Synlait's HY24 financial results and strategic initiatives

Synlait Milk Limited (Synlait) (ASX: $SM1) has released its financial results for the six months ended 31 January 2024. The company announced a strategic review of its North Island assets, received a letter of support from Bright Dairy, and made amendments to its banking facilities to support its forward-looking recovery plan. Synlait CEO Grant Watson emphasized the challenging half-year and the company's efforts to reset to achieve strategic objectives and reduce debt.

Synlait CEO Grant Watson's commentary on the company's strategic focus and recovery plan

It has been a challenging half-year for Synlait as we continue to reset the company to better achieve our strategic objectives, while working to significantly reduce our elevated levels of debt. The delivery of our half-year results brings together several reset initiatives, with the announcement of an amendment to our banking facilities, and a strategic review of the North Island assets. Our strategic focus is on Advanced Nutrition and Foodservice where we have a clear competitive advantage to deliver diversified, high-value growth. It is supported by a well-run Ingredients business enabled by our market-leading Lead With Pride™ on-farm excellence programme. We have built a world-class and highly flexible asset base, and we are well positioned ahead of emerging customer demand trends. Combined with our refreshed executive leadership team, we have all the pieces in place to execute on this strategy and deliver strong returns for our shareholders.

Synlait's outlook and guidance for FY24

Synlait has outlined a clear plan to deleverage its balance sheet and reduce total debt to a sustainable level, with support from Bright Dairy and the banking syndicate. The company is undertaking a strategic review of its North Island assets to maximize value for shareholders and is considering an equity raise to achieve deleveraging. Additionally, Synlait is progressing with the sale of Dairyworks and has provided guidance for FY24, expecting the 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 company acknowledges material uncertainties in respect of the timings and outcomes of various deleveraging options and encourages shareholders to review the detailed disclosure. Synlait remains committed to deleveraging its balance sheet and improving profitability for the remainder of 2024.