Good afternoon, everybody, and thank you for joining us. I'm Hannah Lynch, Synlait's Head of Strategy and Corporate Affairs. Before our Chair, George Adams, formally opens today's annual meeting, like our normal practice, I'll cover off several housekeeping points. Today's meeting is being held online and here at our Dunsandel site. Here are several health and safety reminders for those of you who have joined us in person today. One, you completed a declaration on entry to our site. If you feel unwell at all during our visit, please let a member of our team know. Two, in the case of an emergency, the emergency exit doors are directly behind you. And three, a reminder that this is a non-smoking and vaping facility. I'll now explain how to vote and ask a question. There are three ordinary resolutions to vote on today. All resolutions will be conducted via poll.
To provide online attendees with enough time to vote, online voting is now open. If you are joining us online to vote, click on the Vote tab and select your preferred option. Once your vote has been cast, a tick will appear. A reminder that there is no Submit or Send button. Once you have selected an option, your selection is automatically recorded. For those of you here today in person, welcome. You should have received a white voting paper on arrival to Dunsandel. If you are a shareholder, a proxy holder, or corporate representative and you have not received a white voting card, please raise your hand. Computershare will, of course, act as scrutineers of today's results, and the results will be posted to the New Zealand and Australian stock exchanges before close of play today. For those of you attending the meeting online, welcome also.
Questions can be submitted at any time. To ask a question, click on the Q&A icon, type your question, and press Submit. Our team are monitoring questions and will ensure that they are addressed at the relevant part of the meeting. Please note that questions may be moderated, or if we receive multiple questions on one topic, amalgamated together. For shareholders in the room, if you have a question, raise your hand when asked, and one of our team will bring the microphone to you. Finally, if you have difficulty asking a question or voting online, please refer to the online voting card issued with the notice of meeting in the first instance. You can also use the Q&A function to, of course, message the Computershare team. Their phone number is also on screen and will be on screen during each of the resolutions.
With the housekeeping out of the way, I will now hand over to our Chair, George Adams, to formally open today's meeting.
Thanks very much, Hannah. Good afternoon, everyone. Thank you for joining us. My name is George Adams, and I am the independent chair of Synlait. So before we begin, I'd like to confirm that there will be no new announcements today. I am pleased to confirm that we have a quorum, and I declare Synlait's 2024 annual meeting open. Firstly, a summary of our agenda. I'll speak first, and then we'll hear from Tim Carter, our Acting Chief Executive, and we'll then move on to the formal business and vote on the three resolutions Hannah mentioned. Before I make a short presentation, I'd like to introduce you to the board. So we have our Bright Dairy appointed directors, Julia Zhu, Edward Yang, Tao Yang, and Leon Fung. And we have our independent directors, Paul McGilvary, on the end, and Paul Washer on this side. Excuse me.
Along with our Acting Chief Executive, Tim Carter. So now on to the formal business for today. I'll start off with my address. With two special shareholder meetings held in the last six months and an extremely challenging financial result published in September, everyone knows that the last financial year was unprecedented and certainly very challenging for Synlait. We began FY 2024 with too much manufacturing capacity on sustainably high debt levels combined with high interest rates. At a headline level, we ended FY 2024 reporting a loss of approximately NZD 182 million. And while this is extremely disappointing, to say the least, as the slide shows, our team delivered several activities which will lift performance and profitability. A quick recap. One, we delivered a much-needed balance sheet reset. Two, we settled our disputes with the a2 Milk Company, which were an enormous distraction for both companies.
Three, the North Island Strategic Review concluded. As part of this, we made the very tough decision to exit milk processing at Pokeno and focus on producing high-value-added Advanced Nutrition products at that site. However, we have been clear that while we are not actively seeking a buyer for Pokeno, in the event a compelling offer was received, obviously, we would consider it. Four, customer growth is gaining momentum. Key achievements in FY 2024 include our first full year of UHT whipping creams production, which launched into Southeast Asia and is readying for our new nutrition-based nutritional base powders also for the market. And finally, five, growing our secured milk supply is now a top priority. And you'll hear more of that shortly from Tim about initiatives underway in the space. These achievements mean we start FY 2025 with strong momentum, renewed energy, and reduced distractions.
