Lynch, Synlait's Corporate Affairs Manager. Before our Chair, Graeme Milne, opens today's meeting, I will explain how to participate in Synlait's online annual meeting. Voting today will be conducted via poll for all items of business. Computershare, our share registry, will act as scrutineers, and the results will be posted to the New Zealand and Australian Stock Exchanges before close of play today. Voting is now open. To vote, click on the tab and select your preferred option. Once your vote has been cast, a tick will appear. You can vote for all resolutions at once or by each resolution. There is no Submit and Send button. Your selection is automatically recorded, and it can be changed up until the time that voting closes. Asking a question online. Questions can be submitted at any time.
To ask a question, click on the Q&A icon, type your question, and press Submit. Your question will be addressed at the relevant part of the meeting. We recognize that this meeting format might be new to some of you. If you have difficulty connecting to the online platform, asking a question, or voting, please refer to the online voting guide issued alongside the notice of meeting in the first instance. This guide can also be found on Synlait's website. If you are still having difficulty connecting, use the Q&A function to message the Computershare team or you can call them. Their phone number is on screen now. I will now hand over to Graeme to formally open today's meeting.
Thanks very much, Hannah. Good afternoon, and thank you for joining us, everyone. My name is Graeme Milne, obviously, and I'm the Chair of Synlait, of the Synlait Board. A very warm welcome to the FY 2021 Synlait Annual Meeting. It's the first time we're doing it fully virtual, and I hope it all works and nobody gets cut off. Before we begin, I'd like to confirm that there are no new announcements actually today or any changes to Synlait's guidance. We expect the meeting to last about an hour to an hour and a half, depending on questions. Just so you got an idea of that. I'm pleased to confirm that we have a quorum and therefore declare the annual shareholders' meeting open. Firstly, a quick summary of the agenda today.
I will speak first, and then we'll hear from our CFO, Rob Stowell, and then followed by our CEO, John Penno. Then there'll be an opportunity to ask questions. There'll actually be several opportunities to ask questions through the meeting, so don't panic about if you missed the first opportunity. We'll then move to the sort of formal business of the meeting, where there will be three ordinary resolutions and one special resolution for you to consider and vote as set out in the notice of the meeting. After this, there's a chance to ask questions during that and at the end under general business. Before I begin, I'd like to introduce your board. Here in New Zealand, we have Simon Robertson and Sam Knowles and Ruth Richardson and John Penno, of course.
In Shanghai, we have Edward Yang and Albert Lu. We also have Min Chen, as she's now, who replaces Min Ben as a Bright director on the board. I'll introduce her just in a minute. From our management, we have Rob Stowell, the CFO, and also Deborah Marris, who is the senior executive in charge of legal, risk, and governance. I'd like to welcome Joyce to the Synlait Board. Joyce will replace Min, as I said, as a Bright-appointed director, effective today. This change does not need to be voted on by shareholders, hence it was not included in the notice of meeting. Joyce joined Bright Dairy in 2007 as a senior finance manager responsible for budget planning, data analysis, and business evaluation.
Since 2016, Joyce has been the chief internal auditor for Bright Dairy, reporting to the company's audit committee chair and ultimately to the board of directors. Joyce , would you like to say a few words to the shareholders?
Good afternoon, Mr. Chairman and fellow directors. It is my pleasure to share my professional resume and my expectation to this position with you through this opportunity. In the past two years, the economy wracked by a severe recession. These were the times that test the courage of the conviction and the strength of our union. Finally, Synlait had overcome all the difficulties because Synlait choose to move forward as one team, one people. In the spirit to further support for our business and to strengthen the communications between the board and Bright Dairy, I have been chosen to fill up the gap when the director Min Ben leave the board. I joined Bright Dairy 14 years ago as a senior finance manager responsible for the company's budget planning, data analysis, and business performance valuation.
Since 2006, I have been appointed as audit controller in charge of the internal audit department. Prior to Bright Dairy, I have been a practicing CPA in BDO China Shu Lun Pan for about five years, conducting audits for many manufacturers in various industries, ranging from small businesses to large listed companies. I am encouraged to apply my work experience to this position and work closely with the boards and the management as one team in order to build a solid foundation base for our business and bring real value in our clients to our shareholders and our community where we live. That's all. Thank you.
Thanks very much, Joyce. That's great. Now turning to our FY 2021 performance, and that wasn't so great. It was a very challenging year. Nine years of profitability and then our largest ever loss. An NOPAT result of NZD -28.5 million, just over NZD 100 million less than the previous year. This was very much driven by the sudden and dramatic reduction in the a2 Milk Company's forecasted demand, which we were informed of in December 2020. This meant a sudden drop in manufacture of infant formula as we adjusted inventory levels to the new requirements. The so-called bullwhip effect, as you can see on the graph there. COVID-19, until that time, hadn't affected us badly, actually.
In fact, in June and July of 2020, we were in full production because of the initial sort of pantry filling that happened during the first wave internationally. After the reforecast, all our spray dryers were switched to or had to be switched to ingredient manufacture, which also brought its own difficulties and challenges. The risk of being over-reliant on one product, one customer, and one market was well recognized, and we mentioned that in every annual report for the last four or five years. Of course, we already started to diversify both within the Nutritionals category and outside the Nutritionals category, Pokeno for more infant formula capacity and for our new multinational customer. Also under Cheese and FMCG with the acquisitions of Dairyworks and Talbot Forest Cheese, and also into fresh milk, consumer milk and UHT.
However, these projects weren't sufficiently embedded in the company to protect us from the a2 impact. Of course, the switch to ingredients meant another 40,000 tons of production, which was unexpected and, in a tight market situation, was difficult to place at the usual sorts of premiums that we earn with established customers. We didn't wanna hold on to inventory while we established new customers in a low earnings environment and put further pressure on our balance sheet ratios. This was also at a time where there were other headwinds, including a butter differential to AMF, where butter was returning a higher price, which went against us, and a Forex, a foreign exchange situation, which was foregone, which was also costly. I'm happy to say today that both those issues have reversed in the current year.
