Overview of Synlait Milk's interim financial performance and challenges

Synlait Milk Limited (ASX: $SM1) has released its condensed interim financial statements for the six months ended 31 January 2024. The company reported an after-tax loss of $96.2 million, operating cash outflows of $98.1 million, and a working capital deficit of $204.9 million. The Directors have expressed material uncertainties regarding the company's ability to continue trading as a going concern due to significant debt repayment obligations and ongoing business challenges. The financial statements have been reviewed by independent auditors, PricewaterhouseCoopers (PwC), who emphasized the impairment of Synlait Cash Generating Unit and the uncertainties impacting the value-in-use calculation.

Executive commentary on financial performance and going concern uncertainties

The Directors of Synlait Milk Limited are pleased to present the condensed interim financial statements for the six months ended 31 January 2024. The company has faced challenges in the first half of the 2024 financial year, including lower-than-expected sales volumes, margin compression, and high financing costs. These factors led to a before-tax loss of $37.8 million, excluding the impact of impairment charges. The company is actively engaged in addressing the deterioration in trading performance through a restructuring of the executive leadership team, cost-out programs, and a focus on operational and sales performance. However, the company acknowledges the material uncertainties related to its ability to continue as a going concern, primarily due to the need for successful execution of an equity raise and other deleveraging options by 31 July 2024.

Summary of interim financial statements and outlook

Synlait Milk Limited's interim financial statements for the six months ended 31 January 2024 reflect a challenging period marked by an after-tax loss, operating cash outflows, and significant debt repayment obligations. The company's ability to continue as a going concern is subject to the successful execution of an equity raise and other deleveraging options by 31 July 2024. The company is actively pursuing various deleveraging initiatives, including the divestment of its Dairyworks subsidiary, equity raise, strategic asset review, and alternative forms of financing. The outcome and timing of these options are subject to material uncertainties. The company's financial statements have been reviewed by independent auditors, who emphasized the impairment of Synlait Cash Generating Unit and the uncertainties impacting the value-in-use calculation. The company's future performance and ability to address its challenges will be closely monitored by stakeholders.