Speaker 1: Kilden and welcome to shared lunch. Well, milk is on
Speaker 1: the menu today. Cinlay is not a name that you
Speaker 1: will see on supermarket shelves, but it is playing a
Speaker 1: part in our big dairy exports story. I'm Garth Bray
Speaker 1: and I'm joined by Sinlay's chair George Adams to talk
Speaker 1: about a big vote that could shape the future of
Speaker 1: the company. But first here's some important information.
Speaker 2: Investing involves the risk you might lose the money you
Speaker 2: start with. We recommend talking to a licensed financial advisor.
Speaker 2: We also recommend reading product disclosure documents before deciding to invest.
Speaker 2: Everything you're about to see and here is current at
Speaker 2: the time of recording.
Speaker 1: No my heart, am I welcome here at George. A
Speaker 1: lot of people won't know what Sinnay is, what it does.
Speaker 1: Can you give us a sense of where it fits
Speaker 1: into the industry?
Speaker 3: Absolutely? Thanks for having me. Hey, look, Sinley is part
Speaker 3: of the New Zealand dairy industry. We would be discribed
Speaker 3: was a tier two player. So you've obviously got Fonterra,
Speaker 3: who is the you know, the the largest of all
Speaker 3: the large dairy companies, and then there's a probably three
Speaker 3: or four Tier two players which sit just onto that
Speaker 3: so similar today I think would be the third largest
Speaker 3: by production volume in the in the country. So a
Speaker 3: sizeable company in an off its own rate, and I
Speaker 3: think a reasonably important player for New Zealand's export industry.
Speaker 1: George Adams Sinley chere, that's got a pretty new ring
Speaker 1: to it. But you've got plenty of experience around boardroom
Speaker 1: tables and unlisted companies, a lot of it in sort
Speaker 1: of food and that kind of technology. But you also
Speaker 1: ran Coca Cola amatal here for about like a decade.
Speaker 1: What did a decade of selling fizzies teach you about
Speaker 1: how to handle the dairy industry right here and right now.
Speaker 3: I have to say probably a decade of selling Coca Cola,
Speaker 3: Probably not so much, to be fair, but you certainly learn,
Speaker 3: you know a lot about the commercial side of business.
Speaker 3: Coca Cola was a fantastic thing, to be honest, and
Speaker 3: you know a lot of what people don't really know
Speaker 3: about it is it's one of the most efficient manufacturing
Speaker 3: systems anywhere in the world. It is one of the
Speaker 3: most efficient and smartest distribution systems anywhere in the world.
Speaker 3: And if you want to understand how to create you know,
Speaker 3: get a product within an arm's reach of desire of
Speaker 3: the consumer, which is part of the mantra. You know,
Speaker 3: the coke system is a great place to learn the
Speaker 3: disciplines of fast moving consumer goods.
Speaker 1: As there much of a match then for taking those
Speaker 1: skills into the boardroom and explaining how a Sinila gets
Speaker 1: its product to market, gets that milk or whatever it
Speaker 1: is that you're making with an arm's reach of desire,
Speaker 1: right Fay.
Speaker 3: Probably not so much from the front end perspective, because
Speaker 3: certain is effectively an ingredient manufacturer, so we would sit
Speaker 3: behind the Coca Cola type business. But from a product
Speaker 3: efficiency perspective, from a distribution efficiency perspective, I mean, essentially
Speaker 3: that's what we trade on. Has been able to manufacture
Speaker 3: the same product day in, day out very efficiently because
Speaker 3: the market for pricing is largely set, so we're we're
Speaker 3: largely priced takers on tear pretty much in the and
Speaker 3: and the and the global dairy auction pretty much sets
Speaker 3: the price. So your ability to manufacture ahead of that
Speaker 3: and and and and which should be currency or product type,
Speaker 3: your ability to actually operate within the with with within
Speaker 3: a really strict kind of uh, you know, tram tracks,
Speaker 3: not disimilar to anybody in in business.
Speaker 1: What drew you to the company, because if it's not
Speaker 1: quite exactly what you've been used to doing, what it's
Speaker 1: a it's a bit of a turnaround, really, isn't it,
Speaker 1: with a lot of interested parties having the essay what
Speaker 1: what drew you in there? Yeah?
