WEBVTT - Dairy drama: Synlait’s crucial survival vote 0:00:05.559 --> 0:00:08.520 Kilden and welcome to shared lunch. Well, milk is on 0:00:08.560 --> 0:00:11.360 the menu today. Cinlay is not a name that you 0:00:11.360 --> 0:00:14.200 will see on supermarket shelves, but it is playing a 0:00:14.200 --> 0:00:17.880 part in our big dairy exports story. I'm Garth Bray 0:00:17.920 --> 0:00:21.279 and I'm joined by Sinlay's chair George Adams to talk 0:00:21.440 --> 0:00:24.119 about a big vote that could shape the future of 0:00:24.160 --> 0:00:26.760 the company. But first here's some important information. 0:00:27.200 --> 0:00:29.800 Investing involves the risk you might lose the money you 0:00:29.840 --> 0:00:33.120 start with. We recommend talking to a licensed financial advisor. 0:00:33.840 --> 0:00:37.680 We also recommend reading product disclosure documents before deciding to invest. 0:00:37.920 --> 0:00:40.320 Everything you're about to see and here is current at 0:00:40.320 --> 0:00:41.199 the time of recording. 0:00:41.720 --> 0:00:44.720 No my heart, am I welcome here at George. A 0:00:44.760 --> 0:00:48.280 lot of people won't know what Sinnay is, what it does. 0:00:48.760 --> 0:00:50.480 Can you give us a sense of where it fits 0:00:50.520 --> 0:00:51.320 into the industry? 0:00:51.400 --> 0:00:56.680 Absolutely? Thanks for having me. Hey, look, Sinley is part 0:00:56.720 --> 0:01:00.000 of the New Zealand dairy industry. We would be discribed 0:01:00.160 --> 0:01:02.760 was a tier two player. So you've obviously got Fonterra, 0:01:03.040 --> 0:01:06.240 who is the you know, the the largest of all 0:01:06.520 --> 0:01:09.080 the large dairy companies, and then there's a probably three 0:01:09.160 --> 0:01:11.200 or four Tier two players which sit just onto that 0:01:11.640 --> 0:01:15.160 so similar today I think would be the third largest 0:01:15.160 --> 0:01:21.240 by production volume in the in the country. So a 0:01:21.319 --> 0:01:24.120 sizeable company in an off its own rate, and I 0:01:24.120 --> 0:01:27.760 think a reasonably important player for New Zealand's export industry. 0:01:28.760 --> 0:01:30.960 George Adams Sinley chere, that's got a pretty new ring 0:01:31.000 --> 0:01:33.720 to it. But you've got plenty of experience around boardroom 0:01:33.720 --> 0:01:36.120 tables and unlisted companies, a lot of it in sort 0:01:36.160 --> 0:01:39.360 of food and that kind of technology. But you also 0:01:39.440 --> 0:01:42.280 ran Coca Cola amatal here for about like a decade. 0:01:42.280 --> 0:01:44.840 What did a decade of selling fizzies teach you about 0:01:44.840 --> 0:01:47.360 how to handle the dairy industry right here and right now. 0:01:49.280 --> 0:01:52.120 I have to say probably a decade of selling Coca Cola, 0:01:52.240 --> 0:01:57.000 Probably not so much, to be fair, but you certainly learn, 0:01:57.520 --> 0:01:59.760 you know a lot about the commercial side of business. 0:02:01.480 --> 0:02:04.680 Coca Cola was a fantastic thing, to be honest, and 0:02:04.920 --> 0:02:06.320 you know a lot of what people don't really know 0:02:06.400 --> 0:02:10.120 about it is it's one of the most efficient manufacturing 0:02:10.160 --> 0:02:13.000 systems anywhere in the world. It is one of the 0:02:13.000 --> 0:02:17.080 most efficient and smartest distribution systems anywhere in the world. 0:02:17.200 --> 0:02:19.520 And if you want to understand how to create you know, 0:02:19.639 --> 0:02:21.840 get a product within an arm's reach of desire of 0:02:21.960 --> 0:02:25.640 the consumer, which is part of the mantra. You know, 0:02:25.720 --> 0:02:28.160 the coke system is a great place to learn the 0:02:28.240 --> 0:02:30.280 disciplines of fast moving consumer goods. 