More manufacturing woes for Synlait could leave results 'meaningfully weaker'

Wednesday, 30 July 2025

Synlait’s full-year financials are likely to be “meaningfully weaker than expected” after the listed dairy business said manufacturing challenges at its Dunsandel plant were going to hit its full-year bottom line, according to Forsyth Barr.

But the company’s newly minted chief executive Richard Wyeth said it was still expecting to curb its losses, even after announcing its second round of major manufacturing expenses in the last 12 months.

In a market update on Wednesday, the dairy supplier said its 2025 full-year result would be a “marked improvement” on last year. The net loss for the year to the end of July was now forecast to be between $27 million and $40m, as opposed to a $182m net loss last year.

“However, as well as the headwinds signalled at half-year, Synlait has had manufacturing challenges at its Dunsandel facility across a range of product segments, resulting in one-off costs in FY25,” the announcement said.

‘Very vague’

Forsyth Barr analyst Matt Montgomerie told The Post the announcement was “very vague” as it didn’t outline any specific manufacturing issues or detail which divisions of the business were affected.

But with “a range of product segments” affected, Montgomerie said it indicated a major cost impact on the business.

“It clearly will have some [cost] challenges in the second half of the year due to manufacturing issues,” Montgomerie said. “With its full-year reporting in a few months, it’s likely to be meaningfully weaker than expected.”

The Dunsandel plant had since resolved manufacturing challenges and underwent “routine winter maintenance and is now in new season production”, the company said.

Ongoing manufacturing costs

But it came after Synlait’s former chief executive Grant Watson said last September that its Pōkeno plant would switch to non-dairy, plant-based proteins product manufacturing only after a thorough review of the company’s assets.

Pōkeno began processing plant-based products for nutrition and healthcare multinational Abbott after an expensive refit, estimated to cost $400m to build over six years and with annual losses at the time running as high as $40m.

Dunsandel was Synlait’s manufacturing facility of choice after its Pōkeno plant stopped receiving milk last year, with Open Country now dealing with its 54 Waikato farms.

At its half-year result in March, the then-acting chief executive Tim Carter told investors that Canterbury farmers were its suppliers of choice due to their proximity to the Dunsandel plant. At the time, the company posted a bumper profit, up 105% to the end of January at $4.8m in net profit after a $96.2m loss in the previous period.

“It’s the second time in 12 months there’s been a manufacturing issue,” Montgomerie said.

“It’s definitely a frustration for its large customer, A2, and possibly others.”

Given that A2 was set to announce its full-year results in August, Montgomerie said Synlait was likely to be “relatively guarded” when sharing key expenses like this to the market.

He said however that its underlying profit was broadly in line with the general market as global dairy demand buoyed returns for cash-strapped businesses like Synlait.

Underlying NPAT [net profit after tax] was expected to break even at the end of July compared with a $60.4m loss in 2024 and net debt was targeting $300m for the period.

Wyeth took the reins from Carter, who is now Dairyworks chief executive, 10 weeks ago and said: “The company’s recovery had been tracking in line with expectations and while turnaround will take time, I am confident of success.”

“Synlait has strong foundations – its assets are well-located with the capacity and capability to manufacture complex products that are in high demand around the world,” Wyeth said.

The company was expected to announce its full-year result on September 29.

Synlait shares have dropped over 9% this morning on today’s update, and are currently trading at 59c.