Troubled Synlait misses $130m debt repayment

Thursday, 28 March 2024

Trading in the shares of Canterbury dairy processing company Synlait have been halted while it finalises negotiations with its banking syndicate over delaying the repayment of $130 million of its debt.

The repayment was supposed to be made by the loss-making dairy company on Thursday.

Synlait, whose shares are listed on the NZX sharemarket, said it would update the market on Tuesday on its progress towards reducing its debt and also release its half-year results.

The company, which is part-owned by a2 Milk, expected the trading halt to lift then.

As part of its strategy to reduce debt, Synlait has been trying to sell its Dairyworks branded dairy products business, which supplies supermarkets and the food service trade.

Its butter and cheese brands include Dairyworks, Rolling Meadow and Alpine.

In an announcement on the NZX, Synlait said it had requested the trading halt of its ordinary shares and quoted bonds to provide it with additional time to finalise separate discussions with its banking syndicate regarding an extension to the $130m prepayment obligation due on Thursday, March 28.

It was seeking financial support from its major shareholder, Bright Dairy, the company said.

Bright Dairy is a Chinese company owned by Bright Foods, which is in turn owned by several Chinese state-run organisations.

In September, Synlait reported a $4.3m loss after what chief executive Grant Watson said had been an extremely challenging year.

Watson cited reductions in customer demand, CO₂ shortages, extreme weather events, the Covid-19 pandemic, and higher costs due to inflation and the company’s new enterprise resource planning system as factors in its poor financial performance.

The company’s net debt had risen to more than $400m, and the yield on its bonds spiked into high double digits as investor confidence in its ability to repay them eroded.

Chairperson Simon Robertson said in September that the company would address its balance sheet over the coming year and had plans to sell its Dairyworks and Temuka cheese businesses, reduce costs, build on its advanced nutrition and food service opportunities and lift its operational performance.

The Dairyworks business has stopped production of yoghurt and spreadable butter to focus on expanding its cheese business, he said, while the Temuka factory remains mothballed.

There was so much uncertainty about its future that the company did not provide guidance to investors about its current financial year.

Synlait’s shares have fallen more than 65% in value in the past 52 weeks. In March last year they traded at just over $2. On Thursday, they were worth 75 cents.