Fortuitously, we conducted a NZD 200 million capital raise in November 2020, recognizing the need for financial prudence as COVID was ravaging the world, but not realizing the impact it would soon have on us. To reset, during the last quarter of FY 2021, we carried out a comprehensive analysis of our performance and developed a plan to rebuild. We concluded five key things. Firstly, our strategy remained valid, but execution of it needed to improve. Secondly, we have realigned our structure to suit that strategy, which resulted in, unfortunately, a significant number of redundancies and a new matrix structure, which John will talk through soon, into four profit centers, Ingredients, Nutritionals, Beverages and Cream, and Consumer Foods. We have reset our banking arrangements, as previously announced a few months ago.
Fourthly, we've refocused on inventory and working capital management. The sudden increase in ingredient manufacturing plus the global logistics challenge saw us carry inventories into the current year, which we are now clearing. These inventories are about the same dollar value as the previous year, but the composition is much less infant formula-related stocks and much more ingredients. Clearing these ingredients will drive significant cash flow into the current financial year and is a key factor in reducing debt this year. Fifthly, we've developed a plan to return to strong profitability over FY 2022 and 2023. In summary, we were hit with multiple impacts precipitated by the a2 reduction. The resizing of inventory requirements essentially resulted in a complete stop for our canning operations as we shifted to ingredients which then had to be sold to new customers.
There were other weaknesses exposed in terms of our speed of execution on new investments. All in all, a difficult year, but one we expect to recover from this year and the following year. With that as context for our FY 2021 performance, I'll now hand over to Rob Stowell, who will provide a more detailed overview of the numbers. Just before that, I'd like to mention that we appointed Rob to the CFO position in a permanent capacity. Rob has been with Synlait since our early formation years. He stepped up at short notice in May for the interim CFO role and has done a great job in difficult times. The board was more than happy to confirm him into the permanent role last month. Rob, over to you.
Look, thanks, Graeme, and good afternoon, everyone. Following on from Graeme's comments, look, I'm thrilled to be in the role, excited by the challenge of the business turnaround. It has been an intense first six months, but rewarding all the same. Look, as mentioned quite a few times now, FY 2021 was tremendously disappointing for us. The root cause being the sudden decline in a2 Infant Formula demand, which was explained perfectly by Graeme. Let's recap the key financial metrics. Revenue hit NZD 1.4 billion, so it's NZD 65 million up, and this should be seen as a positive. Underlying earnings will increase off the back of this, and we'll see another big step up in revenue this year. NPAT loss of NZD 28.5 million was NZD 103 million down on the previous year.
As mentioned, this was mainly driven by the a2 volume downgrade on the business and subsequent impacts on the business as well. However, to a lesser extent, there were other issues holding our performance back. Notably, our ingredients and sales performance was well below what we'd achieved in previous years. The Dairyworks and Talbot Forest businesses had hit challenges, particularly in Q4 as well. Our management of costs, headcount, and inventory had become suboptimal, especially in the context of the reduction in the infant demand. Despite all this, we continued to show commitment to our farmers and paid a robust average milk price of NZD 7.82, including premiums of NZD 0.27. This was the second highest milk price in our history. Pleasingly for farmers, this upward trend is set to continue this season.
Our cash flow performance was down on previous years, mainly due to our sales volume performance and inventory overhang at the end of the year. We ended the year with NZD 479 million in net debt. This was clearly too high when compared to our earnings and would have been even higher had we not raised NZD 200 million in capital earlier in the year. To manage this, we renegotiated our banking arrangements in July and now have a really good funding package for the next two years, which time our debt will be expected to be at much lower levels. We'd like to thank both the ANZ and BNZ for their unwavering support through this time. If we flip to Slide 12. As previously mentioned by Graeme, John and I conducted a comprehensive review of the business in June.
Actions were put in place at the start of this financial year to improve performance. While the key impact in FY 2021 was the infant formula decline, the review exposed a number of other areas of underperformance, which gave us confidence we could turn things around relatively quickly in FY 2022. Ultimately, the aim was to increase profit, reduce debt, and both outcomes alongside good strategy should see our share price recover. Listed below, on the slide, you can see there's quite a list of initiatives we reviewed from ingredients business to capital projects. John will talk to some of these shortly as part of his strategy piece. However, I must mention what is really pleasing from my perspective is that a lot of effort has gone into these reviews. They're now complete. They've been adopted by management and are progressing really well.
A good example is the people restructure work we did. This was completed in August and September, implemented in October. This was a key workstream executed to both save on costs, some NZD 12 million on a full year basis, and set a great platform up for success going forward. With all that, I'll hand over to John to give you more insights on our strategy. Thanks for tuning in.
Thanks very much, Rob. Just before you hand over to John, most of you know that John is a founder of the company and was the original CEO until September 2018 when he handed over to Leon Clement. With Leon's resignation and departure, John stepped back into the role on an interim basis in May this year. John has led the refocus and restructure that Rob just talked about of the company since then. John.
Thanks, Graeme. Look, thanks and congratulations to Rob. I'd like to reiterate how well-deserved Rob's position, you know, appointment to the position was. None of us should underestimate the amount of work that Rob has put in over the first six months. I would say seldom has a CFO pulled more hours than Rob has in that period. He has made a you know, very strong contribution to getting us back to where we are today, a position that we feel much more comfortable talking about. I'm not gonna go over again the past year or the reasons that we got to where we did. Instead, I'd like to focus us forward from this point. When we did the deep dive, of course, we asked the question: Is our strategy right?
Have we got the broad strategic overview or plan right for the coming years? I'm pleased to say that if anything, the events, as Graeme mentioned, of the last 12 months have done nothing more than reaffirm the view that we need to build a broad
base of our business in this dairy company, which has the unique opportunity of starting afresh in a very important industry to our country, where we do get to choose the markets that we play in, the products that we produce, the customers that we work with. Because actually, while we have an ambition and are well underway, as you'll see in a moment, toward building a business worth NZD 2 billion worth of revenue, we'll be doing that with less than 5% of the milk produced in the industry. We have a lot of choices to make, and we can focus those choices on the highest returning opportunities that our industry has. Our strategy on a page remains, firstly grounded in our purpose, and that is to be doing milk differently. That's where our heart is.