Speaker 3: Probably certainly unusually and and yes, I've got ten years
Speaker 3: experience in the boardroom today, mostly private companies, family companies,
Speaker 3: a couple have kind of co founded, but also probably
Speaker 3: in the last five or six years, a number of
Speaker 3: public companies also, I genuinely guess a couple of things. One,
Speaker 3: I think Simley is important, and I'll tell you why
Speaker 3: it's important. I think it's important to the dairy industry
Speaker 3: in general. I think that it's important to our farmers,
Speaker 3: it's importantly to our staff. But it's important to have
Speaker 3: smaller companies aren't necessarily the fonterers of the world who
Speaker 3: can generally go after smaller but important opportunities, because you know,
Speaker 3: the big monopolies generally can't do that, right And that
Speaker 3: was certainly my experience of British Telecom some years ago,
Speaker 3: but also genuinely was very enthusiastic about the challenge. Right,
Speaker 3: You've got a lot of directors and boardrooms today who
Speaker 3: are actually quite a freid and quite cautious around taking
Speaker 3: on challenges like this. And I genuinely felt, having looked
Speaker 3: at it in detail, that there was a pathway through
Speaker 3: to a solution for Sidley and for our waiter, you
Speaker 3: day aspa of interested stakeholders, and I felt that it
Speaker 3: was worth taking that risk.
Speaker 1: Let's talk a bit about the pathway then, because I mean,
Speaker 1: you've got you've had a pretty hectic five months so
Speaker 1: that she took on the chair, And I'm just going
Speaker 1: to recap some of the events to catch people up
Speaker 1: if they haven't caught it as I understand them anyway. First,
Speaker 1: you had a dispute over intellectual property rights and production
Speaker 1: agreements with a business partner A two Milk who also
Speaker 1: happens to be quite a major shareholder.
Speaker 3: Awkward.
Speaker 1: And then a bailout from your biggest shareholder, Bright Dairy.
Speaker 1: And now you're asking my minority Sorry, now you're asking
Speaker 1: minority hit Sorry, Now you're asking minority shareholders to effectively
Speaker 1: kind of hand control of the company to those two
Speaker 1: major shareholders. Am I going okay?
Speaker 3: So far that's not bad. I probably correct you slightly
Speaker 3: in terms of handing control. I mean effectively Bright Hu
Speaker 3: Hud control since twenty ten when they were a majority shareholder,
Speaker 3: and while they dropped to thirty nine percent I think
Speaker 3: twenty thirteen is my history. They woultend a very interesting
Speaker 3: constitutional arrangement which the ends it exclained off on whereboy
Speaker 3: they could control the board. So in that sense it's
Speaker 3: kind of status.
Speaker 1: Qual So this is coming to quite a crunch though,
Speaker 1: because you're putting together a capital raise basically in a
Speaker 1: restructure of your debts and so on, and that's happening
Speaker 1: within the next week or so. On September the eighteenth,
Speaker 1: we walk people through that. So those two big shareholders,
Speaker 1: Bright Dairy and A two Milk, they're putting in close
Speaker 1: to two hundred and twenty million dollars to sort of
Speaker 1: reset the balance sheet. And that's set a time when
Speaker 1: I think Sinay's carying about five hundred and fifty million
Speaker 1: dollars worth of.
Speaker 3: Debt all spot on.
Speaker 1: So for so with that reset, Bright Dairy goes to
Speaker 1: about two thirds of the shareholding of the company to
Speaker 1: keep six twenty percent, and that if you do the
Speaker 1: maths means that all of those other minority retail shareholders
Speaker 1: basically get squeezed down. They wind up with about half
Speaker 1: of what they had before, right.
Speaker 3: Correct, actually quite actually actually actually less.
Speaker 1: So what makes you confident that shareholders will accept that?
Speaker 3: Yeah? Yeah, no, it's Look, honestly, you've pretty much described
Speaker 3: the conundrum that we've had and we've been working through it.
Speaker 3: And look, I'm not doing this by myself, right, I've
Speaker 3: got a you know, I'm part of a board which
Speaker 3: which sets alongside of management team and trying to work
Speaker 3: our way through this. So yeah, essentially we needed to
Speaker 3: reais at least two hundred and twenty million dollars. In reality,
Speaker 3: we are a one hundred and thirty million dollars which
Speaker 3: Break Food Group put in roughly yet weeks ago, which
Speaker 3: was by way of shareholder on but a subordinated it's
Speaker 3: that's one hundred and thirty million dollars is subordinated to
Speaker 3: the senior debt that we that we have, so it
Speaker 3: sits behind that, but it does set out of our bonds.
