Synlait Milk Ltd. · NZX:SML
Synlait Milk — H1 2023 Earnings Presentation
29 slides from Synlait Milk's earnings presentation, Mar 26, 2023
Slide 1: Half Year Results Investor Presentation
HALF YEAR RESULTS INVESTOR PRESENTATION For the six months ended 31 January 2023
Slide 2: Key Takeaways From Today
KEY TAKEAWAYS FROM TODAY 1 2 3 4 5 Two year recovery, Operational stability Re-registration for China market Business unit Executive Leadership Team now three years and cost challenges have access continues to progress diversification builds transformation well progressed impacted performance While
Slide 3: Financial Performance
FINANCIAL PERFORMANCE Robert Stowell Chief Financial Officer PAGE 3 HALF YEAR RESULTS INVESTOR PRESENTATION 2023
Slide 4: Results at a Glance
RESULTS AT A GLANCE 3% $241.9M $ 769.8 M ( $ 124.7 M ) REPORTED REVENUE OPERATING CASH FLOW $23.1M $6.8M 27% $ 4.8 M $ 8.9 M $ 33.5 M NPAT ADJUSTED NPAT 1 CAPITAL EXPENDITURE 2 $16.9M $3.1M 32% $ 51.5 M $ 55.0 M $ 518.6 M EBITDA ADJUSTED EBITDA 1 NET DEBT 11% 18% $ 8.50 kgMS $ 81.7 M FORECAST BASE M
Slide 5: Synlait's H1 Result
SYNLAIT’S H1 23 RESULT Adjusted NPAT movement ($ millions) 1.8 Delayed sales, one-off costs due to stabilisation challenges associated with the new SAP enterprise 3.8 resource planning system (ERP), headcount increases in anticipation of an Advanced Nutrition demand 9.4 lift, and cost pressures sign
Slide 6: Revenue and Sales Volumes
REVENUE AND SALES VOLUMES Sales revenue ($ millions) Total reported revenue was down 3% ($20.8m), driven by lower Ingredients sales volumes (down 48%) due to product release delays caused by ERP implementation challenges and higher FY 21 carry-over inventory in H1 22. Higher Advanced Nutrition sales
Slide 7: Production and Closing Inventory Volumes
PRODUCTION AND CLOSING Production volume (MT) INVENTORY VOLUMES Production volumes decreased 5% (6,527 MT) primarily due to increased Advanced Nutrition base powder displacing Ingredients production. Closing finished goods and work-in-process inventories increased 26% due to Ingredient product relea
Slide 8: Gross Margin Performance
GROSS MARGIN PERFORMANCE Gross profit ($ millions) Reported gross margin increased 18% ($12.6m) due to the Consumer business unit’s strong performance and the favourable impact of raw milk and cream sales. Overall performance fell short of expectations due to ERP implementation and operational stabi
Slide 9: SG&A & Manufacturing Costs
SG&A & MANUFACTURING COSTS SG&A cost movement ($ millions) 1.6 63.9 1.4 1.1 1.0 Increase driven by higher employee costs, ERP recurring and one-off costs and general cost pressures due 5.0 4.2 to inflation. In summary, SG&A and manufacturing costs have increased $20.8m and $16.4m, respectively, 6.5
Slide 10: Cash Flow and Net Debt
CASH FLOW AND NET DEBT Net debt movement ($ millions) 18.9 1.9 518.6 Net debt ended 52% ($176.7m) higher than FY 22 due to lower operating cash flows from delayed sales 33.5 124.7 and higher operating costs. (2.3) 341.9 Operating cash flows Financing costs Operating cash flows decreased by $241.9m H
Slide 11: Business Update
BUSINESS UPDATE Grant Watson Chief Executive Officer PAGE 11 HALF YEAR RESULTS INVESTOR PRESENTATION 2023
Slide 12: Advanced Nutrition
ADVANCED NUTRITION Leadership Nutritional base powders • Director of Advanced Nutrition, Naiche Nogueira, • Base powder demand opportunities (infant and adult) started in January 2023. remain strong in China and Southeast Asia markets. • New Zealand’s provenance continues to position Synlait Pokeno’
Slide 13: SAMR Re-registration Update
SAMR RE-REGISTRATION UPDATE Current timetable for achieving the State Administration for Market Regulation (SAMR) re-registration: Q3 FY 23 Q4 FY 23 Q2 FY 24 1 Audit completion 2 Receive re-registration and commence production 3 Product in market PAGE 13 HALF YEAR RESULTS INVESTOR PRESENTATION 2023
Slide 14: Ingredients
INGREDIENTS Performance Customers and forward focus • Ingredients Business impacted by ERP Implementation • Significant deal signed with a major Chinese challenges, which significantly impacted Synlait’s customer in FY 23 will lift volumes in this key market. ability to ship products to customers in
Slide 15: Consumer
