Beleaguered New Zealand dairy and infant formula company Synlait Milk has refuted claims regarding the sale of assets to rival Open Country Dairy.
Local media outlet BusinessDesk reported that Open Country is poised to finalize a deal for Synlait Milk’s North Island milk supply. However, in a statement issued to the local stock exchange on August 22, Synlait clarified that while they are considering the future of the referenced assets as part of a strategic review, no final decision has yet been made.
Synlait stated, “In April, Synlait announced it was undertaking a strategic review of its North Island assets, including its manufacturing facility in Pokeno and its blending and canning facility in Auckland.” The review, which is anticipated to take several months, is nearing completion and does include evaluating the continued collection and processing of milk in the North Island.
Synlait added, “We expect to provide further details regarding the strategic review’s outcome before releasing our full-year results at the end of September. We want to reiterate that no decision has been made concerning the strategic review’s outcome.”
Earlier this week, news emerged that China’s Bright Dairy is set to become Synlait’s majority shareholder as part of a “‘critical’ NZ$271.8m ($166.8m) equity raise” supporting the struggling dairy business. Bright Dairy, which currently holds a 39% stake, will increase its ownership to 65.3% following this equity subscription, pending approval at an upcoming September meeting.
In addition to this arrangement, Synlait has recently secured a NZ$130m bailout loan from Bright Dairy. However, they have warned that without obtaining additional capital, the business may face severe operational challenges.
The refinancing of debts with banking creditors is another critical factor in ensuring Synlait’s viability as a continued player in the food and beverage industry. Synlait’s Chairman George Adams highlighted the potential risks if creditors were to call in loans, following their stock-exchange filing on August 20.
Notably, Synlait is scheduled to release its comprehensive annual results on September 30. Nevertheless, they previously retracted guidance for an EBITDA of NZ$45-60m in July, stating, “We remain unable to provide an update on our expected FY24 results at this time” for the fiscal year ending July 31.
We have reached out to Open Country Dairy for a response to the recent media report, although a reply has not yet been received.
In light of these developments, stakeholders in the food and beverage sector should monitor Synlait’s strategic shifts and corporate actions closely, as these will provide insight into the evolving food and drink business landscape.