Speaker 3: Right So, so ultimately as three hundred and fifty million
Speaker 3: dollars to reset effectively the five hundred and fifty million
Speaker 3: dollars in debt that that that we had, and there's
Speaker 3: no doubt about it. This effectively is a is A
Speaker 3: is a bailout, right. So it's so the challenge I
Speaker 3: think for us, sitting as really three independent directors is
Speaker 3: how do you go to the market and raise three
Speaker 3: and a half times your market cap? That's the challenge, so,
Speaker 3: you know, and we looked long and hard at the
Speaker 3: you know how, we had to also have assurance that
Speaker 3: we could raise the money because our bank refinance runs
Speaker 3: out on the second of October, which is in two
Speaker 3: and a half weeks time, right, so the clock is
Speaker 3: ticking for us on all fronts, on top of having
Speaker 3: to sort out the disputes between ourselves and a two
Speaker 3: plus three is capital in a in a certain way,
Speaker 3: and we're all doing a refinance. I don't I think
Speaker 3: you might have forgotten that one. So essentially everything's moving right,
Speaker 3: So we had to be absolutely certain that we we
Speaker 3: could raise this cash. Otherwise we wouldn't get to a
Speaker 3: point where we could do the refinance deal with the banks,
Speaker 3: who are still going to need to basically have around
Speaker 3: four and fifty million dollars of flexible term debt sitting
Speaker 3: available for Sinny. So back to the challenge, which is
Speaker 3: raising three and a half times your market cap. So
Speaker 3: to put that in perspective, if I'm sitting there as
Speaker 3: a as an independent shareholder with ten thousand dollars with
Speaker 3: a stock this is at our previously undisturbed sure price
Speaker 3: as the term is, and I've got ten grand in Sinley,
Speaker 3: I would have been asked for about thirty four thousand
Speaker 3: dollars to retain my relative a percentage holding position. Now,
Speaker 3: we did take soundings, and I have to say that
Speaker 3: it's highly unlikely that we would have raised a lot
Speaker 3: of money on that front. So then you look at
Speaker 3: well do you do? And the mechanism for that, sorry
Speaker 3: is you would do generally a rights issue. So rights
Speaker 3: issues are done at the at a turp, which is
Speaker 3: a theoretical X rights price. Right, So that minus a
Speaker 3: discount normally twenty twenty five percent, Given that we're in
Speaker 3: a distressed position, it probably would have been Latin and more,
Speaker 3: which means that we would have been issuing shus at
Speaker 3: four cents. That's the theoretical X rights price less a discount,
Speaker 3: which meant we've had issue. I think I've worked at
Speaker 3: five point four billion shures, right, so quite challenging pinball numbers,
Speaker 3: pinball numbers. And the difficulty with that is then essentially,
Speaker 3: if those rights aren't taken up, someone's got to pick
Speaker 3: them up. And that would have meant bright only to
Speaker 3: picking out and I genuinely think we would have ended
Speaker 3: up probably in about the same position from a shareholding perspective.
Speaker 3: And the difficulty with actually issuing stock at a discount
Speaker 3: is that the existing minority shareholders wouldn't be sitting here
Speaker 3: looking at fourteen percent post raise. They would have been smashed.
Speaker 3: They'd have been sitting with literally a couple of percent
Speaker 3: because we'd have been issuing stock at a heavy discount.
Speaker 3: That's the best outcome, I think, which we will have
Speaker 3: gotten to, whereas issuing stock at a which we were
Speaker 3: doing to two of the shareholders, we're doing it at
Speaker 3: a premium. So coming back to your numbers, let me
Speaker 3: just probably work through this. At the thirty cents which
Speaker 3: was referred to this previously undisturbed price, and that's the
Speaker 3: price at which was the day before, effectively we made
Speaker 3: the announcement, the minority shareholders were worth twenty seven million
Speaker 3: dollars market cap post cap raise, assuming the same short price,
Speaker 3: the minority shareholders will be worth forty two million dollars.