0:02:30.639 --> 0:02:32.880 As there much of a match then for taking those 0:02:32.919 --> 0:02:35.520 skills into the boardroom and explaining how a Sinila gets 0:02:35.520 --> 0:02:37.720 its product to market, gets that milk or whatever it 0:02:37.800 --> 0:02:40.440 is that you're making with an arm's reach of desire, 0:02:40.680 --> 0:02:41.079 right Fay. 0:02:42.400 --> 0:02:45.959 Probably not so much from the front end perspective, because 0:02:45.960 --> 0:02:48.839 certain is effectively an ingredient manufacturer, so we would sit 0:02:48.880 --> 0:02:54.320 behind the Coca Cola type business. But from a product 0:02:54.320 --> 0:02:58.880 efficiency perspective, from a distribution efficiency perspective, I mean, essentially 0:02:58.919 --> 0:03:01.200 that's what we trade on. Has been able to manufacture 0:03:01.240 --> 0:03:05.440 the same product day in, day out very efficiently because 0:03:05.480 --> 0:03:08.720 the market for pricing is largely set, so we're we're 0:03:08.800 --> 0:03:11.880 largely priced takers on tear pretty much in the and 0:03:11.880 --> 0:03:14.120 and the and the global dairy auction pretty much sets 0:03:14.160 --> 0:03:17.280 the price. So your ability to manufacture ahead of that 0:03:18.480 --> 0:03:22.720 and and and and which should be currency or product type, 0:03:23.120 --> 0:03:25.880 your ability to actually operate within the with with within 0:03:25.919 --> 0:03:31.960 a really strict kind of uh, you know, tram tracks, 0:03:33.480 --> 0:03:36.000 not disimilar to anybody in in business. 0:03:37.120 --> 0:03:40.280 What drew you to the company, because if it's not 0:03:40.360 --> 0:03:43.200 quite exactly what you've been used to doing, what it's 0:03:43.200 --> 0:03:44.920 a it's a bit of a turnaround, really, isn't it, 0:03:44.920 --> 0:03:49.160 with a lot of interested parties having the essay what 0:03:49.160 --> 0:03:50.280 what drew you in there? Yeah? 0:03:50.720 --> 0:03:55.360 Probably certainly unusually and and yes, I've got ten years 0:03:55.400 --> 0:04:01.960 experience in the boardroom today, mostly private companies, family companies, 0:04:02.000 --> 0:04:06.640 a couple have kind of co founded, but also probably 0:04:06.680 --> 0:04:08.760 in the last five or six years, a number of 0:04:08.760 --> 0:04:14.440 public companies also, I genuinely guess a couple of things. One, 0:04:14.480 --> 0:04:16.760 I think Simley is important, and I'll tell you why 0:04:16.760 --> 0:04:19.839 it's important. I think it's important to the dairy industry 0:04:20.120 --> 0:04:26.440 in general. I think that it's important to our farmers, 0:04:26.480 --> 0:04:29.320 it's importantly to our staff. But it's important to have 0:04:30.279 --> 0:04:34.120 smaller companies aren't necessarily the fonterers of the world who 0:04:34.120 --> 0:04:38.359 can generally go after smaller but important opportunities, because you know, 0:04:38.440 --> 0:04:40.800 the big monopolies generally can't do that, right And that 0:04:40.880 --> 0:04:43.200 was certainly my experience of British Telecom some years ago, 0:04:45.279 --> 0:04:50.200 but also genuinely was very enthusiastic about the challenge. Right, 0:04:50.680 --> 0:04:52.640 You've got a lot of directors and boardrooms today who 0:04:52.640 --> 0:04:56.240 are actually quite a freid and quite cautious around taking 0:04:56.279 --> 0:05:01.159 on challenges like this. And I genuinely felt, having looked 0:05:01.160 --> 0:05:03.520 at it in detail, that there was a pathway through 0:05:03.600 --> 0:05:08.520 to a solution for Sidley and for our waiter, you 0:05:08.760 --> 0:05:12.120 day aspa of interested stakeholders, and I felt that it 0:05:12.200 --> 0:05:13.279 was worth taking that risk. 0:05:13.760 --> 0:05:15.960 Let's talk a bit about the pathway then, because I mean, 0:05:15.960 --> 0:05:18.719 you've got you've had a pretty hectic five months so 0:05:18.680 --> 0:05:20.080 that she took on the chair, And I'm just going 0:05:20.120 --> 0:05:22.320 to recap some of the events to catch people up 0:05:22.320 --> 0:05:24.680 if they haven't caught it as I understand them anyway. First, 0:05:24.760 --> 0:05:28.440 you had a dispute over intellectual property rights and production 0:05:28.480 --> 0:05:32.080 agreements with a business partner A two Milk who also 0:05:32.120 --> 0:05:33.880 happens to be quite a major shareholder. 0:05:34.160 --> 0:05:34.560 Awkward. 