Synlait Faces Steep Losses as North Island Asset Sale Resets Strategy
Synlait Milk Limited reveals a challenging first half of 2026 with significant losses expected, as it pivots its operations around Canterbury following the upcoming sale of its North Island assets.
- Expected HY26 underlying EBITDA between breakeven and $5 million
- Reported EBITDA loss forecasted between $28 million and $33 million
- North Island asset sale set for completion on 1 April 2026 to reduce debt
- Operational challenges at Dunsandel resolved but impacted costs and margins
- Insurance claim pending to offset manufacturing losses
A Difficult Half-Year for Synlait
Synlait Milk Limited has provided a sobering update on its financial performance for the six months ended 31 January 2026, signalling a period of significant challenge and transition. The company expects its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to range from breakeven to a modest $5 million, while reported EBITDA losses could reach as high as $33 million. This marks a sharp contrast to the prior half-year, where underlying EBITDA was $68.5 million.
Strategic Reset Anchored by Asset Sale
Central to Synlait’s turnaround plan is the imminent sale of its North Island assets, scheduled to complete on 1 April 2026. This move is expected to substantially strengthen the company’s balance sheet by significantly reducing debt, allowing Synlait to focus its core operations in Canterbury. CEO Richard Wyeth emphasised that while the company is disappointed with the current results, the sale and operational reset provide a clear pathway to recovery, albeit one that will take at least 12 months.
Operational Challenges and Cost Pressures
Synlait’s manufacturing site at Dunsandel experienced notable challenges earlier in the year, which have now been largely resolved. However, the fallout from these issues continues to weigh on costs and margins. The company had to adjust its manufacturing plans significantly, including selling additional raw milk to rebuild inventory, which further pressured profitability. Additionally, lower returns from its commodities portfolio and a conservative stance on recognising deferred tax assets have compounded the financial strain.
Insurance Claim and Future Outlook
Synlait has an insurance claim underway related to the manufacturing disruptions, which is expected to recover some of the losses incurred. However, the final settlement amount and timing remain uncertain. The company is actively engaging with its banking syndicate to navigate this transitional phase and is preparing to release its audited half-year results on 23 March 2026, which will provide further clarity.
Looking Ahead
While the near-term financial outlook is challenging, Synlait’s strategic refocus on Canterbury operations and the debt reduction from the North Island asset sale could set the stage for a more sustainable future. Investors will be watching closely to see how quickly the company can translate operational improvements into profitability and whether the insurance recovery and asset sale proceeds will provide the necessary financial ballast.
Bottom Line?
Synlait’s reset is underway, but the road to profitability remains long and uncertain.
Questions in the middle?
- What will be the final audited half-year results and how will they compare to these preliminary forecasts?
- How much will the insurance claim ultimately recover, and when will those funds be received?
- What impact will the North Island asset sale have on Synlait’s long-term operational and financial stability?
