ingredients Beverages and Cream Production decrease of 12% (FY22: 122,330 MT Volumes consistent with prior year (FY22: 31,620 M
Slide 8: Gross Margin Performance
GROSS MARGIN PERFORMANCE Gross profit ($ millions) Reported gross margin improved by $79.5m as the performance of all business units lifted. The most significant contributors continue to be the Ingredients and Nutritional businesses. Ingredients Beverages and Cream Increase in gross profit performan
Slide 9: Operating Cost Performance
OPERATING COST PERFORMANCE SG&A cost movement ($ millions) 88.8 0.9 1.5 1.6 1.9 92.3 While total Group SG&A costs benefited from savings following last year’s cost structure review, 0.6 0.7 Synlait experienced strong upward cost pressures that pushed overall costs up $3.5m. (3.7) Savings of $3.7m we
Slide 10: Cash Flow and Net Debt
CASH FLOW AND NET DEBT Net debt movement ($ millions) 479.4 Net debt was reduced by $137.5m as operating cash flows improved significantly. The balance sheet has returned to normal metrics (normalised debt to EBITDA ratio 26.1 3.5 341.9 96.3 of 2.9x) one year earlier than expected. (232.9) (30.5) Op
Slide 11: Debt Facilities and Banking Covenants
DEBT FACILITIES AND BANKING COVENANTS Synlait’s banking syndicate, which includes ANZ and BNZ, has been hugely supportive over the last 12 months and, like Synlait, are pleased with business performance and the headroom created in key banking ratios. In FY23, Synlait will review its capital requirem
Slide 12: Business Performance, Strategy and Outlook
BUSINESS PERFORMANCE, STRATEGY AND OUTLOOK Grant Watson Chief Executive Officer Construction at Synlait Pokeno for our new multinational customer has occurred over the last year. Process Systems Specialist Dwaine Henri, Senior Project Manager Carolijn van der Stok, and Production Manager - Dryer 1 L
Slide 13: Business Review Actions Progressed in FY22
BUSINESS REVIEW ACTIONS PROGRESSED IN FY22 Synlait has made significant progress over the first 12 months of its two year recovery plan. It has been pleasing to see substantial financial and strategic progress sooner than anticipated, despite a challenging trading environment. Operational performanc
Slide 14: Business Update: Ingredients
BUSINESS UPDATE INGREDIENTS • Strong recovery delivered in the Ingredients business with record revenue and margin achieved via: • Improved sales discipline around premiums, timing and product mix. • Synlait’s ability to leverage its manufacturing capability and capacity to maximise market returns.
Slide 15: Business Update: Nutritionals
BUSINESS UPDATE NUTRITIONALS State Administration for Market Regulation (SAMR) Nutritional Base Powders Synlait Pokeno’s multinational customer re-registration update • Base powder opportunities are very competitive, however • Product trials are progressing and construction is in • SAMR renewed Synl
Slide 16: Business Update: Beverages and Cream
BUSINESS UPDATE BEVERAGES AND CREAM JOYHANA (UHT cream) brand launched • JOYHANA launched at Bakery China (Asia’s largest bakery trade show) last week. The brand is a partnership between Synlait and SAVENCIA Group. The ultra-heat treated (UHT) cream, manufactured at Synlait Dunsandel, has been speci
Slide 17: Business Update: Consumer
BUSINESS UPDATE CONSUMER Dairyworks delivered a record result of $7.0m* NPAT and $18.0m EBITDA. Dairyworks has been part of Synlait for ~two years and business case assumptions have been met. FY22 highlights: • Overall, Dairyworks benefitted from favourable procurement gains, an improved cost struct
Slide 18: Business Update: Sustainability
BUSINESS UPDATE SUSTAINABILITY Off-farm decarbonisation roadmap – • Planning for phase two of the decarbonisation roadmap Made With Better Milk phase 1 completed will start in FY23 and focus on conversion to biomass, • Flagship website launched this month: renewables, and energy efficiency. • Delive
Slide 19: Refreshed Strategy
REFRESHED STRATEGY The entrance to Synlait Pokeno where 86 members of our team work. SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2022
Slide 20: Strategy Refresh Process and Scope
STRATEGY REFRESH PROCESS AND SCOPE TIMELINE SCOPE Month Process HEART DOING MILK DIFFERENTLY OUR PURPOSE FOR A HEALTHIER WORLD MAR Workshops with senior leaders to review strategic drivers and historical No change. We do not believe there is a financial performance of business units. requirement to
Slide 21: Our Assumptions
