SML - Synlait

[Basil]

https://www.nzx.com/announcements/413231

Bright Dairy must be seriously worried, bringing in the top brass to try and clean up this horrendous mess.
Wonder what happens in China to directors who have proven over many years they are incompetent.

[BlackPeter]

https://www.nzx.com/announcements/413231

Bright Dairy must be seriously worried, bringing in the top brass to try and clean up this horrendous mess.
Wonder what happens in China to directors who have proven over many years they are incompetent.

Don't think incompetence is a problem in the Chinese bureaucracy as long as they keep praising the dear secretary with all their voice and stay politically in line.

I suppose they consider the board job at Synlait anyway more as an opportunity to improve their English ... and maybe to learn a bit more about the next country the dragon might want to swallow.

[Basil]

Don't think incompetence is a problem in the Chinese bureaucracy as long as they keep praising the dear secretary with all their voice and stay politically in line.

I suppose they consider the board job at Synlait anyway more as an opportunity to improve their English ... and maybe to learn a bit more about the next country the dragon might want to swallow.

Thanks, feel better now, was worried with their woeful performance over the years they would be taken out the back of the milking shed and....

[Minimoke]

Don't think incompetence is a problem in the Chinese bureaucracy as long as they keep praising the dear secretary with all their voice and stay politically in line.

I suppose they consider the board job at Synlait anyway more as an opportunity to improve their English ... and maybe to learn a bit more about the next country the dragon might want to swallow.

The new directors are going to be tough out of luck. Synlait more into offering te reo lessons
https://www.facebook.com/Synlait/posts/1861775100569178/

[Basil]

The new directors are going to be tough out of luck. Synlait more into offering te reo lessons
https://www.facebook.com/Synlait/posts/1861775100569178/

I see that post is from September 2018 when the share price was at the peak and about $13 and they really started to turbocharge their endless ESG, diversity and inclusion programs.  Bring up 5-year share price chart and you'll see what I mean.  It's basically been all downhill since then!  Spooky coincidence or real-world lesson that when you take your eye off the real business objectives you start to lose the plot.    I think the lesson here, in English, not Te Reo, is be VERY careful with companies that go to extreme lengths with all things ESG as its clear there's far too many senior staff with not enough to do.   My contention is the whole B Corp thing is nothing but a load of anti-capitalist garbage and any company that adopts this has completely lost the plot.

[Minimoke]

I wonder how sale of Dairyworks is going. Bought it for $112m,  selling it for

[Minimoke]

I'm wondering about the silence.

Back in April they said they had revised covenants that would apply to 31 July

1. Total shareholder funds of greater than $600m at all times (unchanged).
2. Working capital ratio of greater than 1.5x at all times (unchanged).
3. Interest cover ratio of no less than 2.25x as at 30 April 2023 and 31 July 2023 test dates (previously 3.0x).
4. Leverage ratio of no greater than 5.5x as at 31 July 2023 test date (previously 4.0x)
5. Senior leverage ratio of no greater than 3.5x at as 31 July 2023 test date (previously 3.0x).

Now that 31st July has passed these covenats must be
1. Total shareholder funds of greater than $600m at all times
2. Working capital ratio of greater than 1.5x at all times
3. Interest cover ratio of no less than 3.0
4. Leverage ratio of no greater than 4.0
5. Senior leverage ratio of no greater than 3.0x.

The reversion back to these covenats would imply SML have improved their balance sheet. But I don't see how this could have happened.

There has been silence on the sale of Dairy Wortks and Talbot. So there can't have been a cash injection.

There has been silence on the Mystery Overseas customer starting up production. So there can't be ant increase in revenue

It has been widely reported that demand for milk powder into china has dropped. So presumably revenue has dropped.

Of well. I suppose we just have to wait until the next market update.

[winner (n)]

Hey minimoke — last week they did say they were going to pay the farmers less for their milk

That's good ...for Synlait anyway

[Basil]

I think the chances of them selling assets at a good price in the current environment are slim.  Not only the demand environment you mentioned Minimoke but also the cost of capital is at multiyear highs with the 10-year Govt stock rate over 5% now.  It'll be interesting to see them report on 25 September.  As far as I know all their debt covenants are up for review again in mid-October.

Gosh, you'd need to be very brave to be a holder of this one with their weak demand outlook and seriously stretched balance sheet but I suppose if they use an even brighter shade of pink with bigger and bolder font in their report everything will be alright...or will it?

Also worth noting that getting excluded from the NZX50 in due course, perhaps as early as the next quarterly review next month is now almost a foregone conclusion so that's further downward pressure on the share price, especially given the lack of liquidity.

[mcdongle]

I'm wondering about the silence.

Back in April they said they had revised covenants that would apply to 31 July

1. Total shareholder funds of greater than $600m at all times (unchanged).
2. Working capital ratio of greater than 1.5x at all times (unchanged).
3. Interest cover ratio of no less than 2.25x as at 30 April 2023 and 31 July 2023 test dates (previously 3.0x).
4. Leverage ratio of no greater than 5.5x as at 31 July 2023 test date (previously 4.0x)
5. Senior leverage ratio of no greater than 3.5x at as 31 July 2023 test date (previously 3.0x).

Now that 31st July has passed these covenats must be
1. Total shareholder funds of greater than $600m at all times
2. Working capital ratio of greater than 1.5x at all times
3. Interest cover ratio of no less than 3.0
4. Leverage ratio of no greater than 4.0
5. Senior leverage ratio of no greater than 3.0x.

The reversion back to these covenats would imply SML have improved their balance sheet. But I don't see how this could have happened.

There has been silence on the sale of Dairy Wortks and Talbot. So there can't have been a cash injection.

There has been silence on the Mystery Overseas customer starting up production. So there can't be ant increase in revenue

It has been widely reported that demand for milk powder into china has dropped. So presumably revenue has dropped.

Of well. I suppose we just have to wait until the next market update.














You do know the mystery overseas customer has been outed???

[Minimoke]

No I didn't know they had been outed. Who are they?

[Minimoke]

Hey minimoke — last week they did say they were going to pay the farmers less for their milk

That's good ...for Synlait anyway

And Fonterra have today said they will pay even less. Looks like a race to see who can pay farmers the least.

[mcdongle]

Same name given to me by someone who works at Synlait..

Also see post no, 99 of this thread.

https://www.afr.com/companies/retail/tensions-rise-as-a2-milk-cranky-over-synlait-downgrade-20230426-p5d3al

[Minimoke]

Synlait will now have a very good idea of how there books look and ready for finalt result coming out on 25 September.

Their last guidance range was -$5m to $5m.

I reckon they will fall at the lower end of this range. But not past it as there has been no market update.

But of major concern will be the guidance.

A2M is holding a large inventory with long use by dates.

A2M is forecasting low single digit growth.

Whole milk powder demand is way down - so their new international partner may not be placing as many orders on Pokeno as they had anticipated.

Still no news of Dairyworks / Talbot divestment so balance sheet may still remain very stressed.

[Minimoke]

Synlait back at $1.38. All time low again. And time to go until results announcement