0:05:35.240 --> 0:05:38.560 And then a bailout from your biggest shareholder, Bright Dairy. 0:05:39.080 --> 0:05:42.440 And now you're asking my minority Sorry, now you're asking 0:05:42.480 --> 0:05:46.600 minority hit Sorry, Now you're asking minority shareholders to effectively 0:05:46.680 --> 0:05:49.640 kind of hand control of the company to those two 0:05:49.839 --> 0:05:52.320 major shareholders. Am I going okay? 0:05:52.360 --> 0:05:55.480 So far that's not bad. I probably correct you slightly 0:05:55.480 --> 0:05:58.840 in terms of handing control. I mean effectively Bright Hu 0:05:59.000 --> 0:06:04.599 Hud control since twenty ten when they were a majority shareholder, 0:06:05.600 --> 0:06:07.880 and while they dropped to thirty nine percent I think 0:06:07.920 --> 0:06:12.760 twenty thirteen is my history. They woultend a very interesting 0:06:12.880 --> 0:06:16.839 constitutional arrangement which the ends it exclained off on whereboy 0:06:16.880 --> 0:06:22.039 they could control the board. So in that sense it's 0:06:22.160 --> 0:06:23.120 kind of status. 0:06:22.839 --> 0:06:27.279 Qual So this is coming to quite a crunch though, 0:06:27.320 --> 0:06:30.159 because you're putting together a capital raise basically in a 0:06:30.200 --> 0:06:33.039 restructure of your debts and so on, and that's happening 0:06:33.560 --> 0:06:36.040 within the next week or so. On September the eighteenth, 0:06:36.440 --> 0:06:39.280 we walk people through that. So those two big shareholders, 0:06:39.680 --> 0:06:42.159 Bright Dairy and A two Milk, they're putting in close 0:06:42.200 --> 0:06:43.960 to two hundred and twenty million dollars to sort of 0:06:43.960 --> 0:06:46.840 reset the balance sheet. And that's set a time when 0:06:47.279 --> 0:06:50.360 I think Sinay's carying about five hundred and fifty million 0:06:50.360 --> 0:06:51.000 dollars worth of. 0:06:50.920 --> 0:06:52.000 Debt all spot on. 0:06:52.120 --> 0:06:56.760 So for so with that reset, Bright Dairy goes to 0:06:57.000 --> 0:07:00.160 about two thirds of the shareholding of the company to 0:07:00.520 --> 0:07:03.279 keep six twenty percent, and that if you do the 0:07:03.320 --> 0:07:06.719 maths means that all of those other minority retail shareholders 0:07:07.200 --> 0:07:10.360 basically get squeezed down. They wind up with about half 0:07:10.400 --> 0:07:11.760 of what they had before, right. 0:07:11.560 --> 0:07:15.000 Correct, actually quite actually actually actually less. 0:07:16.480 --> 0:07:20.720 So what makes you confident that shareholders will accept that? 0:07:20.960 --> 0:07:24.280 Yeah? Yeah, no, it's Look, honestly, you've pretty much described 0:07:24.320 --> 0:07:27.000 the conundrum that we've had and we've been working through it. 0:07:27.000 --> 0:07:29.320 And look, I'm not doing this by myself, right, I've 0:07:29.360 --> 0:07:32.560 got a you know, I'm part of a board which 0:07:32.600 --> 0:07:34.800 which sets alongside of management team and trying to work 0:07:34.800 --> 0:07:40.720 our way through this. So yeah, essentially we needed to 0:07:40.760 --> 0:07:43.920 reais at least two hundred and twenty million dollars. In reality, 0:07:43.960 --> 0:07:45.920 we are a one hundred and thirty million dollars which 0:07:45.960 --> 0:07:49.800 Break Food Group put in roughly yet weeks ago, which 0:07:49.920 --> 0:07:52.880 was by way of shareholder on but a subordinated it's 0:07:53.040 --> 0:07:55.200 that's one hundred and thirty million dollars is subordinated to 0:07:55.480 --> 0:07:57.880 the senior debt that we that we have, so it 0:07:57.880 --> 0:08:00.640 sits behind that, but it does set out of our bonds. 