FY 2024 was defined by conversations and actions regarding our balance sheet, with the reset activity a critical focus. The reset involved three key steps, the last of which concludes this month. The first step was delivered in July when you, our shareholders, approved a NZD 130 million loan from Bright Dairy. The second step was achieved in September when again you approved resolutions which delivered NZD 217.8 million in new equity to Synlait to repay bank debts and to repay our retail bonds. And finally, the third step, the bond redemption and repayment. At this stage, approximately NZD 169 million in early redemptions have been paid. The final NZD 11 million will be repaid to shareholders in the coming fortnight. Notably, the bonds cease trading today on the NZX, Wednesday, 4th of December. None of these actions would have been possible without your support and belief in Synlait.
So once again, thank you for the critical role you played in our balance sheet reset. Turning now to FY 2025. As a board, we know that the hard work is just beginning, and we are not taking our foot off the pedal. These are the six key areas we are focused on to ensure Synlait returns to sustainable profitability. One is growing secure milk supply. Synlait presents, we believe, an excellent value proposition to farmers with our best-in-class Lead with Pride program, attractive specialty milk premiums, and market-leading on-farm support standout features. We are also committed to paying a competitive milk price and advance rate offering, last month announcing an increase to our forecast base milk price to NZD 9.50 per kilogram of milk solids. The board is fully committed to supporting management's actions in this area, which, as I have noted, Tim will speak about.
Areas two and three, the strategic focus on our core B2B Advanced Nutrition and Food service businesses and the partners we support with world-class ingredients and products remains unchanged. We have strong partners in the a2 Milk Company, our North Island Advanced Nutrition customer, Nestlé and Danone in our ingredients businesses, for example. We must continue providing great customer service while accelerating volume growth and further optimizing our cost and operational performance. Activity such as being part of the China International Import Expo in Shanghai last month provided a critical opportunity for our team to gauge market response to new product opportunities. I'm personally very energized by product trials and customer conversations happening in this space. Areas four and five, as a board, we know attracting and retaining strong talent is essential, both with our next Chief Executive and across all of our leadership and technical roles.
We have commenced a global search for our next CEO and are working through this process. On behalf of the board and our full team, I want to acknowledge Grant Watson's tenure as Chief Executive. As you know, Grant led Synlait through an unprecedented period in our history. After an extremely busy and challenging period, Grant made the decision to step away from the CEO role. We hope he enjoys a well-deserved break. Tim, who I've already introduced you to, has joined us from Dairyworks as our acting Chief Executive. Returning Synlait's debt to even more sustainable levels remains a key focus. On the slide, our actions which management will deliver in this financial year to further reduce Synlait's debt, mainly via an uplift in operational performance and cash flows.
In addition to the one-off settlement payment from the a2 Milk Company, we are focused on further unlocking working capital through extensions to our receivables assignment program, smarter inventory management, and continued focus on operational efficiencies. Finally, in summary, I want to express my confidence in the progress being made to turn Synlait's performance around. This company has had more than a decade of growth and success, and it is on the right track to enjoy that once more. So that includes my address. I'll now ask our Acting Chief Executive, Tim Carter, to come to the stage and speak to his address. Thank you. Tim.
Good afternoon, everyone. It's great to be here speaking to you as Synlait's acting CEO. As I've said to many of our team and farmers over the last six weeks, I'm really encouraged by what I see at Synlait. We have some great opportunities in front of us. I will share my first impressions and areas of focus shortly, but firstly, a little bit about me. I'm no stranger to Synlait. I've been CEO of Dairyworks based in Christchurch for the last six years. I've been part of the Synlait's executive team for four of those years, and since Dairyworks was purchased in April 2020. This has given me the opportunity to observe and contribute to Synlait while growing and leading the fantastic business that Dairyworks has become.
It is now a real privilege to work more closely with our Synlait team and lead the broader Synlait group as we enter our next era. Our focus as a team is to build and create momentum within the Synlait business, within the business. Or simply put, get Synlait humming again. So how do we do that? On the slide are my first impressions. I've only been acting CEO for six weeks, but these impressions are informing where we are putting all of our energy. The first is all about execution. Execution drives performance, and we must be focused on delivery. We are clear on our immediate strategy and priorities, and all our internal activity must support this. This is critical to return us to profitability. The second, it's all about outcomes.
