The Synlait Milk Ltd (ASX: SM1) share price is climbing on Monday morning after the Kiwi dairy company released its full-year 2021 (FY21) results.
At the time of writing, the Sunlait share price is up 3.42%, trading at $3.33.
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Sunlait share price lifts despite net loss
Synlait results for the year ended 31 July 2021 including the highlights below:
- Revenue down 5% on the prior corresponding period (pcp) to $1,367.3 million
- Earnings before interest, tax, depreciation and amortisation (EBITDA) of $37.3 million
- Net loss after tax of $28.5 million versus a $103 million net profit in FY20
- Operating cash flow down 85% on pcp to $15.9 million
- Debt to EBITDA, a measure of leverage, up 416% on pcp to 12.9 times.
The Synlait share price is climbing following this morning's update which represented the company's largest ever financial loss after 9 years of profitability.
What happened for Synlait in FY2021?
The key takeaways in this morning's investor presentation were quite telling. Synlait said FY2021 was "very challenging" and that the board and management team have now "begun to execute a plan to rebuild".
That includes the appointment of Grant Watson as company CEO who will join Synlait in January 2022. Mr Watson is currently the CEO of the indigenous Māori dairy company, Miraka, in New Zealand.
Operationally, Synlait was impacted by many of the same factors that have smashed the A2 Milk Company Ltd (ASX: A2M) share price this year.
The company said consumer-packaged infant formula volumes declined as demand subsided while liquids volumes normalised after strong FY20 numbers.
In its Q4 2021 review, the board and management found three key areas of concern impacting Synlait's performance. Those included:
- New business areas had been slower to develop than planned
- Cost structures had been allowed to grow at a faster rate than earnings, and
- The use of capital had become suboptimal.
What did management say?
Synlait chair Graeme Milne ONZM touched on the result, saying:
Our financial result for the 12 months to 31 July 2021 (FY21) unfortunately reaffirmed our over-reliance on one product, one customer and one market.
While we have invested significantly in our diversification strategy, we did not anticipate the impact COVID-19 would have on The a2 Milk Company, our key customer, and consequently, our own financial performance.
While this is an extremely disappointing financial result, we continued to execute our strategy and are planning a strong recovery.
What's next for Synlait and its share price
The Synlait share price has been under pressure this year. Shares in the Kiwi dairy company are down more than 30% in 2021 to A$3.28 per share.
Synlait is expecting demand for consumer-packaged infant formula to stabilise in FY2022, combined with a return to normality in global shipping to help reduce inventory levels this year.