0:08:00.880 --> 0:08:04.480 Right So, so ultimately as three hundred and fifty million 0:08:04.520 --> 0:08:07.560 dollars to reset effectively the five hundred and fifty million 0:08:07.600 --> 0:08:12.600 dollars in debt that that that we had, and there's 0:08:12.600 --> 0:08:14.720 no doubt about it. This effectively is a is A 0:08:14.760 --> 0:08:18.240 is a bailout, right. So it's so the challenge I 0:08:18.280 --> 0:08:22.160 think for us, sitting as really three independent directors is 0:08:22.840 --> 0:08:26.600 how do you go to the market and raise three 0:08:26.640 --> 0:08:31.240 and a half times your market cap? That's the challenge, so, 0:08:32.559 --> 0:08:34.959 you know, and we looked long and hard at the 0:08:35.040 --> 0:08:40.360 you know how, we had to also have assurance that 0:08:40.400 --> 0:08:44.280 we could raise the money because our bank refinance runs 0:08:44.280 --> 0:08:46.640 out on the second of October, which is in two 0:08:46.679 --> 0:08:49.000 and a half weeks time, right, so the clock is 0:08:49.040 --> 0:08:53.880 ticking for us on all fronts, on top of having 0:08:53.920 --> 0:08:56.680 to sort out the disputes between ourselves and a two 0:08:56.760 --> 0:08:59.280 plus three is capital in a in a certain way, 0:08:59.559 --> 0:09:02.160 and we're all doing a refinance. I don't I think 0:09:02.160 --> 0:09:06.280 you might have forgotten that one. So essentially everything's moving right, 0:09:07.559 --> 0:09:10.520 So we had to be absolutely certain that we we 0:09:10.520 --> 0:09:12.920 could raise this cash. Otherwise we wouldn't get to a 0:09:12.960 --> 0:09:16.080 point where we could do the refinance deal with the banks, 0:09:16.760 --> 0:09:18.920 who are still going to need to basically have around 0:09:18.920 --> 0:09:24.600 four and fifty million dollars of flexible term debt sitting 0:09:24.600 --> 0:09:30.559 available for Sinny. So back to the challenge, which is 0:09:30.679 --> 0:09:33.000 raising three and a half times your market cap. So 0:09:33.280 --> 0:09:36.040 to put that in perspective, if I'm sitting there as 0:09:36.600 --> 0:09:39.439 a as an independent shareholder with ten thousand dollars with 0:09:39.520 --> 0:09:42.880 a stock this is at our previously undisturbed sure price 0:09:42.920 --> 0:09:46.640 as the term is, and I've got ten grand in Sinley, 0:09:47.480 --> 0:09:49.480 I would have been asked for about thirty four thousand 0:09:49.480 --> 0:09:57.120 dollars to retain my relative a percentage holding position. Now, 0:09:57.800 --> 0:09:59.520 we did take soundings, and I have to say that 0:09:59.600 --> 0:10:01.920 it's highly unlikely that we would have raised a lot 0:10:01.920 --> 0:10:06.200 of money on that front. So then you look at 0:10:06.280 --> 0:10:08.880 well do you do? And the mechanism for that, sorry 0:10:09.000 --> 0:10:13.200 is you would do generally a rights issue. So rights 0:10:13.200 --> 0:10:16.480 issues are done at the at a turp, which is 0:10:16.520 --> 0:10:20.800 a theoretical X rights price. Right, So that minus a 0:10:21.200 --> 0:10:25.280 discount normally twenty twenty five percent, Given that we're in 0:10:25.280 --> 0:10:29.360 a distressed position, it probably would have been Latin and more, 0:10:30.120 --> 0:10:32.120 which means that we would have been issuing shus at 0:10:32.160 --> 0:10:36.079 four cents. That's the theoretical X rights price less a discount, 0:10:37.000 --> 0:10:38.760 which meant we've had issue. I think I've worked at 0:10:38.840 --> 0:10:43.360 five point four billion shures, right, so quite challenging pinball numbers, 0:10:43.480 --> 0:10:48.440 pinball numbers. And the difficulty with that is then essentially, 0:10:48.480 --> 0:10:50.920 if those rights aren't taken up, someone's got to pick 0:10:50.920 --> 0:10:52.480 them up. And that would have meant bright only to 0:10:52.559 --> 0:10:54.800 picking out and I genuinely think we would have ended 0:10:54.840 --> 0:10:59.559 up probably in about the same position from a shareholding perspective. 0:11:00.480 --> 0:11:02.920 And the difficulty with actually issuing stock at a discount 0:11:02.960 --> 0:11:06.280 is that the existing minority shareholders wouldn't be sitting here 0:11:06.280 --> 0:11:09.920 looking at fourteen percent post raise. They would have been smashed. 0:11:09.920 --> 0:11:11.720 They'd have been sitting with literally a couple of percent 0:11:12.200 --> 0:11:14.520 because we'd have been issuing stock at a heavy discount. 