SML - Synlait

[Teitei]

I thought you said that you had some bonds and were unconcerned?

I was referring to Minimoke. 

[Teitei]

Could be as early as Tuesday. Or In december when Bonds need to be repaid. I don't see life after that.

Illogical.

SML will crater on Tuesday or not at all. Think about it - why would Bright Foods drag out the saga if they want SML to fall over?

[Minimoke]

Illogical.

SML will crater on Tuesday or not at all. Think about it - why would Bright Foods drag out the saga if they want SML to fall over?

There is a huge swinging brick.
First swing is today when $130m (or the full full proceeds of Dairyworks) had to be paid to bankers.. Fail
Second Swing. Tuesday. Can they find at least $130m by the time loss making announcements are made
Third swing. December when unsecured bonds have to be repaid
Fourth swing brick B Corp renewal - must be really stressing everyone out and full focus will be on them getting certification again. Failure will result in tears. Which is a whole lot worse than destruction of shareholder wealth.

Disclaimer. I thought it would be obvious from my posts. But I do not hold bonds (nor shares)

[Left Field]

Crikey..... things getting worse (... or  inline with pessimistic expectations.)

https://www.nzx.com/announcements/428830

Key financial metrics:

• Revenue up 3% to $793.5 million.
• Earnings before interest, taxes, depreciation, and amortization (EBITDA) was $19.9 million. Adjusted EBITDA was $36.1 million.
• Net loss after tax was ($96.2) million. Adjusted net loss after tax was ($17.4) million.
• Net debt up 8% to $559.0 million.
• Gross profit down 47% to $43.6 million.
• Forecast base milk price for the 2023 / 2024 season is $7.80 per kg/MS up from $7.50 per kg/MS.

Full year 2024 (FY24) guidance statement

Synlait has updated its FY24 guidance.

The previously announced guidance stated that earnings before interest, taxes, depreciation, and amortization (EBITDA) performance was expected to be broadly flat or down compared to FY23. Synlait's FY23 EBITDA was $90.7 million.

Synlait now expects the FY24 EBITDA result to be significantly down on FY23 within the range of $45 million to $60 million, excluding a non-cash adjustment for the product costing method change of approximately $17 million.

The FY24 EBITDA result is impacted by:

• Softening demand and/or margins across all business units.
• Adverse foreign exchange and product mix.
• Increased operating expenses e.g., legal costs, inventory management, and a range of other costs.

In addition to the above, Synlait is facing material uncertainties in respect of the timings and outcomes of various deleveraging options which are currently progressing. The deleveraging options include an equity raise, a North Island strategic asset review, and the sale of Dairyworks.

[winner (n)]

What's the resident SML guru minimoke think

Seems just kicking the can down the road and hoping something good will happen ...doesn't seem much progress has been made at all

Someone needs to come up with a read between the lines version ...that be a sad story

[Minimoke]

What's the resident SML guru minimoke think

Seems just kicking the can down the road and hoping something good will happen ...doesn't seem much progress has been made at all

Someone needs to come up with a read between the lines version ...that be a sad story

Totally uninvestable.

Take this for example "there are material uncertainties which may cast significant doubt over the Group's ability to continue trading as a going concern." What have I been saying?

Then thiss "Group's current liabilities exceeding its current assets by $204.9m. The Group is unable to repay these debts on demand without additional support from shareholders or from other sources of capital."

So, Bright have given a "letter of support" I reckon this is like getting a Certificate of Participation in the Form 5 100m sprint athletics event.

As expected Dairworks grossly over valued. No one wants it at any price.

Good news is they are going to get $7.5m for the sale of some property plant and equipment. Goodwill on dairyworks has taken a $31m hit. Inventories are up. Dairy works now on the bookat $120.3m.

Clearly Pokeno is going to go on the block. Still silence about this great white knight international customer that Pokeno was built and upgraded for.

Only asset of value is Dunsandel.

The $130m repayment date has now been pushed out to 15 July.  Bright Dairy will stump up this cash via a short term bridging loan - subject to requisite shareholder approval. I note utter silence on A2M.

Going for an equity raise by 30 July but  Material uncertainties will exist around the quantum, timing, structure, participation rate, and ultimate success of the equity raise and resulting impact on the Group's capital and ownership structure. The Group's shareholder structure creates further complexity and uncertainty around the potential outcome of an equity raise" Here we see A2's influence.

"An unsuccessful equity raise will result in significant adverse effects on the Group, including the ability for the Group to remain a going concern."

Shareholders - you still have an opportunity to get out. Bondholders. I still reckon you are stuffed.

[winner (n)]

So a $31m write down of Dairyworks assets to reflect the value of non-binding offers received

So not worth as much as they thought

[Left Field]

But wait there is more.....

Pokeno sale to be considered

Synlait will undertake a strategic review of its world-class North
Island assets, including its manufacturing facility in Pokeno and
its blending and canning facility in Auckland.

The strategic review will explore the highest-value ownership
structure of the assets to maximise value for all shareholders.

The strategic review is expected to take several months, and
there is no certainty that any transaction will result. No decisions
will be made regarding any potential transaction or other
outcomes until the completion of the strategic review.


Dairy Works sale

Synlait remains in discussions with potential purchasers, but no
sale has been completed or is assured.

This is a high value business and the Board will ensure the best
possible return is achieved for shareholders.

Equity Raise

Synlait is progressing with an equity raise as a key option
alongside the outcome of the strategic review of the North Island
assets.

Given that Synlait's share price is trading at a significant discount
to its net tangible asset value, the Board believes that asset
realisation should be progressed to produce maximum value for
shareholders. Equity raise remains an option under consideration
by the Board in parallel to achieve deleveraging of Synlait's
balance sheet.

(.......and no mention anywhere of ATM ?)

[Basil]

Agree 100% with Minimoke, totally uninvestable.

In the midst of all this turmoil, operating margins have ~ halved  "Gross profit down 47% to $43.6m"

Unfortunately for bondholders the key words to describe those bonds are "unsecured" and "subordinated" to all other debt.

[Minimoke]

Just out of sheer interest here's the pre-open at 9:40 this morning
You cannot view this attachment.

[Minimoke]

I've referred to these  line items before. Here they are now.
Cash and receivables = $140m
Payables = $286m

Workers might want to consider going on a weekly payroll

[Minimoke]

And heres the first few minutes
You cannot view this attachment.

Notice how the buyers have suddenly evaporated

[Sideshow Bob]

Best bid currently $0.61 

[BlackPeter]

Ahh, well - net losses and net debts up. Things going up is good, isn't it?

But apart from that - nobody seems to appreciate the amazing design of the reports and presentations. All in pretty pink colour (so appropriate) - and did anybody notice the beautifully shaped picture of a death spiral made from pouring milk they spread all over their presentations? I think the photographer deserves credits!

Rarely seen more telling illustrations to a financial report ....

Be positive, people ... I am sure this spectacle will keep us entertained for some time to go.

[Basil]

But apart from that - nobody seems to appreciate the amazing design of the reports and presentations. All in pretty pink colour (so appropriate) - and did anybody notice the beautifully shaped picture of a death spiral made from pouring milk they spread all over their presentations? I think the photographer deserves credits!

LOL here it is http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SML/428830/415920.pdf

Be positive, people ... I am sure this spectacle will keep us entertained for some time to go.

Yeap agreed.  Don't think I can recall such a spectacular train wreck that's played out in such super slow motion for many years.