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Speaker 1: And Sinley's putting on a brave face despite reporting a

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Speaker 1: big loss for the year to July. So the company's

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Speaker 1: full year results show a one hundred and eighty one

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Speaker 1: point one hundred and eighty two point one million dollar

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Speaker 1: loss and debt up thirty three percent to just over

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Speaker 1: five hundred and fifty million dollars, but Sinley says it

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Speaker 1: is optimistic, especially after shaerholders approved a more than two

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Speaker 1: hundred million dollar capital raise to restore its balance sheet.

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Speaker 1: CEO Grant Watson is with us this evening. Hi Grant

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Speaker 1: Cure to Jack good edning, why has it been such

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Speaker 1: a tough time?

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Speaker 2: Oh, look, a combination of factors. The first is an

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Speaker 2: impairment of one hundred and fifteen million dollars and that

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Speaker 2: speaks to our very underutilized assets in the North Island. Secondly,

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Speaker 2: trading has been very, very challenging on a number of fronts.

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Speaker 2: And thirdly we've been sitting on too much debt and

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Speaker 2: then off the back of that, the financing costs have

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Speaker 2: been very, very high.

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Speaker 1: What are those trading challenges?

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Speaker 2: Trading challenges for us range from lower demand, lower pricing,

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Speaker 2: the way that we operate our ingredients contracts, there's a

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Speaker 2: lag and in the back end of Y twenty four

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Speaker 2: that generated some quite negative profitability for US foreign exchange

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Speaker 2: and less favorable product mix.

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Speaker 1: Are those conditions turning around it all? Do you have

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Speaker 1: reason for optimism on the training front?

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Speaker 2: Yeah, we certainly do. We've started twenty five off on

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Speaker 2: a really good footing and if we look at each

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Speaker 2: of those areas, all of them are moving far more

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Speaker 2: in favor for us and I twenty five Y twenty

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Speaker 2: four was a year of headwinds. Are twenty five heading

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Speaker 2: into that it's looking more like tailwinds on balance?

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Speaker 1: Oh that's good to hear. So talk us through the

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Speaker 1: one off payments to South Island farmers. What is the

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Speaker 1: purpose of that.

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Speaker 2: So effectively our farmers have said to us, we want

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Speaker 2: to stay with sin Lay. Give us a reason to stay.

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Speaker 2: Sort out your balance sheet, we've done that. Sort out

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Speaker 2: your advance rates, we've done that. The twenty cent incentive

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Speaker 2: is to effectively sure up their supply. A number of

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Speaker 2: our farmers have cease noticism which have a two year period,

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Speaker 2: and we've effectively got those two years to convince them

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Speaker 2: to stay. So rather than wait for two years, it's

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Speaker 2: offering that twenty cents up bringing it forward and knowing

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Speaker 2: that we've got a certainty around milk supply moving forward.

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Speaker 1: So sorry, just just explain that to me. So the

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Speaker 1: cease note is basically that you haven't locked in for

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Speaker 1: two years, and if they want to leave sin Lay,

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Speaker 1: they've got to give you two years notice and you

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Speaker 1: can use that two years to try and convince them

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Speaker 1: to stay. As how it works.

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Speaker 2: Yeah, that's exactly right, that's exactly right. So we've got

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Speaker 2: some with only a year to run, some with two

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Speaker 2: years to run. We want to reverse those cease notices.

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Speaker 2: Know that we've got that milk supply locked in, and

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Speaker 2: the feedback we've had from our farmers is a twenty

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Speaker 2: cent per kilogram of milk solids is a really good

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Speaker 2: incentive and the feedback we've had today has been very

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Speaker 2: very positive in that regard.

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Speaker 1: Yeah, talk to us about the feedback today.

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Speaker 2: Oh look, look, I mean we've just paid out seven

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Speaker 2: eighty three as a market farmgate milk price. We're paying

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Speaker 2: on average and extra twenty eight cents per kilogram. This

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Speaker 2: is the icing on the top. This is enough of

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Speaker 2: an incentive for them to draw that notice and so

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Speaker 2: off the back of that. It's been very very positive

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Speaker 2: feedback from our farmer.