As a manufacturing company, it is important we have strong processes in place, especially as we produce food for the world's most vulnerable consumers, babies. But we need to make sure these processes support and do not hinder or slow down the outcomes that we really need to achieve. Delivering products on time, in spec, for our customers is vital and, again, critical for us returning to profitability. Three is data-driven decision-making. Having strong and reliable data to make decisions is critical for any business. So you can make decisions with speed and confidence. Having access to and the use of reliable data will continue to allow us to do this. Four, now I'm a sales guy, so I'm unashamedly focused on our customers. Strong relationships with our customers and having a deep understanding of their needs will ensure we return to a profitable future.
Five, our people are critical to our success. It is a privilege to lead our Synlait team. The talent and capability of our people really is fantastic. We must continue to empower them and develop them and build their capabilities. And finally, six, those who know me well will tell you I'm not one to sit or sit still or move slowly. From day one, I've shared with the team that now is the time to hustle. We must keep picking up the pace and building momentum. I am pleased to say the team is responding. I sense excitement about pushing the boundaries once again. Everyone, including you, our shareholders, want to be part of a profitable and growing team. With these first impressions as a backdrop, I also wanted to share management's focus areas, which naturally support the boards. One is continuing to grow a secured milk supply.
Put simply, without a secure milk supply, we just don't have a business. We know matching market rates is important, but it's not enough. Our milk supply team is underway with several interconnected work streams to increase our engagement with our farmers while speaking to new ones. These work streams focus on financial incentives, showcasing Synlait's market-leading on-farm support and new business development initiatives. Two is all about business performance. The team is looking across all aspects of our value chain and making changes to improve operational performance. The focus is plant reliability, supply chain, procurement, and, of course, cost structures. This is underpinned by ongoing focus on our customers and sales plans. This leads into our final focus, three, volume growth. Filling our plants is absolutely critical. We have world-class, highly specialized manufacturing sites.
We have the right technology, great people, and a strong B2B strategy that can further serve the largest middle-class market in the world in China and a growing middle class in Southeast Asia. Continuing to create and execute a strong go-to-market strategy for all our business units and Synlait's broader brand, which complements our manufacturing footprint, really is key. Finally, I'd like to share the refreshed sustainability strategy. FY 2024 marked the halfway point in Synlait's 10-year sustainability strategy. A lot has changed in the world since it was introduced in 2018. But ensuring we are still focused on the right goals is important. So FY 2024 saw our team lead a strategy refresh. I wanted to share this because it demonstrates the more targeted position and commercial approach we're taking as a business. Previously, we had approximately 100 commitments and key performance indicators.
Now we have six ambitions that span climate, nature, and well-being. FY 2024 was one of the most challenging times in Synlait's history. However, we still took steps forward in our sustainability journey. This is an achievement I think is well worth recognizing. It shows sustainability is now embedded in the way of working, and that's commercially smart. Global customers need to know Synlait is equipped to help them reach their net-zero goals. What's more, if we can inch closer to our ambition to be net positive for the planet during the challenges of the last financial year, there should be no doubt that we will get there in the future. As I conclude, I want to acknowledge your support. I'm really excited by what is ahead and the opportunities which we can step into. I look forward to meeting you all and spending time with you over the coming months.
Thank you. I'll hand back to George.
Thanks, Tim, who is absolutely doing an outstanding job since he started. So thank you for that. So I'm now happy to take any questions you might have on either the annual reports or anything you've heard today. So start in the room or online. If anyone has a question, please raise your hand and we'll thank you.
Alan McNaughton.
Hello, Alan.
In relation to keeping your current dairy farmers customers of yours, how are you going to do that? I mean, the news hasn't been good as a shareholder going on with the company. So how are you going to retain the people that keep the business going?