CONSUMER Leadership and strategy Dairyworks product development • Dairyworks CEO & Director of Consumer, Tim Carter, • Dairyworks Small Grate launched in Countdown’s is responsible for all consumer-facing products within nationwide. The 100 gram (1 cup) grated cheese option Synlait following the str
Slide 16: Foodservice
FOODSERVICE Leadership • President China & Director of Foodservice, Abby Ye, started in March 2023. JOYHANA (UHT cream) update • Commercial sales commenced in Q1 FY 23, and market feedback is positive. • Limited volumes sold, but product expected to deliver strong margin attainment. • Commercial sal
Slide 17: On-Farm Excellence
ON-FARM EXCELLENCE Leadership and strategy Climate • Voice of Synlait farmer suppliers elevated to the • Cyclone Gabrielle and flooding events in the North Executive Leadership Team with the appointment of Island were challenging for North Island farmer Charles Fergusson as Director of On-Farm Excel
Slide 18: Outlook
OUTLOOK Grant Watson Chief Executive Officer PAGE 18 HALF YEAR RESULTS INVESTOR PRESENTATION 2023
Slide 19: Key Priorities for the Second Half
KEY PRIORITIES FOR THE SECOND HALF Secure The a2 Milk Company China label registration and commence initial production Progress ELT transformation to lift Onboard multinational capability, culture and accountability customer at Synlait Pokeno Improve operational stability Continue to stabilise SAP E
Slide 20: Synlait's FY23 Guidance Statement
SYNLAIT’S FY 23 GUIDANCE STATEMENT Synlait’s full year 2023 (FY 23) net profit after tax (NPAT) guidance range is $15 million to $25 million. The key drivers of this guidance range are as follows: Other business unit performance update: • Advanced Nutrition forecast demand and production has been re
Slide 21: Investor Day
INVESTOR DAY • Synlait’s institutional Investor Day will be on Monday 8 May 2023. • If you have not received an invitation and would like to attend, email: investors@synlait.com • Agenda includes: • Synlait Pokeno site tour. • Executive Leadership Team presentations and Q&A on Synlait’s four busines
Slide 22: Key Takeaways From Today
KEY TAKEAWAYS FROM TODAY 1 2 3 4 5 Two year recovery, Operational stability Re-registration for China market Business unit Executive Leadership Team now three years and cost challenges have access continues to progress diversification builds transformation well progressed impacted performance While
Slide 23: Appendix
APPENDIX PAGE 23 HALF YEAR RESULTS INVESTOR PRESENTATION 2023
Slide 24: Banking Facilities, Covenants and Bond Issue
BANKING FACILITIES, COVENANTS AND BOND ISSUE Our banking syndicate remains supportive and engaged as we progress towards renewing our banking facilities which is expected to occur in July 2023. Synlait currently has four syndicated bank facilities in place with ANZ and BNZ: Key financial covenants i
Slide 25: Key Financial Metrics
KEY FINANCIAL METRICS Gross profit per MT ($)* Return on net operating assets (12 month trailing) Debt/(debt + equity) 21.9% 1,170.6 1,109.0 20.5% 1,178.6 983.3 45.2% 47.2% 960.6 14.6% 14.6% 38.7% 39.3% 594.6 557.9 709.0 37.9% 39.3% 37.9% 8.7% 33.3% 5.8% 30.0% 68.4 0.4% 2.0% H1 19 H2 19 H1 20 H2 20
Slide 26: Gross Profit H1 Performance by Category
GROSS PROFIT H1 PERFORMANCE BY CATEGORY H1 19 H1 20 H1 21 H1 22 H1 23 Sales Volume (MT) Ingredients 50,930 45,673 56,971 72,028 37,234 Advanced Nutrition 21,947 23,657 19,679 13,774 17,415 Consumer - 16,942 30,270 30,400 28,238 Foodservice - - - - 218 Subtotal 72,877 86,272 106,920 116,202 83,105 Gr
Slide 27: Summarised Five Year H1 Income Statement
SUMMARISED FIVE YEAR H1 INCOME STATEMENT H1 19 H1 20 H1 21 H1 22 H1 23 Revenue 470,950 559,286 664,182 790,591 769,828 Cost of sales (385,061) (476.410) (604,529) (721,502) (688,108) Gross profit 85,889 82,876 59,653 69.089 81,720 Other income 337 604 1,611 15,426 4,669 Share of loss from associates
Slide 28: Disclaimer
DISCLAIMER This presentation is intended to constitute a summary of certain important factors, many of which are beyond the control of Synlait Any past performance information in this presentation is given information about the Synlait Group (“Synlait”) or in connection and which are subject to chan
Slide 29: For More Information Contact
FOR MORE INFORMATION CONTACT: Hannah Lynch Head of Strategy & Corporate Affairs +64 21 252 8990 hannah.lynch@synlait.com