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Speaker 1: And so I appreciate its early days. You've only had

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Speaker 1: a few hours to digest this, but what percentage of

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Speaker 1: farmers that have ceased notices in place have already said

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Speaker 1: that they will remove those cease notices?

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Speaker 2: Oh, look, it's very early days. We've got our field

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Speaker 2: teams outworking with farmers at the moment, getting a sense

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Speaker 2: of their plans, getting those commitments locked in so literally,

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Speaker 2: it was released this morning. They've got them till the

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Speaker 2: end of May twenty twenty five. But the feedback, the

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Speaker 2: sentiment coming back is extremely favorable.

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Speaker 1: So what do you think again, I know it's early days,

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Speaker 1: but what would extremely favorable mean that eighty percent of

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Speaker 1: those who've got these notices at the moment would withdraw

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Speaker 1: them or is there another figure you've kind of got

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Speaker 1: in your mind.

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Speaker 2: Yeah, we're targeting one hundred. Clearly, if we land at

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Speaker 2: something close to ninety percent, that would work very very

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Speaker 2: well for our business model.

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Speaker 1: How many farmers had to seize notices in place?

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Speaker 2: We haven't disclosed the exact amount, but it's comfortably north

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Speaker 2: of fifty percent.

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Speaker 1: Right, that's a that's a big number.

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Speaker 2: Aim, it's a big chuck, it's a big check.

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Speaker 1: Oh yeah, And so what do you put that down to?

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Speaker 1: What do you put the dissatisfaction down to?

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Speaker 2: Up to this point, Oh, I've known that we've been

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Speaker 2: very leveraged in terms of our balance sheet for the

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Speaker 2: season twenty three twenty four, we didn't keep up with

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Speaker 2: the market advance, right. So when I say advanced, right,

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Speaker 2: that's effectively the cash flow profile during the season. To

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Speaker 2: our farmers, we were behind the eight ball there. Both

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Speaker 2: of those things are unacceptable to our farmers. We accept that,

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Speaker 2: and that's exactly why we've we've addressed that, We've listened

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Speaker 2: to them, and we've added this additional twenty cents into

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Speaker 2: the mix.

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Speaker 1: So acknowledging that you've had really good feedback that farmers

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Speaker 1: say that, yeah, we had to ceased notice in place,

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Speaker 1: but we're going to be ending that, and that you

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Speaker 1: think that ninety percent of farmers who have those notices

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Speaker 1: in place are likely to stick with some Well, what

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Speaker 1: would have been the impact if they hadn't, Just on

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Speaker 1: the impact on the business, do you think, Oh, look.

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Speaker 2: It would be quite devastating to the business. We were

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Speaker 2: a dairy company with our good supply coming off the

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Speaker 2: farms and onto our process and facilities. We're very limited

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Speaker 2: as to the business we can operate. It would have

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Speaker 2: been devastating.

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Speaker 1: Yeah, okay, So give us a bit of a picture

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Speaker 1: for the next twelve months or so. If we're having

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Speaker 1: this conversation twelve months from now, what do you think

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Speaker 1: you'd be saying.

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Speaker 2: Yeah, there's three curriers for us in the next twelve months.

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Speaker 2: We've deleveraged the balance sheet and we need to continue

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Speaker 2: to deleverage the balance sheet. We need to address profitability

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Speaker 2: and it's primarily a function of lifting up our trading

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Speaker 2: volumes and reducing expenses. And we've got a very very

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Speaker 2: clear plan in place that we've started the year well.

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Speaker 2: And thirdly, just making sure that we retain that milk

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Speaker 2: supply with our farmers.

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Speaker 1: Yeah, fantastic. Hey, thanks so much for your time. Really

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Speaker 1: appreciate it. Gran that is Grant Watton, who is the

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Speaker 1: CEO of Sinlay. For more from hither Duplessy Allen Drive,

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Speaker 1: listen live to news talks.

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Speaker 2: It'd be from four pm weekdays, or follow the podcast

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Speaker 2: on iHeartRadio.