Yeah, that's a really good question. And probably a number of things. One is we've obviously increased our advanced rates. We've basically matched the market as far as payments are concerned. And then when we take, say, the average of roughly, I think, 24-ish cents that we pay over and above for a2 premiums and for Lead with Pride, I think we've got a very compelling story. The challenge last year was we were obviously well behind on the advanced rates. We've also announced, I think, activities around paying a bonus next year for anyone who doesn't have a cease notice in place as of the end of May. So that's that one. And there are a number of other activities which are just launching into. Actually, we've just been discussing it in the past couple of hours, actually, with Charles and the on-farm team.
So it's very much a focus of the business. We know it's absolutely critical to retain that going forward. So it'll be a combination of trying to make sure everyone understands the value that we deliver. Partly, it's also about making sure that we actually deliver a really good first half so that people can start to see that we're actually turning the business around and are delivering the results because you clearly want confidence in that. And then it's about also making sure that we have a financially compelling argument for our farmers to stay with us. So I think we're dealing with it.
How many have exited or have you?
Nobody else, I think, since we announced last year, obviously, that a substantial majority had exited. We haven't had any changes on that front. But look, I'm very pleased to say that we now have a cease notice withdrawal program, which is now being actively engaged with by a lot of our ceased farmers. And I can tell you that we've actually received our first cease withdrawal communications from farmers just this week. So fingers crossed, it's now starting to turn. Thank you. Anyone else in the room? Anything online, Hannah?
We've got quite a few questions online from a shareholder called Stephen. They're quite lengthy questions, so you'll just have to bear with me, Chair. Will the Chair commit to having a formal board discussion about pushing the Synlait remuneration report for a non-binding advisory vote at next year's annual meeting, complying with the legal system in Australia, saying we are dual-listed on the ASX, shouldn't we embrace Australian governance standards?
That's interesting. We've had some feedback from a number of our larger shareholders in relation to remuneration, and it's fair to say that that's a conversation which I've already started with the team here internally, so I'll certainly commit to having a very broad discussion on that matter over the coming months and to amending, if the outcome is to amend our disclosure materials specifically for next year to ensure that we do that, so that's certainly something that is on our agenda.
A second question from Stephen also relating to remuneration. It is very unusual for a public company to announce the resignation of a CEO effective immediately. But that's what we did with Grant Watson. Please advise which recruitment firm has been retained to assist with the search for a replacement and what the salary arrangements are for acting CEO Tim Carter during the period. Also, is Tim a candidate for the job permanently? And what sort of exit payment did Mr. Watson receive?
So one, I disagree with the positioning of the question. It's not unusual at all, actually, for CEOs to depart in that manner. Two, we have actually retained Korn Ferry to do the search. Three, I'm not getting into who is and who is not in that process, as that's a matter of privacy at this stage as far as they're concerned. But if Tim wishes to say he's put his hand up for it, that's up to Tim. I'd be very surprised if he hasn't. And in relation to anything else regarding Grant, if we have any disclosure requirements next year or the half year, we will make sure that they are fully disclosed.
Another question from Stephen, who's rightly noted that Fonterra has recently announced it's ending its dual-listing on the ASX to save money. Are you able to provide any color, Chair, on how much extra it costs to be dual-listed in Australia and New Zealand? And if we are considering delisting from one of those exchanges?
The answer I'll answer was in reverse. No, we have not considered delisting from New Zealand or Australia. Firstly, secondly, I think the additional listing costs in Australia are something like NZD 80,000-NZD 100,000 a year. So it's obviously a chunk of change, but it's not much in the scheme of things. And can I give you any color as to Fonterra's point of view? The answer to that is absolutely not. Fonterra, I'm afraid, makes their own decisions and very rarely calls me for advice as to what to do.
We've got a question from Terence as well online, which is just asking for an update on how much debt we still have.
Yeah, I mean, we have a facility which we disclosed as of the special meeting, the last one. So our facility today is NZD 450 million. And we have that in place for the next 12 months. And clearly, the vast majority of that's actually a working capital facility, which peaks certainly around February, if I'm looking to Andy, yep. And I would expect that to be fully drawn at that point or almost fully committed at that point, and then to taper off, obviously, towards the end of the year. So we have a facility with our syndicate of NZD 450 million.