We want to be producing dairy nutrition for the world in a way that is good for the world. Our goals, if you like, or where our head is getting to that NZD 2 billion worth of revenue. We remain a growth company. We see significant opportunities for growth, but perhaps differently from where we've been in the past. This time it doesn't need the deployment of large amounts of new capital. We've been through that phase. This phase of growth is about filling up those plants and making sure that we transition from low returning products to higher returning products, and that we systematically do that over time. We want to do that in a way that is positive for the planet, positive for communities.
Our workforce are very committed to that being the way that we are both here, but also in the way that we partner with our farmers and partner with our customers. We wanna do that with zero injuries, zero defects, and zero losses. Do it in a very high-quality way where we can be very proud of the products and the way that we produce them. Perhaps where we are moving is how we apply the strategy. We have identified for some time that we need to move away from too much reliance on a single customer in a single market, and actually too much reliance on a single country being China. We've got clearer about the four areas of business that we are going to be continuing to develop.
The first being ingredients. That's our whole milk powder, skim milk powder business. The second being Nutritionals, which is at the core of our economic engine, if you like, at the moment. Has become a very important part of our business, where we make infant formula products and ingredients for other infant formula customers. A new area of business being dairy beverages and cream that you'll, or in a few minutes I'll talk about how we're developing. Then our consumer foods business, which we both purchased as, acquired through the acquisition of Dairyworks a little more than 12 months ago, but also that we're building out as we move into the fresh milk market in New Zealand to complement the very strong position that Dairyworks has in cheese and butter in the New Zealand market.
We wanna do that, as I've said, in a way that is net positive for the planet, results in a healthier Synlait, and is good for our people here and builds world-class value chains. Recognizing that while we're here in New Zealand, our consumers are almost always out in the world other than those who we serve in the domestic market, of course. If we go to the next slide, I think it's fair to say that one of the most important things we learned through the discovery phase, that Rob mentioned, was that we hadn't done a good job of aligning our structure to our strategy and ensuring there was good accountability back for delivery of various areas of that strategy to key people at a senior level in the organization.
Made sure that we had systems and processes that made what we were trying to achieve very clear and how we were measuring that success clear. The sorts of things that you would see in a high-performing management structure within a business of this scale. In this page is a, I'm not gonna go into the detail of it, but as we've moved to a matrix structure. A structure where people are working together in cross-functional teams, clearly aligned to the business outcomes that we need in those four areas of business that I just outlined. In Ingredients, in Nutritionals, in Dairy Beverages and Cream, and in our Retail Business. Now, we're really pleased to have appointed Grant as our CEO incoming, and Grant will say a few. He's online.
He will say a few words to us in a moment. Now, we're pleased for two reasons. One is that he brings deep technical expertise in some of the newer areas of our business, some of the areas that we need to develop out in the coming years for our strategy to be successful. Also, he has a track record in making these complex management structures work well. He himself had a very senior role in Fonterra, where he was the global lead of their foodservice business, needing to work across multiple teams who didn't report directly to him, whether they were in country teams, in market, or whether they were manufacturing teams here in New Zealand.
Yet he showed the ability to build a very large, very impressive, and very profitable business as he worked with that large group of people and led them towards success, and that's what we absolutely believe he'll be able to do as he works with our team, and we're greatly looking forward to him coming on board and helping us find success into the future. I'm now very briefly going to just give you an overview of each of these areas and how we're thinking about them. Our ingredients business is our longest standing business. This is where we made our start, in skim milk powder, whole milk powder, and AMF. Again, we're a very small part of a large industry, and therefore have opportunity to choose our markets and our customers and how we work with those.
We have separated this business out from our Nutritionals business, and we'll be becoming much more focused on keeping it simple, keeping focused on those few key things we can do to add value. Very importantly in this part of the business, maintaining cost structures that are competitive with those who are also supplying into this market. You'll see us prioritizing sales strategies to build long-term relationships with some of the world's best customers. Fortunately, that's been a journey for many years, and we continue to find opportunities to serve those customers better and better.
While still maintaining enough spot business so that we can take advantage of the product mix differentials that exist, while not entering into speculative risk, as we develop that business. Our Nutritionals business on the next slide is, as I said, the heart of our economic engine at the moment. We have built a big and very capable team who are, I think, some of the best in the world in terms of manufacturing high-quality nutritionals, nutritional products. These are products for infants and adults, where we're blending many ingredients with dairy, and at times not including dairy, to provide high-value consumer products to our partner companies, to our partner customers.
In this business, we are looking to really rebuild in the next few years and take advantage of that capacity and capability that we have in the business. We do expect to see some recovery in our core, in our key customer, the a2 business. However, with their purchase of MVM and with the market changing significantly in recent years, we're not expecting large increases in their production. Rather, we're putting our efforts into ensuring that we develop new customers. At Pokeno, we are well down the track with delivering adult nutritional products actually made from plant-based materials to one of the world's leading multinationals.
I said before that I see the team as being truly world-class, and one of the best measures of that is the fact that we've been able to sign up this customer and develop the relationship the way that we are. I have no doubt that as long as we serve them well, they will become one of, if not our most important customer in the years to come. We'll look back on the start of this relationship as being an extremely important relationship to have established at this time for that very high-quality Pokeno site. We're also seeing the reemergence of demand from China as their infant and nutritional companies are getting a larger and larger share of what is the most important market in the world.
We're seeing demand come for base powders, and we would like to think that will result in some further demand in that, for those base powders. We're working on opportunities at the moment that we would hope will come to fruition in the next 12 months. Finally, in this area of our business, our lactoferrin business, we have a unique proprietary process for manufacturing our lactoferrin that is recognized as extremely high quality. We have grown volumes, and it is a strong contributor to our earnings even through the last 12 months, and we expect it to continue to be. While there is lactoferrin capacity being built in and around the world, we're not concerned about that.
Because if we look at the reformulations that are happening right now for Chinese infant formula products, we see very strong demand growth coming for lactoferrin as people include it at higher and higher rates in the leading infant formula brands sold into that particular market. Dairy beverages and cream is a new area of business for us, but exciting. In this area of business, it's based on high-value consumer products packed here on site. Now there's two parts to it. The first is liquid products into the domestic market and fits in alongside what we have in Dairyworks with a very strong position in butter and cheese.
