Synlait sells North Island assets, posts $80.6m HY26 loss

The NZ$307 million sale of the Pŋkeno facility to Abbott is complete, delivering a material debt reduction for the Canterbury dairy processor – but significant refinancing pressures remain as the company pursues its Stabilise, Simplify, Scale recovery plan.

Synlait Milk (NZX: SML, ASX: SM1) has completed the NZ$307 million sale of its North Island assets to Abbott, settling on 2 April 2026 and marking what CEO Richard Wyeth described as “an important turning point” for the Canterbury dairy processor. The sale was announced in September 2025 and has been closely watched as a critical step in Synlait’s balance sheet recovery.

The assets sold include the Pŋkeno manufacturing facility, associated inventory, and Synlait’s leasehold Auckland sites – the blending and canning facility on Richard Pearse Drive and a warehouse on Jerry Green Street.

Gross proceeds received at settlement were approximately $233.48 million (NZ$283.1 million, US$164 million), with $20.26 million (NZ$24.57 million, US$14 million) held back subject to no post-completion claims arising.

$165 million (NZ$200 million) of the proceeds will be applied to repay bank facilities, reducing Synlait’s total committed bank facilities from $330 (NZ$400 million to NZ$200 million).

The company acknowledged its balance sheet has been further impacted by costs associated with FY25 manufacturing challenges and that “further work” remains to be done.

HY26: a series of compounding challenges

Released on 23 March 2026, Synlait’s 1H26 was, in the company’s own words, “frustatingly disappointing”.

Reported NPAT was a loss of $66.5 million (NZ$80.6 million, a sharp reversal from the NZ$4.8 million profit posted in HY25.

Snapshot: Synlait HY26 (six months to 31 January 2026)

The result was driven by:

• Manufacturing difficulties in the second half of FY25 left customer inventory levels depleted, requiring catch-up production through HY26;
• adjustments to the manufacturing plan caused surplus milk, particularly at peak season, which Synlait was forced to sell tactically;
• milk sales did not always proceed to plan, pausing catch-up production and leaving whole milk powder (WMP) as the only available output given dryer configurations; and
• WMP prices fell sharply at the end of calendar 2025, creating what the company described as a “perfect storm” of unfavourable ingredients returns.

The result is a stark contrast to HY25 when acting CEO, Tim Carter, reported a gross profit of NZ$87 million and described the period as evidence of “solid headway”.

Revenue for HY26 reached $782.6 million (NZ$949 million), up slightly on the prior period, but gross profit collapsed to $2.56 million (NZ$3.1 million). Underlying EBITDA was $3.4 million (NZ$4.1 million) after stripping out $27.4 million (NZ$33.2 million) in losses from tactical raw milk sales and other one-off items.

Operating cash outflows were $151.3 (NZ$183.4 million) for the half, against $9.9 million (NZ$12 million) in HY25, driven by weaker operating performance, one-off milk incentive payments, and a build-up of ingredients inventory.

Net debt rose to $389.4 million (NZ$472.1 million). An insurance claim is expected to recover a portion of the FY25 manufacturing challenge costs; the quantum has not been confirmed.

Business unit performance

Advanced Nutrition revenue fell 3 per cent on the prior period, with gross profit down 87 per cent, driven by enhanced operational controls prioritised over efficiency, unavoidable inefficiency from pivoting manufacturing under pressure, and use of North Island assets to support the catch-up plan. The a2 Milk Company’s English-label a2 Platinum product is also in the process of transitioning to a2MC’s new manufacturing facility.

Ingredients revenue fell 28 per cent and gross profit by 89 per cent, as capacity constraints forced production into WMP at the worst moment in the global WMP pricing cycle. The two largest Ingredients customers renewed long-term multi-year supply contracts during the period.

Consumer and Foodservice were the standout performers. Consumer revenue rose 51 per cent, with Dairyworks – which Synlait acquired in 2020 as part of a diversification strategy and was unable to sell in 2024 when offers did not meet acceptable levels – driving growth through export markets, private label contracts, and continued sales growth into Woolworths and Costco in Australia.

Foodservice revenue rose 48 per cent, powered by UHT cream volume growth of 24 per cent in China and Southeast Asia.