Synlait Milk, a New Zealand dairy business, has recently secured shareholder backing for a substantial loan from its major supporter, Chinese company Bright Dairy. The NZ$130m loan, to be provided by Bright Dairy at an 8% interest rate over 12 months, was approved by investors in a stock exchange announcement on June 11. The chairperson of Synlait, George Adams, emphasized the significance of this shareholder loan resolution in resetting the company’s balance sheet for the future.
In response to mounting debt warnings and other financial challenges, Synlait had sought this loan from Bright Dairy, who holds a 39% stake in the company. Despite facing a pricing dispute with its second-largest shareholder, A2 Milk Co., Synlait announced plans to use the loan to address its financial concerns. Interestingly, A2 Milk Co. indicated its support for the Bright Dairy loan, further solidifying Synlait’s position.
With an overwhelming 99.6% backing for the loan, Synlait is now set to utilize the funds to meet upcoming bank payments and potentially alleviate pressure from its farmer suppliers, who have expressed concerns over the company’s debt levels. Looking ahead, Synlait remains focused on leveraging the growth potential in its advanced nutrition and foodservice businesses to benefit shareholders.
Addressing inquiries about the company’s financial challenges, Adams explained that Synlait had taken on substantial debt for expansion and diversification efforts in recent years. Factors like Covid-19 impacts and demographic shifts had further compounded the company’s difficulties. Moving forward, Synlait and Bright Dairy are committed to a turnaround strategy aimed at strengthening the company’s financial standing for sustained success.
In conclusion, the approval of the Bright Dairy loan marks a pivotal moment in Synlait’s journey towards financial stability and growth. With a clear focus on addressing debt issues and capitalizing on core business strengths, Synlait is poised to navigate challenges and unlock new opportunities in the food and beverage industry landscape.
