Turning a heavy loss around appears to have stopped a mass exit of farmer suppliers from Synlait Milk which finds out today exactly how many of them will tear up quit notices.
The company, which has a plant at Dunsandel, has sweetened the pot with another 48c/kg in premium payments for suppliers remaining with them. This is on top of its milk price forecast of $10 a kilogram of milksolids for the 2024/2025 season.
Suppliers have until today to decide if they want to access the premiums in return for withdrawing a notice many of them made of their intention to cease supplying milk.
Synlait said many of its suppliers had decided to stay put and only a few were moving on to other processors, while new suppliers were expected to be recruited in coming seasons.
Helping their cause was the announcement last week of a first-half $4.8 million profit after tax on the back of a $96.2m loss over the same period last year.
Synlait’s financial tailspin last year was diverted by an equity raise of $218m by majority shareholders Chinese company Bright Dairy and The a2 Milk Company going ahead in September.
Federated Farmers Mid Canterbury president David Acland said many suppliers had put in cease notices when Synlait was going through a financial battle and last year’s loss had put the wind up them.
They had become uncomfortable with the risk to their businesses, but more lately this seemed to have calmed down, he said.
"We are a Synlait supplier as well, so we put our cease notice in this time two years ago when the uncertainty was about and you basically had to. You had to make a decision two years ago to reduce risk for ourselves.
"As time has gone on we have decided to withdraw that cease notice and we will continue supplying Synlait."
Farmer suppliers would be looking for the processor to remain stable as there were other milk supply options in Canterbury, he said.
Reduced debt and a first-half profit, coupled with advanced payments coming in line with other processors, appears to have removed the pressure.
To leave, farmer suppliers need to give two years’ notice as part of their contracts.
Mr Acland said Synlait had told everyone they had turned a corner, but there was still a long way to go.
A premium payment to retain suppliers appealed when combined with premiums for the audited Lead with Pride supply programme, he said.
"On top of that, it makes it quite favourable to stay engaged with perceived reduction in risk. It’s probably a combination of [a return to profitability and the premium payments], but for us it was the perceived return to stability. It seemed to settle down when we made the call."
Farmer suppliers would be watching the company’s progress under new leadership with chairman George Adams appointed last March and new chief executive Richard Wyeth due to start in May.
