New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>Synlait Milk's (SML) 1H24 market update reinforced the challenging environment it faces.</li><li>Principally: (1) debt levels (and interest costs) remain elevated, and (2) asset base under utilisation continues to be a material drag on margins.</li><li>No new information was provided on SML's potential balance sheet repair (update due 25 March 2024) which will remain a significant overhang on the share price.</li></ul>

Synlait Milk's (SML) 1H24 market update reinforced the challenging environment it faces.Principally: (1) debt levels (and interest costs) remain elevated, and (2) asset base under utilisation continues to be a material drag on margins.No new information was provided on SML's potential balance sheet repair (update due 25 March 2024) which will remain a significant overhang on the share price.

<ul><li>Synlait Milk's (SML) wide ranging market update had a disappointing tone.</li><li>While details were provided on the ongoing supply exclusivity arbitration process with The a2 Milk Company (ATM) and potential pricing renegotiations, the key takeaway is SML’s balance sheet challenges persist.</li><li>A sale of Dairyworks ‘cannot at this time be assured’ and debt levels ‘remain elevated’, not helped by subdued profitability, with 1H24 NPAT expected to be down on 1H23. </li></ul>

Synlait Milk's (SML) wide ranging market update had a disappointing tone.While details were provided on the ongoing supply exclusivity arbitration process with The a2 Milk Company (ATM) and potential pricing renegotiations, the key takeaway is SML’s balance sheet challenges persist.A sale of Dairyworks ‘cannot at this time be assured’ and debt levels ‘remain elevated’, not helped by subdued profitability, with 1H24 NPAT expected to be down on 1H23. 

<ul><li>Synlait Milk's (SML) FY23 result was operationally weak compared to our expectations, confirming what has been a difficult period.</li><li>Minimal outlook commentary was provided; we think the road ahead continues to look challenging, and balance sheet risks remain elevated if SML is unable to sell Dairyworks.</li><li>The three key issues currently are; (1) high gearing, (2) suppressed Advanced Nutritionals margins, and (3) an elevated cost base. </li></ul>

Synlait Milk's (SML) FY23 result was operationally weak compared to our expectations, confirming what has been a difficult period.Minimal outlook commentary was provided; we think the road ahead continues to look challenging, and balance sheet risks remain elevated if SML is unable to sell Dairyworks.The three key issues currently are; (1) high gearing, (2) suppressed Advanced Nutritionals margins, and (3) an elevated cost base. 

Synlait Milk - FY23 Result — The Worst Is Over?

Thematic (Sector/Industry)

<ul><li>The Forsyth Barr Dairy Digest provides a snapshot of information relevant to New Zealand's dairy sector.</li><li>We include forecasts on the Farmgate Milk Price (FGMP), dairy production, on-farm costs and farm prices with supplementary information on lending, confidence, emissions, the infant formula market and our global analysis of the dairy industry. </li><li>This edition highlights that times are tough for farmers with volatile prices, subdued Chinese demand, and elevated operating and interest costs are pressuring on-farm profitability.</li></ul>

The Forsyth Barr Dairy Digest provides a snapshot of information relevant to New Zealand's dairy sector.We include forecasts on the Farmgate Milk Price (FGMP), dairy production, on-farm costs and farm prices with supplementary information on lending, confidence, emissions, the infant formula market and our global analysis of the dairy industry. This edition highlights that times are tough for farmers with volatile prices, subdued Chinese demand, and elevated operating and interest costs are pressuring on-farm profitability.

Forsyth Barr Dairy Digest - Edition 2 Cashflow Constraints

<ul><li>Synlait Milk (SML) has announced its intentions to divest its Dairyworks and Talbot Forest Cheese (TFC) businesses as part of its asset/capital structure review.</li><li>We estimate potential sales proceeds of ~NZ$150m using current earnings and applying prior transaction multiples.</li><li>A sale would reduce pro-forma FY23 net debt to ~NZ$275m (versus our current forecast of ~NZ$425m).</li></ul>

Synlait Milk (SML) has announced its intentions to divest its Dairyworks and Talbot Forest Cheese (TFC) businesses as part of its asset/capital structure review.We estimate potential sales proceeds of ~NZ$150m using current earnings and applying prior transaction multiples.A sale would reduce pro-forma FY23 net debt to ~NZ$275m (versus our current forecast of ~NZ$425m).

Synlait Milk: A Baby Step; Leaps Are Required

New Zealand

Synlait Milk Ltd is a milk production company.  The Company produces, processes, markets and distributes milk, milk powder products and ingredients.

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Synlait Milk (SML NZ)

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Synlait Milk's (SML) wide ranging market update had a disappointing tone. While details were provided on the ongoing supply exclusivity...

Forsyth Barr

Synlait Milk - FY23 Result — The Worst Is Over?

Synlait Milk's (SML) FY23 result was operationally weak compared to our expectations, confirming what has been a difficult period.

Forsyth Barr

Forsyth Barr Dairy Digest - Edition 2 Cashflow Constraints

The Forsyth Barr Dairy Digest provides a snapshot of information relevant to New Zealand's dairy sector. We include forecasts on the Farmgate Milk...

Forsyth Barr

Synlait Milk: A Baby Step; Leaps Are Required

Synlait Milk (SML) has announced its intentions to divest its Dairyworks and Talbot Forest Cheese (TFC) businesses as part of its asset/capital...

Forsyth Barr

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