Synlait Milk has emerged from a difficult financial year with a strong turnaround, announcing a return to profitability. Its half-year results, ending 31 January 2025, highlight a substantial increase in revenue, improved earnings, and solid farmer retention.
Financial Recovery After a Tough Year
Synlait’s financial results for the half-year ending 31 January 2025, show a strong turnaround, with revenue climbing 16% to $916.8 million. The company posted a net profit of $4.8 million, bouncing back from a $96.2 million loss last year.
Gross profit nearly doubled, increasing 99% to $86.9 million, while EBITDA surged 217% to $63.1 million, beating the top of the company’s forecasted range. Synlait attributed the improvement to a sharper focus on its core operations.
“A continued focus on doing the fundamentals well would enable it to significantly improve the company’s overall EBITDA performance compared to the prior year,” the company said.
Nevertheless, the company warned that financial progress could slow in the second half of FY25, citing concerns over milk stream returns, foreign exchange fluctuations, and the need for ongoing operational improvements.
Growth in Key Markets but Ingredient Sales Decline
Synlait saw robust sales growth in its core product areas, with advanced nutrition volumes surging 28%, fuelled by higher demand. Sales to Woolworths Australia through Dairyworks also grew 28% year-on-year.
Volumes in the ingredients category dropped 13%, primarily as a result of the Pōkeno site halting raw milk processing. This decrease in ingredient sales represents a key challenge for Synlait as it works to adjust its business operations.
Debt Reduction and Financial Stability Goals
Synlait has focused heavily on reducing its debt, raising $217.8 million from its two largest shareholders—Bright Dairy and The a2 Milk Company—in 2024. The company’s net debt stood at $391.9 million, a 29% reduction as of 31 January 2025.
Synlait aims to bring its net debt down to between $250 million and $300 million and to reduce its net senior debt to EBITDA ratio to below 2.5x, positioning itself for bank refinancing later in the year.
Auditors have maintained a “material uncertainty related to going concern,” stressing the importance of continued financial stability and addressing farmer cease notices before the company’s long-term future can be fully assured.
Leadership Changes at Synlait
Synlait has experienced leadership changes as part of its efforts to recover financially. Tim Carter has served as interim CEO since October 2024, following the departure of Grant Watson.
Carter, who led Dairyworks since 2018, has been instrumental in driving the company’s recent financial improvements.
Richard Wyeth, the former CEO of Westland Milk Products, will take over as Synlait’s new CEO in late May. His extensive industry experience is expected to further support Synlait’s transformation efforts.
Farmer Retention and Incentive Payments
Synlait has made notable strides in retaining farmers and securing its milk supply during its recovery. The company introduced improved incentive payments that match the market’s base milk price and advance rates over the past six months.
The base milk price forecast remains at $10/kgMS, aligned with Fonterra’s midpoint, while farmers can also earn an additional 28c/kgMS in incentives and a 20c/kgMS secured premium, raising the total forecast to $10.48/kgMS. These changes have led to a significant drop in cease notices.
“This is a significant improvement in the company’s position from six months ago,” Synlait observed. While some farmers are still choosing to leave, the rate of withdrawals has slowed, and the interest from new suppliers has been higher than anticipated.
Synlait now expects to recruit more farmers in the upcoming seasons, enhancing its milk supply network.
Conclusion
Synlait’s recovery signals a strong turnaround after a difficult year. While obstacles like cost management, declining ingredient sales, and second-half financial uncertainties remain, the company’s stronger financial position, reduced debt, and stable milk supply present encouraging signs.
With new leadership on the way and increasing confidence among farmers, Synlait is positioning itself for long-term stability, assuming it continues to execute its strategic improvements.