NEW ZEALAND – Synlait, a leading milk processor in New Zealand, has dropped its plans to sell the Pokeno milk plant in Waikato but remains open to considering offers if they are compelling.
The company had previously considered selling its Pokeno plant and a blending and canning facility in Auckland as part of its debt reduction strategy.
However, after a strategic review, Synlait decided that Pokeno would focus exclusively on producing advanced nutrition products, not requiring raw milk. The Dunsandel facility in Canterbury will remain the hub for dairy operations.
The Pokeno plant, which cost US$280 million to develop, faced challenges due to its dual processing of plant-based proteins and dairy, reducing its operational efficiency.
As a result, the company found it financially unviable to continue processing milk at the Pokeno facility. Synlait has thus arranged for its 54 farmer suppliers in Waikato to have their milk collected and processed by Open Country Dairy.
The company has assured that it will meet all contractual obligations to these farmers, including incentive payments, until their supply agreements conclude.
Synlait’s CEO, Grant Watson, noted that the review of its North Island assets provided valuable insights into improving the financial performance of these assets, setting a path toward profitability.
Despite the operational changes, the company remains committed to maintaining strong relationships with its North Island farmers.
The decision to retain the Pokeno plant comes amid other challenges for Synlait. A complaint lodged by company founder John Penno regarding the company’s recapitalisation plan was dismissed by the New Zealand Stock Exchange (NZX) regulatory body and the Takeovers Panel.
The complaint alleged that Synlait’s two largest shareholders, Bright Dairy of China and a2 Milk Company, should not vote on the recapitalisation resolutions due to their close association. However, the regulators ruled that the two companies had independently negotiated their placements.
Synlait is scheduled to hold a special shareholders’ meeting on September 18, 2024, to vote on the recapitalisation plan.
Under this plan, Bright Dairy’s ownership will rise to 65.25%, while a2 Milk will retain its 19.8% shareholding. Retail shareholders will see their shareholding decrease from 41% to 15%. The company hopes this move will inject much-needed cash to address its debt burden.
Additionally, Synlait has increased its forecast base milk price for the 2024/25 season to $8.60/kgMS, reflecting a cautious optimism amid volatile dairy commodity prices.
The company is committed to remaining competitive in retaining its milk supply and will confirm its final milk price for the 2023/24 season with its full-year results later this month.
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