0:11:15.600 --> 0:11:17.480 That's the best outcome, I think, which we will have 0:11:17.480 --> 0:11:21.720 gotten to, whereas issuing stock at a which we were 0:11:21.720 --> 0:11:25.040 doing to two of the shareholders, we're doing it at 0:11:25.080 --> 0:11:27.960 a premium. So coming back to your numbers, let me 0:11:28.040 --> 0:11:31.760 just probably work through this. At the thirty cents which 0:11:31.880 --> 0:11:34.760 was referred to this previously undisturbed price, and that's the 0:11:34.800 --> 0:11:38.440 price at which was the day before, effectively we made 0:11:38.440 --> 0:11:44.360 the announcement, the minority shareholders were worth twenty seven million 0:11:44.360 --> 0:11:50.520 dollars market cap post cap raise, assuming the same short price, 0:11:50.960 --> 0:11:53.480 the minority shareholders will be worth forty two million dollars. 0:11:54.480 --> 0:11:57.319 So even though you've got a smaller percentage you're shareholding, 0:11:57.440 --> 0:11:59.440 the value for shuretolding actually increases. 0:12:00.280 --> 0:12:02.360 Something is better than one hundred percent or nothing kind 0:12:02.360 --> 0:12:02.800 of thing. 0:12:02.679 --> 0:12:05.880 More or less, more or less. So certainly in this case, 0:12:06.600 --> 0:12:08.920 forty one percent of something is worth a lot less 0:12:08.920 --> 0:12:14.120 than fifteen percent of something. That so you know, we've 0:12:14.120 --> 0:12:17.000 tried to be as far as possible, but genuinely we're 0:12:17.040 --> 0:12:20.240 threatening eye of a needle in terms of assurance on 0:12:20.880 --> 0:12:24.040 the dollars that we needed to raise, plus the the 0:12:24.600 --> 0:12:28.680 the the bank, and also not making sure you don't 0:12:28.720 --> 0:12:32.160 creator the value for minorities or who actually don't want 0:12:32.160 --> 0:12:32.760 to participate. 0:12:33.720 --> 0:12:35.960 You mentioned before that sinlay is important for a lot 0:12:36.000 --> 0:12:39.720 of reasons. Surely part of it was to give retail 0:12:39.760 --> 0:12:43.840 investors and exposure to what is an industry that underpins 0:12:43.880 --> 0:12:47.000 New Zealand. Does this cut that back? 0:12:47.600 --> 0:12:51.679 Look it certainly? From so let's go back if you 0:12:51.760 --> 0:12:56.760 talk about percentages, yes, it does. You'd have to say 0:12:56.760 --> 0:13:01.400 that over the last few years it has not performed 0:13:01.440 --> 0:13:04.280 particularly well. Right, So from about and I think for 0:13:04.480 --> 0:13:06.880 reasons of COVID et cetera. And and and particularly with 0:13:06.960 --> 0:13:10.320 the Chinese infant births dropping off from an average kind 0:13:10.320 --> 0:13:12.960 of longer an average of seventeen million to maybe nine million, 0:13:13.400 --> 0:13:15.520 which halfs the market effectively. 0:13:15.120 --> 0:13:17.760 Because most of what Sinai is doing is creating. 0:13:17.559 --> 0:13:21.320 A big chunk of it was infant formula. These days 0:13:21.320 --> 0:13:23.920 we're much more diverse house so we're infant formed the 0:13:24.240 --> 0:13:30.480 adult nutrition ingredients into the likes owns and nesle. So 0:13:30.840 --> 0:13:32.560 there's a there's a bunch of other things that we 0:13:32.679 --> 0:13:35.720 that we do, including fresh milk, and particularly the one 0:13:35.720 --> 0:13:38.800 that actually is growing for us very strongly is creams, 0:13:39.040 --> 0:13:44.040 so shelf stable creams into Southeast Asia and interestingly, I 0:13:44.080 --> 0:13:47.240 mean even Fonterra is getting into that as as well 0:13:47.520 --> 0:13:50.559 with their recent announcements. So yes, it does give that exposure. 0:13:51.760 --> 0:13:54.000 I'd have to say it hasn't been it hasn't been 0:13:54.040 --> 0:13:58.360 a great outcome over the last couple of years, but 0:13:58.440 --> 0:14:02.120 I guess we are we are, and ultimately what I'm 0:14:02.200 --> 0:14:05.800 giving the shareholders is an opportunity to continue to participate 0:14:05.800 --> 0:14:07.360 in the upside going forward. 