Synlait Milk Ltd. · NZX:SML
Synlait Milk — FY2024 Earnings Presentation
31 slides from Synlait Milk's earnings presentation, Sep 30, 2024
Slide 1: Full Year Results Investor Presentation
FULL YEAR RESULTS INVESTOR PRESENTATION Annie McLaren and Andrew Lindsay, For the 12 months ended 31 July 2024 Synlait Area Managers
Slide 2: FY24 Key Achievements
FY24 KEY ACHIEVEMENTS Much-needed Synlait and The North Island Customer Retaining milk balance sheet a2 Milk Company strategic review growth continues supply reset delivered settle disputes completed Two-step plan Resolved all disputes Operations to solely focus Expansion into Balance sheet reset (s
Slide 3: Retaining Milk Supply
RETAINING MILK SUPPLY A critical next step in Synlait's business recovery. • Synlait has historically enjoyed high support from farmer suppliers. 2023 / 2024 has been a challenging season. • A significant majority of Synlait's farmer suppliers issued cessation notices ahead of 31 May 2024. Submittin
Slide 4: FY24 Key Financials
FY24 KEY FINANCIALS 2% $88.0M $ 1.64 B $ 56.0 M TOTAL GROUP REVENUE TOTAL GROUP GROSS PROFIT 221% ( $ 47.2 M ) $177.8M $55.8M ( $ 182.1 M ) ( $ 60.4 M ) TOTAL GROUP NPAT ADJUSTED TOTAL GROUP NPAT 1 OPERATING CASHFLOW $94.8M $40.5M 53% ( $ 4.1 M ) $ 45.2 M $ 30.5 M TOTAL GROUP EBITDA ADJUSTED TOTAL G
Slide 5: Financial Performance
FINANCIAL PERFORMANCE Charles Fergusson Director On-Farm Excellence, Business Sustainability and Corporate Affairs (Acting Chief Financial Officer April to September 2024) PAGE 5
Slide 6: Summary of Synlait's FY24 Result
SUMMARY OF SYNLAIT’S FY24 RESULT Adjusted NPAT movement ($ millions) Poor trading and operational performance combined with high interest costs drove a poor result. (4.6) INGREDIENTS CONSUMER 11.8 • Total gross profit ($39.9m) adverse to FY23. • Total gross profit $3.1m favourable to FY23 driven (39
Slide 7: Ingredients Performance
INGREDIENTS PERFORMANCE Volumes (MT) Sales volumes returned to normal levels after ERP and plant reliability challenges impacted FY23. Profitability was down due to less favourable market pricing and adverse FX performance. SALES PERFORMANCE • Synlait’s FY24 hedged rate was unfavourable Revenue down
Slide 8: Advanced Nutrition Performance
ADVANCED NUTRITION PERFORMANCE Volumes (MT) Margins were down due to a softening lactoferrin market and cost pressures relating to manufacturing expenses. SALES PERFORMANCE MANUFACTURING PERFORMANCE Revenue up 11% or $48m driven by: Production volumes down 22% or 8,643 MT driven by: • Overall sales
Slide 9: Consumer Foods Performance
CONSUMER FOODS PERFORMANCE Volumes (MT) Performance improvement driven by a well-managed Dairyworks business which delivered on its export strategy. SALES PERFORMANCE MANUFACTURING PERFORMANCE Sales revenue increased by $8m or 2% and was Production volumes up 4,270 MT or 8% driven by: driven by: • D
Slide 10: Foodservice Performance
FOODSERVICE PERFORMANCE Volumes (MT) Higher than expected start-up costs and a delayed ramp-up of production have impacted demand and therefore performance. SALES PERFORMANCE MANUFACTURING PERFORMANCE Sales revenue increased by $20m driven by: Production volumes were up 192% or 2,907 MT • Sales volu
Slide 11: SG&A and Manufacturing Costs
SG&A AND MANUFACTURING COSTS SG&A cost movement ($ millions) Unadjusted SG&A and manufacturing costs increased by $4.7m and $12.0m, respectively. The recapitalisation 129.3 1.4 0.8 1.6 0.8 3.3 134.0 of the business and a customer related dispute resulted in SG&A costs remaining at higher levels thro
Slide 12: Cash Flow and Net Debt
CASH FLOW AND NET DEBT Net debt movement ($ millions) 54.8 5.6 551.6 Net debt ended 33% ($138.1m) higher than FY23 due to poor trading performance and significantly higher 30.5 47.2 interest costs. 413.5 OPERATING CASH FLOWS FINANCING CASH FLOWS AND NET DEBT Operating cash flows decreased by $86.2m
Slide 13: Debt Facilities and Banking Covenants
DEBT FACILITIES AND BANKING COVENANTS Synlait has refinanced its banking facilities, adding three new banks to the syndicate. The refinance will be fully executed on 1 October 2024 upon receipt of proceeds from the equity placement and settlement of the dispute with The a2 Milk Company. Synlait's re
Slide 14: Important Information Regarding the FY24 Financial Statements
IMPORTANT INFORMATION REGARDING THE FY24 FINANCIAL STATEMENTS 1 GOING CONCERN 2 IMPAIRMENT OF ASSETS 3 CHANGE IN PRODUCT COSTING METHODOLOGY Our financial statements have been prepared on a During the year, we recognised a total non-cash We implemented a new product costing going concern basis. impa
Slide 15: Business Update
BUSINESS UPDATE Grant Watson Chief Executive Officer PAGE 15