OUR ASSUMPTIONS Our underlying assumptions Our strategic assumptions 1. Innovation, disruption and sustainability are at the heart of Synlait – it is in our DNA. • We have been operating in an unprecedented crisis environment. A focus on stability is therefore critical; strong financial and operatio
Slide 22: Our Strategic Intent Over the Next Five Years
OUR STRATEGIC INTENT OVER THE NEXT FIVE YEARS HORIZON 1 HORIZON 2 HORIZON 3 FY23 FY24 FY25-FY27 INTENT Stabilise Accelerate Extend FOCUS • Health, safety and well-being • Key stakeholder engagement • Staff engagement to upper quartile • Farmer, staff and customer engagement • Milk recruitment • Farm
Slide 23: Synlait's Strategy FY23 – FY27
SYNLAIT’S STRATEGY FY23 – FY27 Our Purpose – Doing Milk Differently For A Healthier World AMBITION RIGHT TO PLAY CHANNELS CATEGORIES TO FY27 OUR STRONG FOUNDATIONS OUR FOCUS BUSINESS TYPES OUR FOCUS PRODUCTS B Corp™ Farmer Net Promoter IWS Level 3 Food Safety Regulatory Nutritionals Consumer Foodser
Slide 24: New ELT Structure Aligned to Key Business Units and Enablers
NEW ELT STRUCTURE ALIGNED TO KEY BUSINESS UNITS AND ENABLERS Grant Watson Chief Executive Officer Rob Stowell Tim Carter Adam Maxwell Ruth Leary Nigel Macdonald Dr Suzan Horst Boyd Williams In Progress In Progress In Progress Chief Financial CEO Dairyworks Director of Acting Director Director of Dir
Slide 25: Outlook
OUTLOOK One of our milk tankers at Synlait Pokeno’s milk reception bay. We have 63 farmer suppliers in the North Island, responsible for 14% of Synlait’s total milk supply, or 12.4 million kgMS. SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2022
Slide 26: Key Priorities for FY23
KEY PRIORITIES FOR FY23 Embed new Executive Leadership Team Commercialise multinational customer Enable The a2 Milk Company’s opportunity at Synlait Pokeno growth ambitions Re-registration of SAMR license for Grow Foodservice cream and The a2 Milk Company’s Chinese consumer beverage volumes labelled
Slide 27: Full Year 2023 (FY23) Guidance Statement
FULL YEAR 2023 (FY23) GUIDANCE STATEMENT • Disciplined management of the Ingredients business will continue without some of the one-off foreign exchange gains experienced in FY22. Milk will be diverted to produce higher-margin products in the Advanced Nutrition and Foodservice businesses. • The perf
Slide 28: Next Steps
NEXT STEPS Annual Meeting • Synlait’s Annual Meeting will be held on Friday 2 December 2022 at 1.00pm. • Annual Meeting will be held online and in person. • Presentation materials will include further refreshed strategy updates on Synlait’s core business units (Advanced Nutrition, Ingredients, Consu
Slide 29: Appendix
APPENDIX Process Engineer Liam Hawley weighs Synlait’s lactoferrin at our Dunsandel facility. SYNLAIT MILK FULL YEAR INVESTOR PRESENTATION 2022
Slide 30: Gross Profit Performance by Category
GROSS PROFIT PERFORMANCE BY CATEGORY FY18 FY19 FY20 FY21 FY22 Sales volume (MT) Nutritionals 42,177 51,231 52,871 34,362 33,506 Ingredients 86,424 98,499 97,561 125,914 132,481 Beverages and Creams - 8,947 32,803 31,500 31,972 Consumer Foods - - 12,015 26,983 27,814 Subtotal 128,601 158,677 195,250
Slide 31: Key Financial Metrics
KEY FINANCIAL METRICS Gross profit per MT ($)* Return on capital employed Debt/debt + equity 1,167.6 1,283.3 22.6% 47.2% 1030.8 39.3% 38.7% 659.2 18.0% 12.5% 30.0% 5.4% 20.9% 309.8 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 (1.5%) EBIT per MT ($) Basic earnings per sh
Slide 32: Summarised Income Statement
SUMMARISED INCOME STATEMENT FY18 FY19 FY20 FY21 FY22 Revenue 879,001 1,024,305 1,302,025 1,367,349 1,660,601 Cost of sales (712,533) (837,976) (1,098,292) (1,300,042) (1,513,827) Gross profit 166,468 186,329 203,733 67,307 146,774 Other income 430 898 404 3,870 8,391 Share of loss from associates 42
Slide 33: Milk Price and Milk Pool
MILK PRICE MILK POOL RAW MILK PROCESSED No. of kgMS kgMS Farms (millions) (thousands) $10.00 $0.29 300 100.0 90,000 90.0 80,000 $0.27 250 $8.00 80.0 70,000 $0.25 $0.13 $0.18 70.0 200 60,000 $6.00 60.0 50,000 150 50.0 40,000 $4.00 40.0 $6.65 $6.40 $7.05 $7.55 $9.30 100 30,000 60,785 66,066 70,472 82,
Slide 34: Disclaimer
DISCLAIMER This presentation is intended to constitute a summary of certain information about the Synlait Any forward looking statements in this presentation are unaudited and may include non-GAAP Group (“Synlait”) or in connection with its full year 2022 financial results. It should be read in fina
Slide 35: For more information contact
For more information contact: Hannah Lynch Head of Corporate Affairs and Brand +64 21 252 8990 hannah.lynch@synlait.com