Synlait Milk Limited (ASX: SM1)
Synlait Milk Limited (ASX: SM1), on 3 April 2025, progress in securing its future milk supply, with the majority of cease notices from farmers now withdrawn. This positive shift reflects growing confidence in the company, partly due to its return to profitability. The company has also introduced a premium incentive for farmers who withdraw their cease notices by the end of May 2025. Due to strong farmer support and new inquiries from potential suppliers, Synlait is confident in having sufficient milk volumes for the fiscal years 2026 and 2027. Synlait remains committed to being a supplier of preference against mounting rivalry across Canterbury and supports long-term continuity with value partner farmers.
For the first half of fiscal year 2025, Synlait reported a total group EBITDA of $63.1 million, slightly above the projected range. The company returned to profitability with a net profit after tax (NPAT) of $4.8 million. This recovery was driven by higher demand for advanced nutrition products and improved returns from the ingredients segment, supported by favorable foreign exchange rates and manufacturing efficiencies. Net debt was reduced by 29%, largely due to an equity placement with major shareholders. The financial results reflect a solid operational performance in key business segments, evidencing the success of cost management and strategic investments in growth sectors.
In the advanced nutrition segment, Synlait saw a 28% increase in sales volumes, driven by rising demand and improved manufacturing cost performance. The ingredients segment also performed well, despite a drop in sales volumes, benefiting from favorable stream returns and optimized product mix. The consumer foods division experienced growth, especially in the value-added slice and snacking markets, while the foodservice segment faced margin challenges despite strong volume growth, particularly in China and Southeast Asia. The company is concentrating on building out its Nutrabase™ portfolio, creating new customized infant formula products, and building presence in Asia Pacific markets. Also, Synlait continues to build its dairyworks brand in Australia and Southeast Asia, utilizing partnerships to spur regional expansion.
Synlait aims to continue strengthening its milk supply, with new premiums offered to South Island farmers for the 2024/25 through 2027/28 seasons. The company plans to focus on showcasing its on-farm offerings, enhancing customer relationships, and driving operational efficiencies. Full-year guidance targets a significant improvement in EBITDA, although the second half of FY25 may show slower progress due to balancing milk stream returns and foreign exchange risks. Synlait is targeting a net debt range of $250–300 million and aims to maintain a strong net senior debt-to-EBITDA ratio below 2.5x, positioning itself well for future financial stability and growth. The company also plans to explore new nutritional categories to diversify its portfolio and capture emerging market opportunities.
(Source: Company’s Report)
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