Synlait Publishes FY22 Result & Refreshed Strategy

Tuesday 27th September 2022

Synlait Milk Limited (Synlait) today announced its financial result for the 12 months ended 31 July 2022 and published its refreshed strategy, which has a greater focus on the company's core business opportunities: Advanced Nutrition, Ingredients, Consumer and Foodservice.

Please find the following materials attached:

1. Synlait Full Year 2022 Annual Report

2. Synlait Full Year 2022 Investor Presentation

3. Synlait Full Year 2022 Media Release

4. Synlait Full Year 2022 Shareholder Letter

5. NZX Results Template

Key financial highlights:

• Revenue up 21% to $1.66 billion.

• NPAT up $67.0 million to $38.5 million.

• Adjusted NPAT up $62.4 million to $34.0 million.

• EBITDA up $91.8 million to $129.1 million.

• Adjusted EBITDA up $79.8 million to $117.2 million

• Net debt down 29% to $341.9 million.

• Operating cash flows up $214.5 million to $232.9 million.

• Impairment charge of $12.2 million due to continued idling of Temuka cheese plant.

• Gain on sale and lease back of Auckland land and building of $11.9 million.

Final 2021 / 2022 milk price:

The final average base milk price is $9.30 per kgMS for the 2021 / 2022 season – the highest base milk price Synlait has paid. In addition, an average of $0.29 per kgMS was paid for incentives, taking the total average milk payment to $9.59 per kgMS for the 2021 / 2022 season.

Tight global milk production and solid demand for dairy have resulted in Synlait’s forecast average base milk price remaining at $9.50 per kgMS for the current 2022 / 2023 season.

Key takeaways from today:

• Return to robust profitability on track – EBITDA up $91.8m to $129.1m.

• Balance sheet returned to normal metrics (net debt to EBITDA ratio of 2.6x) enabled by strong operating cashflows and inventory reduction.

• Review of Synlait strategy and Executive Leadership Team structure completed.

• SAP successfully implemented in August.

• Commercial production to start in early 2023 for Synlait Pokeno’s multinational customer.

• Launch of Foodservice cream in China under JOYHANA brand in partnership with SAVENCIA Group.

Full year 2023 guidance statement:

• Disciplined management of the Ingredients business will continue without some of the one-off foreign exchange gains experienced in FY22. Milk will be diverted to produce higher-margin products in the Advanced Nutrition and Foodservice businesses.

• The performance of the Advanced Nutrition business will continue to build.

• Synlait’s new multinational customers will start to lift margins and improve asset utilisation at Pokeno and Dunsandel (Liquids facility).

• The Consumer business will deliver a steady contribution as it maintains growth but navigates high cheese commodity prices and continues to expand into overseas markets.

• Operational cash flows will continue to be robust but softer than FY22 due to the rebalancing of opening and closing finished and raw material inventory levels.

• Costs will increase modestly due to higher sales volumes, SAP stabilisation activities, inflation and supply chain pressures, and key enabler activities within the refreshed strategy.

• A debt to EBITDA ratio of 2.0x to 2.5x is being targeted.

• At the end of FY23, Synlait will have completed its two-year recovery plan. As previously indicated, Synlait intends to exit FY23 and enter FY24 with a similar level of profitability experienced before FY21. However, Synlait is managing several risks, including, but not limited to, the SAMR registration timeline, a tight labour market, high inflation, and supply chain pressures. All of which could materially impact the company’s current FY23 guidance.

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