0:14:07.720 --> 0:14:11.360 Should we maybe talk about what you think Sinley is worth, 0:14:11.880 --> 0:14:16.520 then what is sinlay Worth, Oh. 0:14:16.679 --> 0:14:21.120 Well Sinddley is worth sor what our market caps probably 0:14:21.160 --> 0:14:24.160 seventy really million dollars at the minute. That's pretty much 0:14:24.200 --> 0:14:29.080 what it's worth going forward. That if you disaggregate that 0:14:29.480 --> 0:14:33.720 right in reality, we've got a business in Dune Sandal 0:14:33.760 --> 0:14:35.640 which I think we'll be able to get back to 0:14:36.280 --> 0:14:41.480 a strongly profitable position. Last two years have been challenging 0:14:41.520 --> 0:14:44.680 for a number of reasons, but largely for X exposure 0:14:44.720 --> 0:14:48.760 has has really troubled the business. Haven't done particularly well there. 0:14:49.920 --> 0:14:52.960 So I think that's a strongly profitable business. Dairy Works, 0:14:53.080 --> 0:14:55.160 I think it's been on the cards for a bit, 0:14:56.200 --> 0:14:58.880 certainly as far as some of the parts goes. Yep, 0:14:58.960 --> 0:15:02.120 we've had sort of offer, but in really nothing that 0:15:02.280 --> 0:15:05.200 God has anywhere close to effectively what it cost. 0:15:06.280 --> 0:15:08.960 But just senal disclosure, I really like your dairy Works 0:15:09.000 --> 0:15:10.640 tasty cheese. I think it's probably one of the better 0:15:10.640 --> 0:15:12.440 tasty cheeses on the market. I'm not sure if that 0:15:12.440 --> 0:15:14.520 will make the cut in the podcast, but well, this 0:15:14.640 --> 0:15:17.520 is a personal disclosure of interest. Look, I suppose I 0:15:17.560 --> 0:15:21.080 was asking what is it worth because the former chair 0:15:21.360 --> 0:15:24.800 John Peno, he was challenging your numbers wasn't it. He 0:15:24.880 --> 0:15:27.720 was saying, actually, broken up, this company is worth more 0:15:28.120 --> 0:15:30.560 than the reports that you are seeing it is worth. 0:15:30.720 --> 0:15:33.560 And that is why you should seriously consider not voting 0:15:33.600 --> 0:15:37.640 for this proposal and instead just put it through and 0:15:37.680 --> 0:15:41.360 you will actually make more money that way. Why should 0:15:42.160 --> 0:15:43.440 why should shareholders pay him? 0:15:43.480 --> 0:15:46.720 No mind? No? I think you know. Look, John's are broad, 0:15:46.760 --> 0:15:50.320 gay and a lot of time for John, and he 0:15:50.400 --> 0:15:53.160 certainly holds I think a very sincere very sincere view. 0:15:53.440 --> 0:15:56.080 I don't think it's right, but I think it's very 0:15:56.080 --> 0:16:01.320 sincerely held. You we've been looking at essentially selling a 0:16:01.360 --> 0:16:03.800 couple of the company's assets for the past few months, 0:16:03.800 --> 0:16:05.960 and as you know, we also were looking at what 0:16:06.080 --> 0:16:10.960 the Pocono business was worth, and you know, the market's 0:16:11.040 --> 0:16:14.560 changed a little bit and right now we just cannot 0:16:14.600 --> 0:16:19.200 find the value that John was purporting to believe that 0:16:19.240 --> 0:16:20.960 the company was worth. That's fine, that's the difference off 0:16:20.960 --> 0:16:24.840 opinion between us. Ultimately, we also have to then take advice. 0:16:25.400 --> 0:16:29.120 So you know, part of doing a CAPRAS is you're 0:16:29.160 --> 0:16:33.280 obligated to get an independent assessor's report, which we have 0:16:33.320 --> 0:16:36.280 got through Northington, and I think Northington's numbers are the 0:16:36.280 --> 0:16:38.720 ones which the board is pretty much obligated to pay 0:16:38.720 --> 0:16:41.240 attention to. So that's the one that says that our 0:16:41.360 --> 0:16:45.480 view on the future value is that actually it was 0:16:45.560 --> 0:16:49.480 certainly lower than the numbers that John was indicating that 0:16:49.520 --> 0:16:53.240 he thought it was worth. So that's the numbers effectively 0:16:53.280 --> 0:16:55.280 that we got to plug into our model going forward, 0:16:55.280 --> 0:16:58.000 which means that ultimately we think there is value in 0:16:58.720 --> 0:17:00.200 the In the Capris. 