Speaker 3: So even though you've got a smaller percentage you're shareholding,
Speaker 3: the value for shuretolding actually increases.
Speaker 1: Something is better than one hundred percent or nothing kind
Speaker 1: of thing.
Speaker 3: More or less, more or less. So certainly in this case,
Speaker 3: forty one percent of something is worth a lot less
Speaker 3: than fifteen percent of something. That so you know, we've
Speaker 3: tried to be as far as possible, but genuinely we're
Speaker 3: threatening eye of a needle in terms of assurance on
Speaker 3: the dollars that we needed to raise, plus the the
Speaker 3: the the bank, and also not making sure you don't
Speaker 3: creator the value for minorities or who actually don't want
Speaker 3: to participate.
Speaker 1: You mentioned before that sinlay is important for a lot
Speaker 1: of reasons. Surely part of it was to give retail
Speaker 1: investors and exposure to what is an industry that underpins
Speaker 1: New Zealand. Does this cut that back?
Speaker 3: Look it certainly? From so let's go back if you
Speaker 3: talk about percentages, yes, it does. You'd have to say
Speaker 3: that over the last few years it has not performed
Speaker 3: particularly well. Right, So from about and I think for
Speaker 3: reasons of COVID et cetera. And and and particularly with
Speaker 3: the Chinese infant births dropping off from an average kind
Speaker 3: of longer an average of seventeen million to maybe nine million,
Speaker 3: which halfs the market effectively.
Speaker 1: Because most of what Sinai is doing is creating.
Speaker 3: A big chunk of it was infant formula. These days
Speaker 3: we're much more diverse house so we're infant formed the
Speaker 3: adult nutrition ingredients into the likes owns and nesle. So
Speaker 3: there's a there's a bunch of other things that we
Speaker 3: that we do, including fresh milk, and particularly the one
Speaker 3: that actually is growing for us very strongly is creams,
Speaker 3: so shelf stable creams into Southeast Asia and interestingly, I
Speaker 3: mean even Fonterra is getting into that as as well
Speaker 3: with their recent announcements. So yes, it does give that exposure.
Speaker 3: I'd have to say it hasn't been it hasn't been
Speaker 3: a great outcome over the last couple of years, but
Speaker 3: I guess we are we are, and ultimately what I'm
Speaker 3: giving the shareholders is an opportunity to continue to participate
Speaker 3: in the upside going forward.
Speaker 1: Should we maybe talk about what you think Sinley is worth,
Speaker 1: then what is sinlay Worth, Oh.
Speaker 3: Well Sinddley is worth sor what our market caps probably
Speaker 3: seventy really million dollars at the minute. That's pretty much
Speaker 3: what it's worth going forward. That if you disaggregate that
Speaker 3: right in reality, we've got a business in Dune Sandal
Speaker 3: which I think we'll be able to get back to
Speaker 3: a strongly profitable position. Last two years have been challenging
Speaker 3: for a number of reasons, but largely for X exposure
Speaker 3: has has really troubled the business. Haven't done particularly well there.
Speaker 3: So I think that's a strongly profitable business. Dairy Works,
Speaker 3: I think it's been on the cards for a bit,
Speaker 3: certainly as far as some of the parts goes. Yep,
Speaker 3: we've had sort of offer, but in really nothing that
Speaker 3: God has anywhere close to effectively what it cost.
Speaker 1: But just senal disclosure, I really like your dairy Works
Speaker 1: tasty cheese. I think it's probably one of the better
Speaker 1: tasty cheeses on the market. I'm not sure if that
Speaker 1: will make the cut in the podcast, but well, this
Speaker 1: is a personal disclosure of interest. Look, I suppose I
Speaker 1: was asking what is it worth because the former chair
Speaker 1: John Peno, he was challenging your numbers wasn't it. He
Speaker 1: was saying, actually, broken up, this company is worth more
Speaker 1: than the reports that you are seeing it is worth.
Speaker 1: And that is why you should seriously consider not voting
Speaker 1: for this proposal and instead just put it through and
Speaker 1: you will actually make more money that way. Why should
Speaker 1: why should shareholders pay him?
Speaker 3: No mind? No? I think you know. Look, John's are broad,
Speaker 3: gay and a lot of time for John, and he
Speaker 3: certainly holds I think a very sincere very sincere view.
