Synlait Publishes Full Year 2023 Results

Monday 25th September 2023

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Synlait Milk Limited (Synlait) has announced its financial results for the 12 months ended 31 July 2023.

Please find the following materials attached:

1. Synlait Full Year 2023 Annual Report

2. Synlait Full Year 2023 Investor Presentation

3. Synlait Full Year 2023 Media Release

4. Synlait Full Year 2023 Shareholder Letter

5. NZX Results Template

Key financial highlights:

• Total Group revenue down 3% to $1.60 billion

• Total Group NPAT down 111% to loss of ($4.3) million

• Total Group EBITDA down 31% to $90.7 million

• Total Group gross profit down 2% to $144.0 million

• Operating cashflow down 83% to $39.0 million

• Capital expenditure down 32% to $65.1 million

• Net debt up 21% to $413.5 million

Final 2022 / 2023 milk price:

• The final average base milk price is $8.22 per kgMS for the 2022 / 2023 season. In addition, an average of $0.27 per kgMS was paid for incentives, taking the total average milk payment to $8.49 per kgMS.

• The base milk price forecast for the 2023 / 2024 season remains unchanged at $7.00 per kgMS.

Key takeaways from today:

• Joyhana (UHT cream) launched, commercial sales underway.

• State Administration for Market Regulation (SAMR) re-registration achieved.

• TRIFR reduced more than 30% since Synlait Safe launch in November 2022.

• ELT renewal completed.

• Strategy refresh completed, creation of a more focused Synlait.

Full year 2024 outlook:

FY 23 was highly challenging for Synlait with material reductions in customer demand, CO2 shortages, extreme weather events, the COVID-19 pandemic, inflationary impacts, ongoing investments in new product workstreams (i.e., UHT cream and Advanced Nutrition customer growth), and the launch and stabilisation of the company’s new enterprise resource planning (ERP) system.

Looking ahead to the 2024 financial year, Synlait could still face challenging China market dynamics, softening global conditions more generally, and continued inflationary pressures across its cost base, which could impact future customer demand and the company’s overall profitability. Synlait does, however, expect Advanced Nutrition volumes to continue to grow at the Pokeno site in FY 24, and the company’s overall EBITDA performance is also expected to improve in FY 24, compared to FY 23.

The a2 Milk Company’s purported cancellation of the exclusivity arrangements under the Nutritional Powders Manufacturing and Supply Agreement (NPMSA) for the a2 Platinum® and other nutritional products is not expected to impact Synlait’s FY 24 results. Synlait disputes that The a2 Milk Company has the right to cancel the exclusivity arrangements.

While Synlait is confident in its strategy to right-size its cost base to current activities and its near-term Advanced Nutrition and Foodservice growth opportunities, the uncertainty of broader macroeconomic factors means the company will not provide guidance at this time.

Synlait is committed to its refreshed strategy to create a more focused company and remains largely on track to meet its five-year (FY 28) strategic ambitions.

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