Synlait Milk secures US$28.34M to bolster its financial liquidity

New Zealand – Synlait Milk has taken immediate steps to bolster its financial liquidity by temporarily increasing its existing banking facilities by US$28.34 million ($50 million).

The action directly addresses the persistent financial strain caused by costs associated with significant prior manufacturing challenges.

Despite this necessary capital injection, the company confirmed that it remains fully compliant with all its existing banking covenants.

The need for this increased working capital stems primarily from manufacturing challenges experienced at the company’s crucial Dunsandel site during the second half of the previous financial year.

These operational issues resulted in a substantial one-off cost of US$24.69 million ($43.5 million).

Synlait’s planned lean working capital program for the current financial year became difficult to execute and manage due to negative cash flow impacts and ongoing expenses arising from earlier operational issues.

While the core manufacturing problems have now been “largely resolved,” the company is still experiencing “related cost impacts in FY26.”

To accommodate revised earnings forecasts reflecting these lingering challenges, Synlait also announced adjustments to its quarterly and annual minimum EBITDA event-of-review thresholds under the banking facilities agreement.

This proactive negotiation ensures flexibility as the company manages the cost hangover from the Dunsandel issues.

A significant financial turning point is expected next year following the completion of its major asset divestment.

Synlait is on track to reduce a considerable portion of its debt upon receiving the proceeds from the US$174.13 million ($307 million) sale of its North Island assets, a transaction scheduled to be finalized on April 1st next year.

This sale has already received the necessary backing, including a positive vote from the majority shareholder, Bright Dairy, ahead of the official vote at next week’s annual general meeting (AGM).

The upcoming AGM in Christchurch will be notable as it marks the first for new chief executive Richard Wyeth, who joined in May—coincidentally, during the peak of the manufacturing difficulties.

Financially, Synlait is currently forecasting a base milk price of $10 per kilogram of milk solids {kgMS} for its farmers, aligning with the midpoint forecast provided by competitor Fonterra. At its last balance date, Synlait reported a net debt position of US$141.75 million ($250 million).

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