0:17:01.200 --> 0:17:03.240 You make it sound like a very very principled and 0:17:03.320 --> 0:17:06.600 gentlemanly disagreement, but you were talking about Russian roulette in 0:17:06.640 --> 0:17:09.239 respect of what he was saying. I mean, let's say 0:17:09.240 --> 0:17:10.520 he described it pretty strong words. 0:17:10.600 --> 0:17:15.159 Yeah look Russian roulette in yeah, look and look I 0:17:15.240 --> 0:17:17.160 worked in Russia for a while, so I'm very familiar 0:17:17.160 --> 0:17:20.560 with with with with the particular phrase. But it wasn't 0:17:20.600 --> 0:17:24.200 to describe John in anyway. But John's view was essentially 0:17:24.440 --> 0:17:27.480 we should take it to VA, right, And I don't 0:17:27.560 --> 0:17:31.480 think there is an elegant VA option after be really frank, 0:17:32.320 --> 0:17:36.080 you know, my conversations with some of the receivers quite 0:17:36.119 --> 0:17:38.480 recently have been very clear and consistent that, you know, 0:17:38.680 --> 0:17:40.920 companies don't go into VA and come out looking. 0:17:40.720 --> 0:17:44.000 Better, right, They just voluntary administration. 0:17:45.040 --> 0:17:49.679 Administration, and it essentially provides for asset break up and 0:17:49.760 --> 0:17:51.480 seal of the assets, right, which is so so in 0:17:51.560 --> 0:17:55.880 other words, it's a single shot right, Whereas what we're 0:17:55.960 --> 0:17:58.360 doing right and bearing in mind the directors are obligated 0:17:58.359 --> 0:18:01.479 to act in the best interests of company. Right, And 0:18:01.520 --> 0:18:04.800 particularly when you get down to the point where you're 0:18:04.840 --> 0:18:09.600 looking at a challenging future from an insolvency perspective, you 0:18:09.640 --> 0:18:11.480 then also got to start to think really heavily about 0:18:11.520 --> 0:18:19.560 your creditors. So the proposal that we're supplying refloats the business, refinances, 0:18:19.640 --> 0:18:23.600 the business, pays our creditors, provides a future for our 0:18:23.640 --> 0:18:27.840 farmers and our staff and for Sinley as an ongoing 0:18:27.840 --> 0:18:32.000 business in the dairy industry. So our proposal, I believe 0:18:32.320 --> 0:18:39.600 as independent directors, provides multiple options for multiple stakeholders and 0:18:39.680 --> 0:18:43.440 satisfies a lot more than say a single shot, which 0:18:43.480 --> 0:18:45.320 is let's take it to VA and see what happens. 0:18:45.600 --> 0:18:47.159 Look, you mentioned the famis that if we look at 0:18:47.160 --> 0:18:49.680 the supply side, you can't have a dairy company unless 0:18:49.680 --> 0:18:53.520 you've got dairy. So how do you convince your suppliers 0:18:53.640 --> 0:18:54.880 to stick with Sinley? 0:18:56.400 --> 0:19:02.720 It's a really good question, and I probably characterize this 0:19:02.800 --> 0:19:06.000 a number of ways. So we've been going a long time. 0:19:06.080 --> 0:19:10.520 It's particuarly in the Sutherland and the majority of farmers 0:19:10.520 --> 0:19:12.280 that have that are with us in these two hundred 0:19:12.280 --> 0:19:15.360 and twenty one of the minute farms have been with 0:19:15.440 --> 0:19:18.720 us since the start, so we've got a very long 0:19:18.800 --> 0:19:21.920 history with a lot of those farms and they've been 0:19:21.920 --> 0:19:25.280 making it really clear to us that they like working 0:19:25.320 --> 0:19:29.200 with Sinley. They've had a good relationship for the context 0:19:29.280 --> 0:19:31.640 and it may be something that is helpful for your 0:19:31.840 --> 0:19:36.720 listeners is that New Zealand is a little bit unusual 0:19:36.840 --> 0:19:40.680 in that farm generally will only sell the one processor, 0:19:41.960 --> 0:19:47.040 so not multiple processors. So if they have balance sheet risk, 0:19:47.320 --> 0:19:51.120 that becomes your day factor risk. Also, so our farmers, 0:19:52.119 --> 0:19:54.320 who you know, been on the land a long time, 0:19:54.320 --> 0:19:59.880 in most cases intergenerational, they feel the risk of selling 0:20:00.080 --> 0:20:03.159 to one process or very acutely, particularly if