Speaker 3: I don't think it's right, but I think it's very
Speaker 3: sincerely held. You we've been looking at essentially selling a
Speaker 3: couple of the company's assets for the past few months,
Speaker 3: and as you know, we also were looking at what
Speaker 3: the Pocono business was worth, and you know, the market's
Speaker 3: changed a little bit and right now we just cannot
Speaker 3: find the value that John was purporting to believe that
Speaker 3: the company was worth. That's fine, that's the difference off
Speaker 3: opinion between us. Ultimately, we also have to then take advice.
Speaker 3: So you know, part of doing a CAPRAS is you're
Speaker 3: obligated to get an independent assessor's report, which we have
Speaker 3: got through Northington, and I think Northington's numbers are the
Speaker 3: ones which the board is pretty much obligated to pay
Speaker 3: attention to. So that's the one that says that our
Speaker 3: view on the future value is that actually it was
Speaker 3: certainly lower than the numbers that John was indicating that
Speaker 3: he thought it was worth. So that's the numbers effectively
Speaker 3: that we got to plug into our model going forward,
Speaker 3: which means that ultimately we think there is value in
Speaker 3: the In the Capris.
Speaker 1: You make it sound like a very very principled and
Speaker 1: gentlemanly disagreement, but you were talking about Russian roulette in
Speaker 1: respect of what he was saying. I mean, let's say
Speaker 1: he described it pretty strong words.
Speaker 3: Yeah look Russian roulette in yeah, look and look I
Speaker 3: worked in Russia for a while, so I'm very familiar
Speaker 3: with with with with the particular phrase. But it wasn't
Speaker 3: to describe John in anyway. But John's view was essentially
Speaker 3: we should take it to VA, right, And I don't
Speaker 3: think there is an elegant VA option after be really frank,
Speaker 3: you know, my conversations with some of the receivers quite
Speaker 3: recently have been very clear and consistent that, you know,
Speaker 3: companies don't go into VA and come out looking.
Speaker 1: Better, right, They just voluntary administration.
Speaker 3: Administration, and it essentially provides for asset break up and
Speaker 3: seal of the assets, right, which is so so in
Speaker 3: other words, it's a single shot right, Whereas what we're
Speaker 3: doing right and bearing in mind the directors are obligated
Speaker 3: to act in the best interests of company. Right, And
Speaker 3: particularly when you get down to the point where you're
Speaker 3: looking at a challenging future from an insolvency perspective, you
Speaker 3: then also got to start to think really heavily about
Speaker 3: your creditors. So the proposal that we're supplying refloats the business, refinances,
Speaker 3: the business, pays our creditors, provides a future for our
Speaker 3: farmers and our staff and for Sinley as an ongoing
Speaker 3: business in the dairy industry. So our proposal, I believe
Speaker 3: as independent directors, provides multiple options for multiple stakeholders and
Speaker 3: satisfies a lot more than say a single shot, which
Speaker 3: is let's take it to VA and see what happens.
Speaker 1: Look, you mentioned the famis that if we look at
Speaker 1: the supply side, you can't have a dairy company unless
Speaker 1: you've got dairy. So how do you convince your suppliers
Speaker 1: to stick with Sinley?
Speaker 3: It's a really good question, and I probably characterize this
Speaker 3: a number of ways. So we've been going a long time.
Speaker 3: It's particuarly in the Sutherland and the majority of farmers
Speaker 3: that have that are with us in these two hundred
Speaker 3: and twenty one of the minute farms have been with
Speaker 3: us since the start, so we've got a very long
Speaker 3: history with a lot of those farms and they've been
Speaker 3: making it really clear to us that they like working
Speaker 3: with Sinley. They've had a good relationship for the context
Speaker 3: and it may be something that is helpful for your
Speaker 3: listeners is that New Zealand is a little bit unusual
Speaker 3: in that farm generally will only sell the one processor,
Speaker 3: so not multiple processors. So if they have balance sheet risk,
Speaker 3: that becomes your day factor risk. Also, so our farmers,
Speaker 3: who you know, been on the land a long time,
Speaker 3: in most cases intergenerational, they feel the risk of selling
Speaker 3: to one process or very acutely, particularly if you've got
Speaker 3: balance stress, which we've had. So the message that we've
Speaker 3: had from them, and you know, I've met a lot
Speaker 3: of them in the past five months, is you need
Speaker 3: to sort your balance dope, because that's a real problem
Speaker 3: for us and you need to get back to paying
Speaker 3: market marching advanced threats. Right, so we acknowledged that, so
Speaker 3: one we do when we have we are back paying
Speaker 3: market marching advanced threats. We announced an increase in milk
Speaker 3: price last week to sixty eighty, which actually is ten
Speaker 3: sounds higher than the market sixty. I think you get sixty.