We're thinking our way through how do we make sure that we bring products, bring white milk products, fresh milk products to the market, but in ways that don't just copy everybody else, in ways that create additional value and serve the market in new ways. You might have seen our Swappa bottles, which we're trying in the market at the moment, while at the same time planning to roll out at scale as quickly as possible as we learn how to execute those products. We do see, however, over time, that there will be an ongoing move in the Chinese market in particular to products, consumer products that have been packed at source, not in market.
Particularly at the high end of that market, we are exploring several opportunities both with partners and on our own account to move products into those markets, including a cream product which is long life whipping cream and culinary creams, which we would expect to have in the market inside this financial year. Taking advantage of the tariff, the large tariff reduction that's gonna be made available to product imported from New Zealand from January in the coming year. Finally, our consumer foods business, which is Dairyworks. About 60% of the table cheese that is sold through retail outlets in New Zealand comes out of that repackaging facility that we have acquired as part of Dairyworks.
We're number one in cheese, we're number two in butter, and if we can build out some of the other categories, we believe that we've got a plan in place to grow to become the second largest player in the New Zealand domestic market. Beyond that, there are opportunities we see to use some of the skills and networks that Synlait has to help Dairyworks become an export-oriented company, again, with some of those consumer products. They're making inroads into the Australian market at the moment, and we are pursuing opportunities to move products into the Chinese market as well. Of course, the same cost control measures and operational efficiency focus that we've had here at Synlait in the last six months has been rolled out at Dairyworks.
Look, I'd like to congratulate Tim Carter, who's the CEO there, for the gains that he's been making. Longer term, we have an opportunity to begin manufacturing our own cheese for that plant. While the purchase of Talbot Forest Cheese has been somewhat of a disappointment, and at the moment we're not operating that plant as we make some changes to recover whey and provide a pathway to manufacturing cheese profitably at that site, after some investments that we make here, that will give us an integrated cheese to consumer pipeline. Probably not for all of the volume that we manufacture and sell at Dairyworks, but for the heart of the volume. That will take some time to bring that about.
Finally, before I hand back to Graeme, let me go to our guidance. As Graeme said at the outset, we're not changing our view on guidance. We did say at the announcement of our year-end results back in September that we expect to return to robust profitability in the FY 2022 year, and that'll be based on, one, our ingredients business returning to normal trading conditions. Graeme talked about a little bit of that. The butter AMF differential is not as we saw in the past. FX conditions remain strong, and the product mix options in the market are favorable to us at the moment and we're being able to capitalize on some of that.
We will see improved base powder volumes flowing through the business as we return to a more normal manufacturing profile, having worked through a large amount of inventory in the first half of this year and last year, and late last year. We see growing contributions from some of those new areas of the business that will also contribute. On top of the RPD sale and leaseback, and cost savings through the business, we are well on track not only to get to the profitability numbers that we expect, but also to get the balance sheet and net debt numbers to more acceptable levels. Although I do note that we see this as a two-year journey to being back to where we were, rather than a one-year journey.
Just before I finish at this point, I would like to acknowledge the work that your directors have put in over the last 12 months. When things get tough, that's when everybody goes to work. We have been very well served by directors who have never stood back from the challenges that are in front of us and the work that is required to work through them in a robust way and get to the best decisions that we possibly can. I thank them for that. I also acknowledge the work that the senior management team has put in here. We've been through some really difficult change, particularly in the last six months.
They have leaned in, they have worked hard and they've found time to enjoy it every now and again as well, even though it's been tough going at times. I thank them for that, and I look forward to continuing to serve you into the fu ture. Graeme.
All right. Thanks very much for that comprehensive comments there, John. We'll go to question time. Questions on anything that John or Rob or myself have said. The first question, just hoping the technology works here, which is well proven and does. The first question is, I think John's already covered in his comments, is about Talbot Forest. Why did we buy it in the first place? Why is it not operating at the moment, and what's the future? I think you pretty much covered it there, John, but have you got any further comments to make on it?
Look, I think it's fair to say that we did get a few things wrong when we did the analysis and made that decision to buy. It's taken us longer to get to a solution to recover the whey, and that's a really important part of running a cheese operation efficiently and profitably, is making sure that all the milk components that go to the manufacturing site are used, particularly with something as valuable as whey. We didn't get that quite right. We have decided that the best thing to do is to actually stop manufacturing there until we get that solved, but are confident of doing so and have a plan in place to do that. In summary, we got that a bit wrong. We didn't act fast enough, but we have working towards a solution.
Okay. It takes a little while while you type in the questions for them to come through. I'm not seeing any others at the moment, but we'll just wait. You can if you type a question and when we've moved on, we'll come back to the question. We'll still see it here. I think there is a fifth question coming through, but I can't see it.
Gee, I think I can see a question there, Graeme.
Oh, okay. You can get it before me.
[crosstalk] Can you see that one?
No,
Let me
[crosstalk] Oh, yeah. There we go. Yep.
You've got it? Good.
Could shareholders be watchful of the farmgate milk price and what are its effects on company profitability?" It's pretty much. I'll get John again to or Rob to comment, but it's pretty much a pass-through. Obviously, when the prices move rapidly, there's a risk that we'll be too fast into the market, too early or too late. That definitely affects profitability. When prices are high or prices are low, you know, we pretty much calculate the milk price and pass that through. John or Rob, do you wanna add anything to that?
I think that's a good description, Graeme.
Right. My computer's obviously a bit slower than others. Can anybody see any other question, "Supplying milk to Foodstuffs has been making a loss. What is being done to correct this? When can we expect it to become profitable?" Making a loss, Rob, I wouldn't say it was making a loss. You wanna comment on that?
Look.
Let me.
No, you go, John.
Look, the key issue there is that we've invested in a lot of plant and equipment, and we have a plan. We invested with a plan to fill that in over time. At this stage, that's the only contract we have in place, and so it's carrying a whole lot of overheads and so forth on a plant that is effectively less than half full. There, there's two lines there. There's a pasteurized milk line which the products for goom, which the Foodstuffs come off. There's quite a lot more capacity. We're building that out at the moment.