Slide 16: Advanced Nutrition
ADVANCED NUTRITION Formulated powders in bulk or consumer-ready format and specialty nutritional ingredients that Synlait customers sell to consumers. LEADERSHIP FY25 FOCUS • Advanced Nutrition continues to be a strategic • Following the dispute resolution, Synlait is product category. It is oversee
Slide 17: Ingredients
INGREDIENTS Bulk milk powder and other bulk products sold to manufacturers who use them in a range of applications. LEADERSHIP FY25 FOCUS • Ingredients is now overseen by the revenue team • Continue to optimise and customise Synlait’s established in the second half of FY24, led by product portfolio,
Slide 18: Foodservice
FOODSERVICE Functional UHT cream is sold to customers who turn it into finished products for out-of-home consumption at bakeries, cafés, beverage chains etc. BUSINESS DEVELOPMENT • Sales ramp-up efforts were supported by increased brand recognition via e-commerce, trade expos, and social media activ
Slide 19: Consumer
CONSUMER A range of fresh milk, cream and cheese products continues to be produced and sold under the Dairyworks, Rolling Meadow and Alpine brands. DAIRYWORKS SALE UPDATE MARKET DEVELOPMENT – AUSTRALIA • Dairyworks is a high-value business, and • New supply agreements are in place with key the Board
Slide 20: On-Farm Excellence
ON-FARM EXCELLENCE Synlait manages approximately 4% (84.5 million kgMS) of New Zealand’s milk supply and ended the FY24 season with 274 farmer suppliers. SECURING MILK SUPPLY LEAD WITH PRIDETM • A significant majority of the company’s farmer • Several changes were made to refresh Lead suppliers issu
Slide 21: Refreshed Sustainability Strategy
REFRESHED SUSTAINABILITY STRATEGY Synlait’s sustainability strategy was refreshed in FY24. A further update will be provided in the Sustainability Report which will be released in November 2024. AMBITION RIGHT TO PLAY TO FY29 OUR STRONG FOUNDATIONS CO2 100% of product packaging reusable, -30% GHG on
Slide 22: Outlook Update
OUTLOOK UPDATE Grant Watson Chief Executive Officer Nicky Halley, Synlait Farms Operations Manager and PAGE 22 Andrew Lindsay, Synlait Area Manager
Slide 23: Business Recovery | Areas of Focus
BUSINESS RECOVERY | AREAS OF FOCUS 1 DELEVERAGING AND IMPROVING WORKING CAPITAL 2 RETAINING MILK SUPPLY AND ACCELERATING VOLUME GROWTH 3 IMPROVING TRADING AND OPERATIONAL PERFORMANCE Synlait’s balance sheet must be further deleveraged. Synlait has excess production capacity relative to softening Opt
Slide 24: Full Year 2025 Guidance
FULL YEAR 2025 GUIDANCE Synlait’s business recovery plan focuses on three key areas: 1. Deleveraging and improving working capital. 2. Retaining milk supply and accelerating volume growth. 3. Improving trading and operational performance. At the end of the full-year 2024 (FY24) and the start of the
Slide 25: Appendices
APPENDICES PAGE 25 Synlait bus arriving at Gary and Rowan Michael’s farm in Dunsandel.
Slide 26: Milk Price and Milk Pool
MILK PRICE MILK POOL RAW MILK PROCESSED No. of kgMS kgMS Farms (millions) (thousands) $10.00 $9.59 300 100.0 90,000 $0.29 $8.49 90.0 80,000 $8.11 250 $7.82 $8.00 $0.27 80.0 70,000 $7.30 $0.28 $0.27 70.0 $0.25 200 60,000 $6.00 60.0 50,000 150 50.0 40,000 $4.00 40.0 $7.05 $7.55 $9.30 $8.22 $7.83 100 3
Slide 27: Key Financial Metrics
KEY FINANCIAL METRICS Gross profit per MT ($)* Return on capital employed Debt/(debt + equity) 1,043.5 47.5% 47.2% 725.1 38.7% 650.1 34.3% 30.0% 307.7 12.5% 253.2 5.6% 2.7% FY20 FY21 FY22 FY23 FY24 FY20 FY21 FY22 FY23 FY24 FY20 FY21 FY22 FY23 FY24 (1.5%) (15.5%) EBIT per MT ($) Basic earnings per sh
Slide 28: Gross Profit Performance by Category
GROSS PROFIT PERFORMANCE BY CATEGORY FY20 FY21 FY22 FY23 FY24 Sales Volume (MT) Ingredients 97,561 125,914 132,481 108,856 120,714 Advanced Nutrition 52,871 34,362 33,506 31,971 34,316 Consumer 44,818 58,483 59,786 56,999 61,524 Foodservice - - - 757 4,686 Subtotal 195,250 218,759 225,773 198,583 22
Slide 29: 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 Gross profit FY20 FY21 FY22 FY23 FY24 normalised as if the new product costing methodology had been applied consistently across all periods. As previou
Slide 30: Disclaimer
DISCLAIMER This presentation is intended to constitute a summary of certain known and unknown risks, uncertainties, assumptions and other information in this presentation is given for illustration purposes information about the Synlait Group (“Synlait”) in connection with important factors, many of
Slide 31: For more information contact
For more information contact: Hannah Lynch Head of Strategy & Corporate Affairs +64 21 252 8990 hannah.lynch@synlait.com Annie McLaren Area Manager on farm at Dunsandel