Speaker 1: So I mean this is we're really getting too the
Speaker 1: weeds or the long grass or the pastures here. But basically,
Speaker 1: we've got a system where dairy companies a little bit
Speaker 1: like a company paying a dividend, they kind of set
Speaker 1: a price that they will pay an average price across
Speaker 1: the air if you like more or to suppliers, and
Speaker 1: that's a guarantee that they can take to the bank. Literally.
Speaker 1: So if the farmers are getting an eight dollars sixty
Speaker 1: price from you, are they breaking even? Now? Are their
Speaker 1: balance sheets okay?
Speaker 3: Oh yeah, there would be certainly in terms of in
Speaker 3: terms of their operating costs. I mean the good you know,
Speaker 3: really good, really good farmers been around a long time,
Speaker 3: probably slowly bigger. They're making recentably good money at that point.
Speaker 1: Smarter people than the analystic banks have said probably that
Speaker 1: price needs to be more like eight dollars seventy. Oh look,
Speaker 1: how does sin they get to that price?
Speaker 3: Well, we do the same math as everybody else does,
Speaker 3: So we basically sit down and work out, essentially in fact,
Speaker 3: with what our mass balance is. So every milk, every
Speaker 3: dairy company takes in a lead of milk, right, and
Speaker 3: then from it you disaggregate it into the various parts,
Speaker 3: and some parts sell for more. So wholemok poter will
Speaker 3: sell for more than skim milk poter friggs, for example,
Speaker 3: in formula poter might sell for more than that. Again,
Speaker 3: cream's butters, et cetera. And so you kind of break
Speaker 3: it up into a range of different products and they
Speaker 3: sell for different amounts of value, and what you try
Speaker 3: and do is you try to maximize that value depending
Speaker 3: on the equipment and the installed capacity that you've that
Speaker 3: you've got, so it's a balance and effectively that means
Speaker 3: you can afford to pay so much for the milk?
Speaker 1: Can you get to out seventy?
Speaker 3: Look, honestly, I think it seveny might be late for
Speaker 3: this year. You know, certainly, indications that we're looking at
Speaker 3: is that actually it might go higher than that. But
Speaker 3: you gotta remember only two months into the into the season.
Speaker 3: You've only sold a tiny portion of the year as such,
Speaker 3: but certainly indications are that that that pricing is likely
Speaker 3: to strengthen across the the year. I mean, Fonteria went
Speaker 3: up from eight dollars eight dollars, fifty went from we
Speaker 3: went from eighty at six sixty. So I think there
Speaker 3: could well be room and have to put a obviously
Speaker 3: a warning or that that's that's not a guarantee of
Speaker 3: the future of a of a of a future of
Speaker 3: a future payer.
Speaker 1: So but back to your don't start looking at the
Speaker 1: new Ford ranger just yet.
Speaker 3: Yet, just yet, But back to your question. That's essentially
Speaker 3: give us confidence that once we've resolved with two issues,
Speaker 3: our farmers like doing business with us, and I've given
Speaker 3: us very strong indications that at that stage they'll start
Speaker 3: to withdraw their cease notices.
Speaker 1: Right because they're I mean, they're really the clock sticking
Speaker 1: for them too, right.
Speaker 3: And taking for them too. They have two years you
Speaker 3: basically give two seasons on a day effectively is the
Speaker 3: notice period that you have to to give.
Speaker 1: You've talked a bit about why you think it's important,
Speaker 1: but can you expand a little bit more on the
Speaker 1: future for this company and what you would want to see,
Speaker 1: you know, doing differently if you can get this one
Speaker 1: over the line.
Speaker 3: But I think a couple of things are probably worth
Speaker 3: also remembering is that fundamentally the two businesses that we
Speaker 3: run are well run, smart businesses. So if I look
Speaker 3: at the Dune Hattle Busines, I mean it's a fantastic business,
Speaker 3: runs well and you know, nine years out of ten
Speaker 3: will make a very good return, just not last year.