We have a Dairyworks milk in the market that's going out through. In your local café, you might see some Dairyworks milk in the fridge, which is going out through a distributor that we're working with. We're looking to roll that out nationally. That'll build volume. As volumes build, we'll get back closer to the business case for those products. You'll see, as the overheads are shared over a larger volume of milk, you'll see profitability come into it. More importantly in that facility is filling up, so what we call the Sidel line. The line that is export-oriented and long life PET format. We have a whole range of products that we're working on there. One of them is the export cream product.
There are other customers, we were looking at, packing consumer products for them. As we get volume on those lines, you'll see. We're confident that we'll bring that to be a profitable and important part of the business, potentially even at higher margins that we make from our milk powder business at the moment.
Thanks, John. Dennis has asked my favorite question, which is, "When will the company start to pay a dividend? Because clearly capital growth is not something investors can rely on." Thank you, Dennis. Synlait since inception has been a growth company. I mean, we've always had ideas, you know, rather than a yield company. You know, we're not established in churning out yield and paying dividends yet. Not to say that that day won't come.
Actually, if you look back in our cash accounts, you'll see that we churn a lot of, you know, cash. It's a cash engine. Even this year with this, you know, what is a massive and disappointing loss, which has been inflicted on us to a fair extent. Although, you know, we're putting our hand up to the issues inside the company, there could've been some things that could have been done better. We do, you know, even this year, we're reporting on making a loss, but still an operating profit. It's not out of the question. We've pretty much come to the end of our cycle of capital investment. We're now executing against that. We're filling those plants. We're getting the best profitability we can out of them.
That'll bring us back into that strong cash generating situation again. The board will be looking at, have we got new and advanced proposals that'll get good return on investment for shareholders? Or will we start returning some of that cash back to shareholders? That'll be a decision that's made in the future. Rob or John, do you wanna add anything to that? No? Right. "Can you explain exactly what the plant-based initiatives are?" Plant-based, John mentioned that our new multinational customer that's coming on stream at Pokeno will be predominantly plant-based. The raw ingredients that go into those products is quite complex and well-established products, internationally known. They're predominantly plant-based, so they're made from plant materials rather than from bovine milk. That's what we mean by that.
Hope that covers that question. Is the instability COVID-19 is creating globally helping or hindering Synlait? Well, like we said, at first it was pantry stocking, and we didn't think that was a help. We thought that was a blip in the flow, in the logistics. What we didn't see coming but was now obvious is the, you know, the big interruption to our key customer, a2 Milk's, you know, international trading situation using, to some extent, daigou, which is Chinese students in Australia and New Zealand. You know, so that certainly was, you know, a big disruption to our business.
However, as John and Rob to some extent have covered, you know, we're responding in a multitude of ways and other businesses and diversification that will insulate us to some degree from the COVID environment. Obviously it's still a risk. It's a risk to all companies, and it's a risk to us. We're making food, we're making added value food, you know, nutritional foods, and so there'll always be a demand for that if people can afford it. You wanna add anything to that, John or Rob?
No, I think that's very fair. It's changing the shape of the business as it's changing the shape of the world. I think that's. We're trying to respond as quickly as we can. Clearly it's had a very big impact on demand for infant formula because people aren't having babies through this. You know, birth rates have fallen right away, and when you're in the infant formula game, that's not a good thing. On the other hand, we're seeing very strong demand growing for lactoferrin, the product that can give immunity properties to the consumer. We're seeing infant formulas being formulated with a lot more lactoferrin in them, probably in response to the global pandemic.
The products that we are going to be manufacturing on the Pokeno line, these plant-based products that Graeme was explaining before, are consumed by older people. They're often consumed by ill people. We're seeing very fast growth and demand for those products, double-digit growth in what has been well-established large brands. That's really good for us. Product flows. We're talking about the negative impact of product flow around the world. There are some markets that are much more expensive for us to get to at the moment because of shipping problems.
However, there are opportunities opening up in the market where some of our global competitors have been selling into strongly and now cannot or can't access those markets or the shipping costs of those competitors, those international competitors reaching those markets is much higher, and that's giving us opportunities. When these big things happen, there's always negatives which we tend to focus on, but we've gotta be just as mindful of the opportunities and be quick to take them.
Thanks, John. I'll throw this one to you too, John. Swappa Bottle, how's it going so far, and what's been the customer feedback?
Look, it's a very early start. We're trying it in a few supermarkets in Christchurch. We have been genuinely surprised pleasantly with both the demand in those stores and the interest beyond those stores. It's fair to say the team's accelerating the rollout plans and figuring out how to make sure that we meet the demand that's coming. You know, we're watching competitive response. It may well be one of those things that you get in, and we're changing, and other people will be quick to follow. We need to make sure that we take advantage of the early, you know, of that early start and get it out there.
What I can suggest is that anyone near the store should be buying it, and moving right away from your plastic bottles, only using stainless steel ones whenever you get access to it. Make sure you take them back. That's the whole point, is making sure we recycle and a very robust, high quality container with fantastic milk in it, worth every penny.
Thanks, John. Never miss a marketing opportunity. Next questioner is very excited about us going into plant-based products, which we did announce earlier on. Does the CapEx allow for further contracts or, you know, is it fully allocated? We do expect that this is a large, you know, customer that we're just finishing the build for now, and we do expect them to utilize the capacity over time, but in the first few years, there will be capacity for, you know, new contracts and new customers in that area. Do you want to add anything to that, Rob or John?
No, I think that's fair, Graeme. So it's a big installation. There's a lot of product. We do see that customer filling it reasonably quickly over time. But we're learning a lot. It's, you know, we're learning a huge amount internally. We're building capability in this area, and I agree with whoever asked the question. I think it's, you know, transferring our skills out of dairy into nutritionals, which we've done over the last 10 years, and now into plant-based products, we think is important.
Yeah. This is a bit more of a high-level question. Are you concerned about fermentation alternatives? Fungi can be used to create a liquid with similar properties to animal milk or to make animal-free ice creams or cream cheeses. Yes. You know, we're we watch the trends and we're participating in the trends and to some extent, we're creating the trends, you know. As I said, we're already you know into you know some existing plant-based products, and we're looking at further alternatives. We are doing milk differently for a healthier world. That is us. Where customers wanna go, that's where we'll be going and to some extent leading customers. But obviously, at the moment, we are very strongly a bovine milk-based company. Do you want to add anything to that, John, or?
