Early Bird I Wednesday June 5th 2024

Struggling dairy company Synlait gets temporary cash injection, banks fail to convince MP’s they are farmers' friends and NZ Pork has new board directors. Welcome to Proud Country's Early Bird - The top things you need to know that impact rural New Zealand delivered to you by 5am, because who doesn’t need better chat beyond the weather! Struggling dairy company Synlait gets temporary cash injection Troubled dairy company Synlait Milk has secured a deal with its major shareholder to gain the financial flexibility needed to execute its plan to sell assets and reduce its debt to sustainable levels. As part of this plan, Synlait is working on selling its manufacturing plants in Auckland and Pōkeno, aiming to cut its debts by $300 million, which also involves raising equity from investors. Synlait faces the challenge of regaining the trust of its farmers, with over half of its suppliers having issued "cessation notices," indicating their intention to stop supplying milk once their current contracts expire. To buy time for its deleveraging plan, Synlait required funds to make upcoming debt repayments. The company announced a deal with Bright Dairy, a Chinese company owning 39.01% of Synlait, which will provide a loan of up to $130 million. This loan is expected to cover repayments to Synlait’s syndicate of senior lenders by July 15. The syndicate includes ANZ, Bank of China, China Construction Bank, HSBC, and Rabobank. Synlait’s financial struggles stem from a significant pre-pandemic investment program, which included spending $280 million on a manufacturing plant at Pōkeno, $125 million on a new liquid plant at Dunsandel, and $150 million on cheese companies Talbot Forest Cheese and Dairyworks. The company is also in a dispute with a2 Milk over a manufacturing deal for infant formula. The financial difficulties have severely impacted Synlait’s market value, with shares plummeting from $3.66 in late 2022 to below 50 cents.  Synlait is striving to retain its farmer suppliers, who have expressed a desire to see the company’s balance sheet deleveraged, enabling higher advanced rates.  Alliance Group cuts costs amidst capital raise The Alliance Group is seeking a capital injection from its farmer shareholders to maintain its 100% farmer-owned co-operative status, but the success of this initiative may not be clear until mid-way through next season.  The company announced its need to raise between $100 million and $150 million, increasing the number of shares required per stock unit killed from 12 to 16, equating to an additional $4 per head deduction per stock unit.  Since this announcement, the company has been engaging with farmers through in-person meetings, online Q&As, and direct outreach by livestock representatives. Alliance Group's board chair, Mark Wynne, acknowledged that the timing of the capital raise is challenging, as farmers are currently under financial strain. He said that the meetings with farmers, which have so far reached a few hundred of the 5000 shareholders, revealed that approximately 80% of attendees are inclined to support the co-operative, while 20% are still considering their options. The co-operative has already made about 150 redundancies, primarily from head office, and has taken steps to reduce working capital, minimise inventory, accelerate payments from overseas customers, cut costs, and reduce capital expenditure. Banks fail to convince MP’s they are farmers' friends MPs are far from convinced by assurances from big banks who recently presented to parliament that they are supportive allies of farmers ACT's Mark Cameron stated that many questions remain unanswered, though parliamentary confidentiality prevents disclosing whether a formal inquiry into rural banking will be initiated before the select committee releases its report. The primary production select committee is currently considering whether to conduct a full inquiry into rural banking amidst rising farmer dissatisfaction with banks.  Representatives from ANZ, ASB, and BNZ described themselves as "trusted advisers" to farmers, but Cameron indicated that MPs from ACT, National, Labour, and the Green Party found the banks' presentations to be arrogant and unsatisfactory. MPs’ were also frustrated with the limited time available to address farmers' concerns but suggested that what they heard was enough to raise serious worries about potential issues in rural banking. Mark Camerons says that the committee is committed to uncovering the underlying issues, with more questions to be asked and answers sought in the coming discussions. M bovis levy to drop drastically next month The Biosecurity (Response – Milksolids) Levy will decrease from 2.4 cents to 0.8 cents per kilogram of milk solids starting July 1. DairyNZ chair Jim van der Poel attributes the reduction to the collective efforts of New Zealand dairy farmers in combating Mycoplasma bovis. He emphasised that the sector’s collaboration led to significant progress in managing the disease, now entering a surveillance phase with decreased costs. The Mycoplasma bovis (M bovis) Programme, now six years into its ten-year eradication plan, currently reports no active, confirmed properties.  To date, the M bovis eradication programme has cost approximately $722 million, compared to an estimated $1.3 billion in lost productivity over ten years if the disease had spread unchecked.  Dairy NZ Chair Chris Lewis praised the collective effort, with around 98% of New Zealand dairy farmers having supported the 2% affected by M bovis.  Lewis says that the Biosecurity Response Levy has been crucial in managing the outbreak and strengthening New Zealand's biosecurity system. NZ Pork has new board directors New Zealand pig farmers have elected Jason Palmer and Nigel Young to the NZPork board of directors, bringing significant experience and expertise to the board. Jason Palmer, who is already serving as a director on the NZPork board, is a pig farmer from mid-Canterbury with additional interests in dairy and forestry. Nigel Young, the newly elected director, has 40 years of experience in the pig farming sector in New Zealand, the United Kingdom, and Australia. He currently serves as the general manager for PIC/Sunpork New Zealand. Palmer and Young were elected by farmers from the Region 3 area, which encompasses the South Island. The unsuccessful candidate in the election was South Canterbury pig farmer Helen Andrews, who has been a NZPork board director since 2018.See omnystudio.com/listener for privacy information.