Speaker 3: But that's a different issue. Therery works good business. You
Speaker 3: know Tim runs it, does a great job, right, so
Speaker 3: that that's a solid business. Ultimately, the decisions that we're
Speaker 3: taken around some of the investments were taken not by
Speaker 3: the people who are running these businesses or operating these businesses.
Speaker 3: There were issues effectively taken after say by senior manager
Speaker 3: at the board table, which for whatever reason didn't pan out.
Speaker 3: So ultimately, what we're doing through this cap is actually
Speaker 3: taking that issue, solving for that issue. So the future
Speaker 3: force in me is really in the in the adult nutrition,
Speaker 3: infant nutrition and value add ingredient business going forward. So
Speaker 3: it's a little bit back to the roots, but it's
Speaker 3: really focusing on what we do well because you know
Speaker 3: there is significant growth available to us in those markets.
Speaker 3: And just for context, I think it might be helpful
Speaker 3: to know that global dairy is worth approximately twice what
Speaker 3: Apple is worth. Right. So, but the recent report I
Speaker 3: saw from Coriolisis vows it about nine hundred million dollars,
Speaker 3: which is twice what Apple's capitalized. That right, Global consumption
Speaker 3: of dairy is increasing by one point something kilos per
Speaker 3: person per year, as essentially the world gets wealthier, that
Speaker 3: you're seeing consumption and increase. And here's the start that
Speaker 3: absolutely blew my mind is that the growth required to
Speaker 3: support the increase in demand globally is one point two
Speaker 3: New Zealand's every year.
Speaker 1: There's an opportunity.
Speaker 3: So that's the opportunity that we're leaning into into, right,
Speaker 3: I mean, there is fabulous growth in this global industry
Speaker 3: which we can play a big part in and that's
Speaker 3: the opportunity for Sinny.
Speaker 1: So it sounds like you're just cranking more and more
Speaker 1: out of that plant down in Canterbury.
Speaker 3: Cranking more and more, but also being smarter about it. Right.
Speaker 3: And also, we announced yesterday that we will be retaining
Speaker 3: the Pocono facility. We're not going to process milk there anymore,
Speaker 3: so that milk is all there was still our contracts,
Speaker 3: but open Country will might be basically processing that milk
Speaker 3: and we'll focus on actually adding value to simously advanced
Speaker 3: nutrition through that facility.
Speaker 1: So but that was why there was quite a lot
Speaker 1: of investment in that plant. Once you'd already built at
Speaker 1: sea is still checking a bit of good money after
Speaker 1: bed there.
Speaker 3: No no effect of what we're doing is I think
Speaker 3: we're still have a foot on a home base. So
Speaker 3: we've taken the foot off home base now, so we're
Speaker 3: we're just simply not going to process milk, which means
Speaker 3: we don't spend half the month processing milk and in
Speaker 3: a half a month basically getting into nutrition advanced nutrition
Speaker 3: products now will be one hundred percent focused on advanced
Speaker 3: nutrition products. Was still used dairy, but that dairy would
Speaker 3: be processed some somewhere else and would it simply come
Speaker 3: to us as as an ingredient.
Speaker 1: Was that pretty much the money that's been spent at
Speaker 1: that plant, which you know, anyone that's sort of driven
Speaker 1: out of all plane heading towards coromand or sees this
Speaker 1: sizeab huge piece of stainless steel and concrete on the horizon.
Speaker 1: That's been the millstone around the neck as it.
Speaker 3: Yeah, that's basically it was. That was that was that
Speaker 3: was a four hundred and fifty million dollars roughly facility
Speaker 3: which sentially has never made a cent.
Speaker 1: Wow.
Speaker 3: Yep, yeah, look again context right, So you go back
Speaker 3: and you look at that that that business was kind
Speaker 3: of conceived probably sixteen seventeen, eighteen, nineteen twenty was was
Speaker 3: kind of built, and our infant formula business was literally
Speaker 3: going off the charts at that stage, right, I mean,
Speaker 3: it had been in just relent this growth and it
Speaker 3: was doing extremely well. Analysts were kind of looking in
Speaker 3: our business going, ooh, you've got a bit of risk
Speaker 3: around that done saddle facility because you know Chrysier's earthquakes
Speaker 3: blah blah blah. You've got a single facility site risk.