No, other than to say we need to focus on the advantages that New Zealand has. You know, we do produce milk with a much lower carbon footprint than many other large dairy industries around the world. As Graeme said, you know, we need to stay with changes. The bugs that, you know, the companies coming along producing products out of fermentation, they don't get it for free. They have to feed them an awful lot of sugar, and that sugar has to be grown somewhere, too. They like to be a bit quiet about that bit of it.
Yeah. Next question is, will we ever know who the large international customer is? Yes, you will. Because once we start manufacturing, it's gonna have it all over the labels. We'll be... That particular customer is a very well-known customer, large multinational that many, many, many people will have heard of. Not exactly sure why they're a bit shy at the moment, but anyway, that is the case, and we respect that. Yes, that'll become obvious in due course. Anything to add there? Right. I think, unless my computer's, I can't see any further questions at the moment. We've given that a good bash, but keep writing in the questions because we'll do general business at the end and have another go if necessary.
With that, we might thank you for all of that. We might move on to the next part of the meeting, which is the formal resolutions. What I'll do is, three out of the four resolutions are devoted to changes in the board and/or changes and confirmation. I'll just put some context to that first, and then we'll go into the actual voting. You can vote at any time, and you can change your vote at any time. Firstly, I announced in 2018 that I would stand down as the Chair this year after I think something like 17 years in the role.
This allows for new talent, but at the same time, the board has asked me to stay on as an advisor for one year, which I'm more than happy to do. I'll step down when Grant Watson starts as the new CEO, which is around about the twenty-fourth of January. Our new Chair will be John Penno. Unfortunately, the timing doesn't quite fit with the annual meeting, so I'm having to stand again for re-election just to be a director until Grant starts in January. John is ideally placed to be our new Chair as we go through the recovery phase, as you've heard, and to assist directly in bedding in the new CEO.
However, our constitution requires that the board chair is an independent director, which John, by way of being the current interim CEO, is not by way of the definition. So therefore, there's a need for a temporary change to the constitution, and that's all explained in the notice of meeting. We do see independence as best practice, and therefore, John's tenure will be for a relatively short one or two-year period until a longer-term replacement is identified. So filling my place as a new independent director will be Paul McGilvary, who I will introduce in a couple of minutes and ask to say a few words.
In summary, for the next period, we're structuring the board as such that we retain the experience of John and myself while we bring on the new skills of Grant and Paul, alongside the rest of the board. In 2022, your board will have three strong independents in Simon Robertson, who's an experienced director and former listed company executive and the Chair of Synlait's Audit and Risk Committee. Sam Knowles, who's also a very experienced director and Chair of Synlait's People, Environment and Governance Committee. Paul McGilvary, who we'll just cover off in a little minute. This will be complemented by the Bright directors, being Ruth Richardson, a Bright appointee and the original non-executive director on the Synlait Board. Edward Yang, who's in charge of strategy at Bright Dairy, so a senior executive there.
Albert Lu, who's responsible for offshore investments at Bright Food Group, which is the corporate over and above Bright Dairy. Then Joyce, who you've met this afternoon, who's got a strong finance and audit background. Just to introduce Paul McGilvary to you, and I'll ask him to say a few words. Paul brings a strong sector experience to the table. He's had an international career in dairy. In fact, I've worked with him internationally before returning to New Zealand and becoming the CEO of HortResearch, which is now Crop and Food, and then as the CEO of Tatua, which is certainly the most successful dairy co-op in New Zealand. For the last six years, Paul has had a career in governance. Paul, would you like to say a few words?
Thank you very much, Graeme. I really appreciate this opportunity to join the Synlait Board. I'm very, very passionate about value-adding in dairy, believing New Zealand has to focus on providing nutrition to the wealthier and more discerning customers of the world. We simply can't feed everybody, and therefore, we must use our unique position to provide more functional, better returning products that are valued by the most sophisticated customers and consumers. This includes provenance and sustainability, which have been referred to earlier in the presentation, and these underpin the New Zealand supply story, and Synlait has really embraced this wholeheartedly. I ran the food ingredients business for Fonterra in Australia and Europe for more than 10 years, including advanced blended powders and functional fats. I was the CEO of Tatua Dairy Company for nine years.
Tatua perhaps epitomizes a value add company with its range of sophisticated products and optimized operations, delivering superior returns for shareholders year after year. During my tenure at Tatua, we completed a new foods plant to produce high value creams for consumer and foodservice applications. We constructed a highly specialized third dryer for sophisticated protein products such as hydrolysates for infant formula and adult nutrition. We invested heavily in systems to ensure our environmental impact was negligible. Tatua is also well known for its very deep customer orientation. Currently, I'm the deputy chairman of Australia and New Zealand's largest food testing and inspection organization, AsureQuality. I am chairman of the People and Culture Committee for this organization and a director of Dairy Agritech company, Waikato Milking Systems.
I believe this background and skill set will enable me to support and guide the further development of Synlait as we focus hard on the needs of our core customers, while diversifying further our products and markets to rebuild the performance of the company. I assure you, I will bring passion and energy to the board and a high degree of cooperation with management, shareholders, and other directors, including a relentless focus on customer and company performance. Thank you again. I'm very excited and appreciative of this opportunity.
Great. Thanks very much, Paul. That's great. Finally, I wanted to touch on the experience and background of our new CEO, Grant. Grant has most recently been the CEO of Miraka Dairy Company. Before that, he was at Fonterra for 10 years, where he had various roles, including heading up the global foodservice division, but also worked in Fonterra brands and was the Managing Director of Tip Top before its sale. Prior to that, Grant worked for McDonald's for 17 years, becoming Chief Operating Officer for New Zealand. John's already commented to some degree as well. He brings a wealth of dairy experience, plus a proven track record of success in materially transforming businesses and achieving sustainable results. Grant, you're online. Would you like to say a few words to the shareholders as well?
Thank you, Graeme. [Non-English content] Good afternoon. To briefly touch on my career path, as Graeme mentioned, I started with McDonald's at the age of 16, part-time on French fries. During that 17 years, I worked my way up through their corporate organization to Chief Operating Officer. I think for me it was a great opportunity to work for one of the most disciplined business models in the world, ranging from consumer insights, supply chain, and financial disciplines. I then spent 10 years with Fonterra. Initially brought into Fonterra to help turn around their Anchor Milk business in New Zealand and ran their foodservice business as well.