you've got 0:20:03.200 --> 0:20:07.280 balance stress, which we've had. So the message that we've 0:20:07.400 --> 0:20:09.520 had from them, and you know, I've met a lot 0:20:09.560 --> 0:20:13.840 of them in the past five months, is you need 0:20:13.880 --> 0:20:16.200 to sort your balance dope, because that's a real problem 0:20:16.240 --> 0:20:18.639 for us and you need to get back to paying 0:20:19.240 --> 0:20:24.399 market marching advanced threats. Right, so we acknowledged that, so 0:20:24.640 --> 0:20:27.399 one we do when we have we are back paying 0:20:27.400 --> 0:20:33.320 market marching advanced threats. We announced an increase in milk 0:20:33.320 --> 0:20:36.240 price last week to sixty eighty, which actually is ten 0:20:36.320 --> 0:20:39.440 sounds higher than the market sixty. I think you get sixty. 0:20:40.920 --> 0:20:43.119 So I mean this is we're really getting too the 0:20:43.160 --> 0:20:45.520 weeds or the long grass or the pastures here. But basically, 0:20:45.520 --> 0:20:49.439 we've got a system where dairy companies a little bit 0:20:49.480 --> 0:20:52.480 like a company paying a dividend, they kind of set 0:20:52.520 --> 0:20:55.200 a price that they will pay an average price across 0:20:55.240 --> 0:20:57.560 the air if you like more or to suppliers, and 0:20:57.800 --> 0:21:00.000 that's a guarantee that they can take to the bank. Literally. 0:21:01.240 --> 0:21:04.320 So if the farmers are getting an eight dollars sixty 0:21:04.359 --> 0:21:07.480 price from you, are they breaking even? Now? Are their 0:21:07.520 --> 0:21:08.520 balance sheets okay? 0:21:08.600 --> 0:21:11.800 Oh yeah, there would be certainly in terms of in 0:21:11.880 --> 0:21:14.480 terms of their operating costs. I mean the good you know, 0:21:14.680 --> 0:21:16.760 really good, really good farmers been around a long time, 0:21:16.800 --> 0:21:21.480 probably slowly bigger. They're making recentably good money at that point. 0:21:22.000 --> 0:21:25.280 Smarter people than the analystic banks have said probably that 0:21:25.280 --> 0:21:27.760 price needs to be more like eight dollars seventy. Oh look, 0:21:27.960 --> 0:21:29.399 how does sin they get to that price? 0:21:29.720 --> 0:21:32.080 Well, we do the same math as everybody else does, 0:21:32.119 --> 0:21:36.600 So we basically sit down and work out, essentially in fact, 0:21:36.640 --> 0:21:39.560 with what our mass balance is. So every milk, every 0:21:39.640 --> 0:21:43.040 dairy company takes in a lead of milk, right, and 0:21:43.080 --> 0:21:45.520 then from it you disaggregate it into the various parts, 0:21:46.080 --> 0:21:48.200 and some parts sell for more. So wholemok poter will 0:21:48.200 --> 0:21:50.800 sell for more than skim milk poter friggs, for example, 0:21:51.800 --> 0:21:55.000 in formula poter might sell for more than that. Again, 0:21:55.560 --> 0:21:58.720 cream's butters, et cetera. And so you kind of break 0:21:58.720 --> 0:22:01.840 it up into a range of different products and they 0:22:01.920 --> 0:22:04.760 sell for different amounts of value, and what you try 0:22:04.800 --> 0:22:07.760 and do is you try to maximize that value depending 0:22:07.840 --> 0:22:10.560 on the equipment and the installed capacity that you've that 0:22:10.600 --> 0:22:14.000 you've got, so it's a balance and effectively that means 0:22:14.040 --> 0:22:16.000 you can afford to pay so much for the milk? 0:22:16.520 --> 0:22:17.600 Can you get to out seventy? 0:22:18.400 --> 0:22:21.199 Look, honestly, I think it seveny might be late for 0:22:21.280 --> 0:22:24.399 this year. You know, certainly, indications that we're looking at 0:22:24.480 --> 0:22:27.639 is that actually it might go higher than that. But 0:22:27.680 --> 0:22:30.560 you gotta remember only two months into the into the season. 0:22:30.840 --> 0:22:33.960 You've only sold a tiny portion of the year as such, 0:22:34.840 --> 0:22:37.760 but certainly indications are that that that pricing is likely 0:22:37.840 --> 0:22:41.240 to strengthen across the the year. I mean, Fonteria went 0:22:41.320 --> 0:22:43.239