Highlights

  • The company expects net loss after tax of between $77 million and $82 million in HY26
  • EBITDA impacted by operational adjustments, inventory rebuilding, and lower commodity returns.
  • North Island asset sale set for 1 April 2026 to reduce debt and focus core operations.

Synlait Milk Limited (ASX:SM1) has reported a significant decline in earnings for the six months ended 31 January 2026, prompting a sharp fall in its share price. Synlait shares fell 13.46% to $0.45 on Wednesday morning as the investors reacted to the projected net losses despite the company highlighting steps taken to stabilise operations and improve financial performance over the medium term.

Operational and Manufacturing Challenges

The company noted that while manufacturing issues at the Dunsandel facility have largely been resolved, associated costs and operational impacts persisted. Adjustments to rebuild inventory across product segments required additional raw milk sales, which negatively affected margins and operating costs.

Lower returns from the commodities portfolio and a conservative approach to deferred tax assets further contributed to the half-year result. Synlait confirmed it was not affected by recent infant formula recalls linked to ARA ingredients.

Financial Performance

Synlait expects underlying EBITDA for HY26 to range from $0 to 5 million and a reported EBITDA loss between $28 million and $33 million.

For net profit after tax:

  • Underlying net loss: $33 million to $38 million
  • Reported net loss: $77 million to $82 million

These figures compare with HY25 underlying EBITDA of $68.5 million and reported EBITDA of $63.1 million. Underlying NPAT in HY25 was $8.7 million with reported NPAT at $4.8 million.

An insurance claim related to earlier manufacturing losses is expected to recover part of the financial impact, though the timing and final amount remain uncertain.

Strategic Steps and Asset Sale

Synlait is progressing with the sale of its North Island assets for completion on 1 April 2026. Proceeds will be used to reduce debt and focus operations in Canterbury. The company aims to enhance operational efficiency, diversify its customer base, and improve profitability over the longer term.

Synlait’s half-year results highlighted ongoing operational and financial challenges, resulting in substantial losses and a sharp share price decline. Completion of the North Island asset sale and continued operational improvements might improve the company’s financial position in the coming months.

FAQ

Why did Synlait shares fall sharply?
Shares dropped due to the projected half-year losses despite operational progress and asset sale plans.

When will the North Island asset sale be completed?
The sale is scheduled for 1 April 2026. Proceeds will be used primarily to reduce debt.

What is Synlait’s expected EBITDA for HY26?
Underlying EBITDA is forecast between $0 and $5 million, with reported EBITDA losses of $28 million to $33 million.