Went on, as Graeme mentioned, to run the Tip Top ice cream business. For the last five years, headed up one of the three global divisions of Fonterra, being the global foodservice division. We took that business over a five-year period from NZD 1.4 billion to NZD 2.8 billion. If I reflect on what drove the performance of that foodservice business, it was very much around having a very focused strategy, having the right capability and right structure to support that strategy, and developing a very high performance culture across the organization. The other, and potentially the most important part of that journey was just a relentless focus on execution.
More recently, I've headed up the Miraka dairy business based in Taupō. The focus there very much literally from strategy all the way through to execution to really lift up the financial performance of Miraka. What really attracts me to Synlait, it's a business that has an amazing track record when it comes to sustainability and innovation. As both John and Graeme have mentioned, it's got fantastic capabilities today, especially with its people and with its factory capability. It's just so well-positioned to deliver strong value in the years ahead, whether that be the consumer business, Dairyworks, the potential that exists with foodservice, and certainly its very, very strong position today with nutritionals.
The other area that I see as being a huge opportunity, again, it's been touched on, is in the area of operational excellence, whether it be around filling the capacity of the plants today through to ensuring that we deliver against world-class benchmarks. For me, really looking forward to joining the team and getting on board effective the 24th of January next year.
All right. We're looking forward to you joining us as well, Grant. There is a question, but I think you've answered it. Says, "What was the primary motivator that motivated you to join the Synlait team? And what do you think Synlait does better than its peers?" I think you just covered that, unless there was anything else you wanted to add. We'll call that.
[crosstalk] Great. Thanks very much, Grant. I hope I haven't confused everybody in the sort of intro to the resolutions, but we'll find out when we go to the resolutions. Which we'll do right now. Resolution one is not to do with the board, but is reasonably straightforward, is to appoint PwC, PricewaterhouseCoopers, as Synlait's auditor, and that the board be authorized to determine the auditor's fees and expenses for the FY 2022 financial year. This is a change in auditor from Deloitte, who have been the auditor for many years. It's good practice to change the auditor every now and again, to rotate every few years.
Also, there's a rationale here in that Bright recently changed to PwC, and it is more convenient if both Bright and us use the same auditor, even if, you know, they're using PwC in China. It's also good to retender the opportunity now and again and make sure that the audit's correctly priced. Is there any questions on that proposal? If not, I would ask you to vote accordingly and hopefully support that resolution. I'm not seeing any questions. Right. We'll move on to the second resolution, which relates to me. I'll hand over to John to chair this bit.
All right. Thanks, Graeme. As Graeme outlined before, we're asking Graeme to go the extra mile and stand in the position of chair for or to be re-elected so he can remain chair through until when Grant starts. If the other resolutions are supported, that he would stand aside, and we would bring on Paul. Of course, constitutionally, that requires us to re-elect Graeme at this point. We'd like. I'm certainly comfortable recommending this to shareholders and ask you to vote on that resolution now. With that, Graeme, I'll hand back to you.
Okay. Look, just in terms of my reelection and all the other elections, you know, thanks very much to all my fellow shareholders and all Synlait staff, and all shareholders, obviously, you know, for your support. It's been extremely gratifying to be part of a company that's, you know, come from an idea to a billion-dollar company and soon to be a multi-billion-dollar company. You know, you don't get those opportunities very often. I am very grateful. It's more than a bit unfortunate that the last year of reporting is a loss. You know, the current year is going to be a robust profit. We're confident about that as we've guided. Yep, I do appreciate your support one last time. Thank you. Right.
Now we'll go to resolution three, which relates to the reelection of John Penno. John, although a board-appointed director, it's a New Zealand Stock Exchange listing rules that he has to go to shareholders every three years. That's three years ago since we elected him last time. John's obviously offering himself for reelection today. Just before asking John to say a few words, I'd like to thank him for stepping back into the CEO role in May at very short notice. Since stepping down in September 2018, John has obviously involved himself in a lot of new ventures and created startups himself, new ones that need his time and energy.
It was no easy decision for him to go back into what is essentially a full-time or more than a full-time role at Synlait, which is in difficult and challenging times. A genuine and sincere thank you, John, from all Synlait stakeholders for doing that. John, at this point, whether you wanna say any words to shareholders before we put that to the vote.
No, Graeme. Look, I appreciate that. You get to these moments, and there is, there's no choice really. You know, we are all deeply committed to the success of the business. It's been a privilege to get back involved and to work with the team, work with the board, and begin to reshape things for the future again. Very much looking forward to working with Grant. I do ask for shareholder support for this, not just for me to come on, but for the
You know, we will take this as if I am supported in this re-election, we'll take it as mandate to put the changes in place for me to come through to that Chair role, and to continue to work with Grant and the board and the staff to make sure that we bring the company back to a strong position financially and put the company in a position where it can move forward to take you know, to take up the potential that we all see for the business long term. Thanks for your words, Graeme, and I ask for people's support.
Thanks very much. If you could vote now on that, if you haven't already. If there are any questions, just keep firing them in as we go through these resolutions. I'm not seeing any questions, so I'll go on to resolution 4, which is a special resolution, which means that it requires 75% support of those that vote. The normal resolution is 50%. The proposed amendments here to the constitution, they're explained in the notice of meeting, but in summary, we propose one amendment to the constitution to enable the Chair of the Board to be either an independent director or the board-appointed director for a limited period up until the next annual meeting to be held towards the end of 2022. Currently, of course, the Chair can only be an independent director.
The resolution enables the board to appoint John Penno to the Chair role when Grant steps up and I step down. We do believe in an independent Chair, hence the change we propose automatically resets after one year. A search for the next Chair, the next permanent Chair after John will begin sometime early in 2022. We do have one advance question, and that's from Saul. Saul asks, basically, having the board appointed director to become the Chair, is this the way to go? Well, Saul, in this circumstance, it is the way to go. John's obviously been, you know, the author, as I've said, of the recovery. You know, led the recovery plan.
