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September 27, 2022

Synlait outlines new strategy as dairy group returns to the black

The New Zealand group suggested it now has a greater focus on its core business opportunities.

By Andy Coyne

New Zealand dairy and infant-formula firm Synlait has announced a new strategy initiative as it returns to profitability.

In an announcement coinciding with Synlait’s annual financial results, the company said its refreshed strategy has a greater focus on its core business opportunities: advanced nutrition, ingredients, consumer and foodservice.

It follows a review of the group’s four business units, which took place between March and June.

The company said: “The refreshed strategy articulates what success looks like in FY27 for Synlait, the company’s right-to-play, how it will gain a competitive advantage – customer and farmer supplier right-to-win models – and most importantly how Synlait will deliver executional excellence across its entire business.

“The refreshed strategy’s focus across channels, categories and geographies also reduces Synlait’s concentration risk and delivers diversified growth. In addition, the strategic focus on milk supply, foodservice and the China market has increased.”

Synlait brought in a new CEO in the shape of ex-Fonterra executive Grant Watson in September last year as it looked to bounce back from a year in the red.

On its new strategy, Watson said: “Our refreshed strategy is key to creating greater focus and accountability across Synlait. Now that we have a clear strategy and the right leadership structure to enable our strategy, our focus turns to delivering a far greater level of execution in FY23 and beyond.”

Synlait’s results, announced today (27 September), revealed it has returned to the black. Its net profit in the year to 31 July was NZD38.5m (US$21.9m), compared with a loss of NZD28.5m in the previous year. Revenue was up by 21% to NZD1.66bn while EBITDA was up NZD91.8m to NZD129.1m.

However, the company has warned of headwinds affecting the business over the next 12 months.

Synlait said it intends to exit fiscal years 2023 and 2024 with a similar level of profitability experienced before fiscal year 21 but added: “Synlait is managing several risks, including, but not limited to, the SAMR registration [in China] timeline, a tight labour market, high inflation, and supply chain pressures – all of which could materially impact the company’s current FY23 guidance”.

The new leadership structure changes referred to by Watson include introducing a new position of director of strategy, innovation and corporate affairs, although no one has yet been confirmed in the role.

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