Speaker 3: So can you basically put some money into somewhere somewhere else,
Speaker 3: which the business did, and then of course COVID happened.
Speaker 3: Infant Forma dropped off a cliff for our period and
Speaker 3: it's unlikely to recover to that same levels. The Diagoo
Speaker 3: channels basically have evaporated, and so it never really got
Speaker 3: around to producing what it was intended for, so you know,
Speaker 3: you'd have to say that was just really bad luck,
Speaker 3: I mean, super bad timing. Then the business basically invested
Speaker 3: a further ninety two hundred million dollars basically converting it
Speaker 3: to advanced nutrition, but it was still producing or protesting milk,
Speaker 3: and the problem with that was it's too far really
Speaker 3: from the center of milk production. So the actual on
Speaker 3: cost for us to get milk from farms to poconol
Speaker 3: was more than we could bear as an ingredient manufacturer,
Speaker 3: as opposed to infant milk from the manufacturer, which can
Speaker 3: absorble lot more overhead, and so that was losing fortune. Frankly.
Speaker 3: Then we were commissioning the facility for the last year
Speaker 3: to produce advanced nutrition. That's a three hundred day commissioning
Speaker 3: process early year, so ultimately, you know, we were losing
Speaker 3: best part of the million dollars a week, which is
Speaker 3: not much you've said, if you said fast.
Speaker 1: I'm just thinking, if I'm setting there trying to make
Speaker 1: a decision about whether or not as Beck a company
Speaker 1: like that, that's that's pretty material information that I'd want
Speaker 1: to be building up as I.
Speaker 3: And that's yeah, that's and we just yeah, that's so
Speaker 3: that's in the accounts. You'll you'll see that's pretty straightforward. So, yeah,
Speaker 3: we had a final solution for that, and so essentially
Speaker 3: eliminating dairy processing, going boots and all in to the
Speaker 3: adult nutrition and advanced nutrition business moves the way forward
Speaker 3: for that for that site. And literally we just announced
Speaker 3: that two days ago.
Speaker 1: So you're actually holding the vote at that Dune Sandal plant.
Speaker 3: Yes, we are.
Speaker 1: The shareholders Association has been pretty active, but I think
Speaker 1: that it's open disclosure was that we still haven't quite
Speaker 1: made up our minds about whether or not we want
Speaker 1: to back this, So we're not giving that kind of
Speaker 1: guidance to people.
Speaker 3: I respect the Shoulder Association's use conscious that when you
Speaker 3: leave a minority group out off a caprears, you know,
Speaker 3: that's that's pretty much a red flag for them, and
Speaker 3: so they're not kind to be happy with that.
Speaker 1: You can get a kicking from that, aren't you.
Speaker 3: You're going to get a bit of a kicking for that.
Speaker 3: And you know, I mean, and I've certainly learned to
Speaker 3: take my legs frankly when you're since since I've been
Speaker 3: doing this job. But ultimately I hope that minority shoutdles
Speaker 3: will read through the documentation and we'll understand that this
Speaker 3: is a rational decision. It hasn't been a decision I've
Speaker 3: taken because I don't like minority shareholders, or the board
Speaker 3: doesn't like minority shuffles were really late minority shareholders. It's
Speaker 3: just this is the only one that for us makes sense,
Speaker 3: texts all the boxes for us to move forward with.
Speaker 3: So look, ultimately, I acknowledge the Shoulder Association always have
Speaker 3: a challenging job on these on these things, it's it's
Speaker 3: not easy, but I think there also will they'll be
Speaker 3: sufficiently nuanced in terms of there's probably a headline which
Speaker 3: says dead rut, which I think was the headline, But
Speaker 3: below that I think, as I said, even a dead
Speaker 3: rut can be nutritious.
Speaker 1: It's a tasty thought.
Speaker 3: Well, apparently was a big thing in medieval times. Right
Speaker 3: on a stick. Barbecued rut on a stick in London
Speaker 3: apparently was a real thing.
Speaker 1: George Enams, thank you very much. You're welcome, right, and
Speaker 1: thank you for joining us. Also, you can watch Shared
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Speaker 1: you'd like to hear about in the future. That's us
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