To have him as the Chair as Grant comes into the CEO role is, in this instance right now, the very best thing for Synlait in the opinion of the directors. Long term, it is listing, guidance, you know, for the listed companies and most other companies to have an independent chair. We will revert to that good practice. Right now, yes, as you put it is the way to go. Just see if there's any questions for that resolution. It doesn't appear to be so I'll invite you to vote on that as well, if you haven't already. Thank you very much. That really concludes the resolutions. The results will be published to the market later today and emailed to the shareholders reasonably soon. Process doesn't take too long.
Online voting will now close. I'll just take any further questions. Yes, we do have some further questions. Questions of any sort of general business are fine. We'll take another 5-10 minutes if they're there. I've heard that Synlait's lactoferrin is very high grade. You're well informed. Is that true? How is Synlait placed in comparison to other producers? Yes, that is true, and it is high grade. Maybe John, you'd like to comment on that.
Yeah. Look, when we designed the process, we designed it for two purposes. We saw that the current lactoferrin products on the market had opportunity to look after the bioactivity a little better. The second thing we saw opportunity for is for drying it in a different way. We spray dry our lactoferrin, and most lactoferrin is not spray dried, it's freeze dried. For inclusion in infant formula products, it makes it enables it to blend much more easily. They were two specific design criteria we had when we put our process together.
We were really pleased that in the last 12 months, completely unknown to us, there was a study done at UC Davis which compared lactoferrin from around the world, and they pitched the Synlait lactoferrin as most like human lactoferrin in a number of characteristics. They independently ranked it as we would interpret it as the best in the world. That was very pleasing. We certainly see very good demand from our customers. We sell to some of the world's most respected customers and buyers. It's a product we're very proud of.
Thanks, John. Doesn't appear to be any other questions. With that, I think I'm meant to pass it back to you again.
There's another slide to come up here, which is our final slide. As we've explained through the course of this meeting, we're entering into a transition phase where we're transitioning away from Graeme, assuming that you support the resolutions that we've put to you at this meeting. It's appropriate that we stop and mark the contribution that Graeme has made to this business over the 17 years that he's been involved with the Synlait company. I'd also like to pause, though, and point to the wider contribution that Graeme has made to the dairy industry. This marks, I guess, a drawing to a close of a period of a lifetime's commitment to the industry.
Before Graeme started with Synlait 17 years ago, he had already been CEO of Bay Milk, where he helped that company, that cooperative manufacturing company in the Bay of Plenty, recover from the earthquakes that had occurred and destroyed much of their plant in the years just before Graeme took the helm as CEO. He guided that company through to being probably one of the best respected dairy companies in New Zealand. They had an enviable customer base. Actually, one of the customers who we have talked about on this call were a key customer with Graeme and that company at that time. He then oversaw the merger of that company into New Zealand Dairy Group to form the largest dairy manufacturing cooperative in New Zealand's history as part of the dairy group.
He went overseas and served the New Zealand dairy industry from England, overseeing. I'm not quite sure of the role, Graeme. I can't remember the name of it, but basically in charge of sales for about a third of the dairy industry at that time through Europe and North Africa and the Middle East. He oversaw a very infamous moment in the industry's history, making sure our executives didn't go to jail for doing things with butter that they perhaps were pushing the limits on. He came back and became the Chief Executive of the New Zealand Dairy Group.
During that time, he's actually credited with being the person who started promoting the idea that all of the manufacturing cooperatives and the New Zealand Dairy Board should come together into a large company that served the interests of New Zealand farmers, in a company that would come together some years later and be called Fonterra. He served as CEO of New Zealand Dairy Group, which was at that time the largest cooperative and the company that he had merged or overseen the merger of Bay Milk into it. All of this was before Synlait, and he probably stood down from being CEO of that big company, thinking his time in dairy was done. Little did he know.
He joined us when we were dairy farming with ideas to manufacture products and build a manufacturing company here at Dunsandel. I think we might have bought the farm with ideas about where we were going to put it, but those ideas were in hindsight perhaps not fully formed. Graeme had an enormous influence on the way the plan came together, helping us make contacts with people in the industry who we needed to build an idea to a company. The photograph that's in front of you is Graeme in the digger turning the first sod. True Milne style, the digger that we had a ceremony, we turned the first sod with a spade, and Graeme said, "It's not a sod turning.
Give me the keys to this digger." Jumped in and took a great scoop out of the earth on the very site where I'm sitting now here at Dunsandel. Now, Graeme has had an unwavering commitment to the business and to its future and to its success, and it's been an unselfish one. He has never stood back from the time, commitment, or energy that the company's required. The calm persona that you saw throughout this meeting is exactly the persona that we have always had in every moment, whether it be good or bad. But below that is an absolutely formidable intelligence.
An intelligence that can take complex situations and sum them up quickly, see the right answer, and work alongside people who took a little longer to get to the right answer over time in a patient but determined way. Graeme, I owe you a debt of gratitude for the mentoring that you've given me over the years. The shareholders owe you a debt of gratitude, and everybody who you have worked with has or holds you in huge esteem. You are greatly respected, and it's absolutely deserved, and we thank you for the contribution that you've made. The mere fact that you're willing to continue to work with us through this difficult time is testament to the way that you've worked.
Look, if we were in the room, we would give you a standing ovation. It's a little hard to do that on Teams, but I'm sure that everybody wishes that we could. We wish you all the best. We wish you many, many happy years with Julie as you move forward through your next adventures. I'm not gonna call it retirement 'cause I don't know that you know what that means. We look forward to many years of friendship ahead. Thank you.
Well, thank you very, very much for those very kind words. Some of them might be stretching the truth a little bit, but, Thanks. I'll take it anyway. Yeah, I'm still a chairman of a company that's just recently bought two dairy farms in Canterbury, and they both supply Synlait. There you go. I'll still have a connection to the company. Thank you very much. That's very humbling. That actually concludes. There are no final questions, so that concludes all of the business for today. Thank you very, very much for your support, all the shareholders. It has been a trying time. During the year that we reported on, our share price halved, and we realized that.
We're very, very conscious of that, and we're doing everything we can, and I'm sure we'll be successful to reverse that and more. Look forward to the next period. Thank you very much, and the meeting is now closed.
Thanks, everybody.