Synlait sale Synlait to sell and leaseback

Synlait chases growth

By Gerald Piddock and BusinessDesk

Synlait Milk has confirmed a sale and leaseback of its property in Mangere in Auckland. Synlait will sell the building for $30.05 million, with an initial 10-year lease term. It was valued at $12.4m when they bought it in May 2017.

Settlement on the sale takes place on October 4.

The building forms part of the company’s North Island manufacturing network, providing additional blending and canning capacity, warehousing and office space.

Synlait chief executive John Penno says the sale and leaseback allowed the company to free up cash and allow it to pay down debt.

“The lease will have an initial term of 10 years, with further rights of renewal, providing plenty of long-term certainty and flexibility for our business,” Penno says.

The sale comes as Synlait announced plans to cut 15% of its staff to reset the business and generate savings of $10m-$12m a year.

“We need to build teams that are working together with clear roles and responsibilities and the systems needed to chase the growth we are looking to achieve,” he says.

“This is not just a cost out exercise, it is a complete reset of how we operate as a business.”

The company is discussing the proposed changes with impacted team members and union representatives. The consultation process will take place over the next two weeks, according to its website. Synlait is made up of 1000 people and more than 280 milk suppliers.

Penno says the aim is to “remove any unhelpful hierarchy from the organisation to ensure staff have the information, resources and freedom to act as they need to, to do their jobs every day”.

Synlait has said it expects to report a net loss of between $20m and $30m in the year that ended July 31.

The company has been grappling with ongoing shipping delays, lower prices for ingredient products and has taken a more conservative approach to year-end inventory volumes and valuation.

It has also been hurt by troubles at a2 Milk. Synlait has an exclusive supply rights deal with a2 Milk for baby formula that is in place until 2023. A2 Milk, however, has been hit by a dramatic drop in sales due to ongoing travel disruptions.

“This is not just a cost out exercise, it is a complete reset of how we operate as a business.”

John Penno

Synlait chief executive John Penno says the sale and leaseback of an Auckland property allowed the company to free up cash and allow it to pay down debt.

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Synlait will sell their building in Auckland for $30.05 million with an initial 10-year lease term as part of their plan to reset the business.