NEW ZEALAND – New Zealand-based dairy and infant-formula company Synlait Milk has refuted reports suggesting a decision has been made regarding the sale of its North Island milk supply assets to competitor Open Country Dairy.
The speculation, reported by local media outlet BusinessDesk, implied that a deal was imminent, but Synlait has clarified that no final decisions have been taken.
In an official statement filed with the New Zealand stock exchange, Synlait acknowledged that the future of its North Island assets, including its manufacturing facility in Pokeno and its blending and canning facility in Auckland, is under review as part of an ongoing strategic evaluation.
The company emphasized that this review, which began in April, is nearing its conclusion, but no definitive outcome has been reached.
Synlait expects to announce the results of the strategic review before releasing its full-year financial results at the end of September.
The company reiterated that while the review includes considerations about the continuation of milk collection and processing in the North Island, no concrete decisions have been made.
This development comes at a critical time for Synlait, which is facing financial difficulties.
Earlier this week, it was disclosed that China’s Bright Dairy, currently the largest shareholder with a 39% stake, is set to increase its ownership to 65.3% following a NZ$271.8 million (US$166.8 million) equity raise.
This move is essential for Synlait’s survival, as the company has already secured a NZ$130 million loan from Bright Dairy and warned that failure to raise additional capital could lead to its collapse.
The equity offering also involves A2 Milk Co., which is expected to subscribe to NZ$32.8 million worth of Synlait’s shares, maintaining its position as the second-largest shareholder with a 19.8% stake.
However, the continuation of this investment is contingent on the resolution of a contractual dispute between the two companies.
Additionally, Synlait is in discussions with its banking creditors to refinance its debt, a crucial step in securing its future as a viable business.
Chairman George Adams recently warned that without an agreement, the banks might call in their loans, further jeopardizing the company’s stability.
Synlait is scheduled to release its full-year results on September 30, but the company has already withdrawn its previous EBITDA guidance of NZ$45-60 million.
It has also stated that it remains unable to provide an update on its expected financial performance for the fiscal year ending July 31.
This strategic review and the outcome of the equity raise will be pivotal in determining Synlait’s path forward amid its ongoing financial challenges.
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