Are there any more questions here in the room?
All good. Thank you. All right, thanks very much for those questions. We'll now move on to the formal part of today's meeting. There are three ordinary resolutions to vote on today, which were set out in the notice of meeting. Two resolutions relate to the election of directors, and the third resolution relates to auditor fees and expenses. That's the exciting one. As I'm up for election in resolution one, I will ask Paul McGilvary to come forward and to chair the first resolution. Paul.
Thank you, George. The first resolution today is an ordinary resolution relating to the election of George. So he clearly can't do it himself. So George is no stranger to you. He took a fairly high-profile position through our deleveraging, and he very ably led Synlait through that process.
George has outstanding commercial and governance acumen with over 30 years' experience in international business in fast-moving consumer goods and telecommunications. He's also a very passionate supporter of occupational health and safety, which is a crucial thing for us. George has had a range of executive leadership positions before moving into governance roles. So he's actually very experienced as a business leader as well. The board assessed George to be an independent director within the meaning contained in the NZX listing rules and NZX government's corporate governance code. The board of Synlait fully supports George's election as a director. So I will just very quickly invite George to address you before we pass that we'll work on that resolution.
Thanks very much, Paul. Good afternoon, ladies and gentlemen.
Look, I'm sure at this stage, with two special shareholder meetings under my belt since joining the board in March, that you are well aware that my name is George Adams, and I'm offering myself for election to the board today. No doubt you'll have noticed in my bio that I am a fellow of the Institute of Chartered Accountants and a Chartered Fellow of the Institute of Directors, with, as Paul has highlighted, about 30 years of international business experience. I was first appointed to the board in March this year and was elected to the role of Chair in May. I do believe, genuinely, I've served the company and its shareholders diligently since my appointment, helping to steer the company through its deleveraging and putting it in a position to chart a positive course in future.
I have worked exceptionally hard on your behalf and have not recoiled from difficult and challenging decisions which have had to be made. So in seeking your support, I am also committing to ensuring that the business returns to its winning ways and provides a strong return to shareholders over time. Thank you.
Thanks very much, George. I move that George be elected as a director of Synlait. Important that we take questions related to that. So are there any questions?
There is a question online, unless we have any in the room. Okay. Could the Chair and re-election candidate, George Adams, please comment on whether he would support moving to annual director elections starting at the 2025 annual meeting in order to lift board accountability to shareholders and give us more items to vote on?
No. Good. Any further questions? That's it. Okay. There being no further questions, I invite you to vote either by marking your voting paper, for those of you obviously in the room, or on your printed electronic voting card. I'll now hand back to George to continue chairing today's meeting. Thank you.
Sorry, I was a bit far off the microphone. That was maybe a very perfunctory no. But look, I think we will do our best to follow NZX guidelines on those matters and be guided by that. So at the minute, that's a three-year term cycle for directors. So thank you, Paul. So we now move to resolution two, which relates to the election of Edward Yang. Edward has over 20 years of industry experience and has been a member of our board since August 2010 in the role of Bright Dairy Appointed Director. Edward is the Director of Strategy and Development in Bright Dairy and Food Company Limited and a Director of several Bright Dairy subsidiaries. Edward holds a Master's Degree in Food Science and Engineering. Edward is offering himself for election, and I invite him to address you now.
Good afternoon. Dear shareholders, ladies and gentlemen. It's so nice to see you again. Let me introduce me. I'm Edward Yang. Proud to have joined Bright Dairy back in 2009. I'm responsible for strategy and investment. I also served as a director at Zhejiang Jinhua Dairy Company and Wuhan Dairy Company in China. I have been doing some incredible things at Bright Dairy, which I would like to share with you. Over the years, we've crafted a winning strategy for Bright Dairy, focused on building core competitiveness across the entire industry chain. We've invested heavily in the Bright Dairy farming sector. We have 26 farms with 105,000 dairy cows, with average milk yield over 11.7 tons per cow. We've also built smart milk factories in Shanghai, Wuhan, and Zhengzhou, each capable of processing over 1,000 tons daily.
We also have our Bright Home Delivery e-commerce platform serving over 3 million families. Now, let's talk about New Zealand. It's an incredible place, a unique dairy kingdom with pure nature, abundant resources, and top-notch dairy cows. New Zealand produces the best dairy products in the world, and the people are kind and welcoming, with a government that's open-minded. Since 2010, our partnership with Synlait has been a huge success. We've grown from a small factory of 50 people here in Dunsandel to a midsize business with 1,400 employees. Revenue has grown from NZD 200 million to about NZD 1.7 billion. We've faced some challenges recently, but let me tell you, with unwavering support of shareholders, banks, and our dairy partners, we've weathered the storm. Thank you, all of our shareholders, for your incredible support, and to the fantastic team at Synlait.
I'm now asking all of you to continue your support for me as a director. Together, we will collaborate closely with shareholders, the board, and management to implement our performance improvement plan. We will get Synlait back on track, back to the health and creating value for the company and a better return for our shareholders. Let's make it happen. So I can march.
Thank you very much, Edward. So I move that Edward be elected as a director. But firstly, are there any questions on that resolution?
There are three questions online, so the first question, why did Bright Dairy select Edward to serve on the Synlait board?
Look, my assumption is that Edward is a very senior member of the Bright team and a very senior and trusted member of the Bright team and has experience in operating on international boards since 2009, and as such, that would make him a very natural member of the team. And I have to say, the fact that he has a very technical background is actually very helpful for us as a Bright board, or obviously as a Synlait board.
The second question is the same one which was put to you, Chair. Does Edward support a move to annual director elections for better accountability for all shareholders?
No.
Yeah, I think Edward has also indicated that that's not something that we would support at this stage.
And the third question, in contrast, we also have a question on this particular resolution as well coming up next. But could Edward please comment on why he supported the move last week to replace our former external PwC auditor with Bright Dairy's auditor, KPMG?
I was going to comment on that just very briefly on the next resolution, but we should probably just do that now. All we've done is we've simply aligned the auditors with our Bright Dairy largest shareholder auditors, which means that from an efficiency perspective, it's just really helpful having the same auditor in the subsidiary as it is in the parent company. So that essentially is why we, as a board, voted for that to occur.
That's all the questions online.
Thank you. Okay. So there being no more questions, can I invite you to vote on that resolution too? Either on your printed card or your electronic voting card. Finally, moving to resolution three, that the board be authorized to determine the auditor's fees and expenses for the coming year. And I would also acknowledge, having spoken about it earlier than I probably was going to, but acknowledge that Peter was here. He did a great job for us. But we've also essentially aligned with our holding companies, our parent company, rather, audit group. So KPMG is a Big Four, obviously, I think, have got tremendous credentials and will be taking over from KPMG, or sorry, from PwC with immediate effect. And welcome to KPMG in that role. So are there any questions on that resolution? Fantastic. Thanks, Hannah.
KPMG going to cost more or less than PwC? And did we run a full tender process? And how long has KPMG audited Bright Dairy?
KPMG, I believe, audited Bright Dairy for about, well, this is their first year. First year. So this will be their first year. We have been through costs, and they're largely the same as previously. So I can't really imagine there'll be any massive savings on that front.
No more questions online.
Thank you. Okay. So any questions in the room? No? So can we please move to vote on that resolution on your printed card or on your electronic form? I'll give you a minute to conclude that before I close voting. So if you are voting online, I will close that very shortly. And once we're done in a second, I'll ask Computershare to pick up the ballots. Thank you. Okay. So this brings voting to a close. I'm going to close the online voting as well and conclude the formal part of today's meeting. So the results will be published to the NZX and the ASX later today. So unless we have any other questions online or in the room? Okay.
We've got one final question online in general business. Chair, I note that this is probably a question for A2, but I will ask it anyway. Is the company able to provide any insight into why there has been a noticeable reduction in A2 milk clinical trials and research papers compared to pre-COVID times?
I think as the questioner has alluded to, that's really one for A2, genuinely not one for us. So I couldn't comment on that at all. Thank you.
No more questions online.
All right. Any more questions here? Thank you very much. No further questions. I declare the meeting now closed and invite you in the room to join us for some afternoon tea. Thank you very much.