Yep, I couldn't let slip the chance to visit their premises and...

Yep, I couldn't let slip the chance to visit their premises and have been there. AGM felt quite positive and relaxed. As well interesting to have an opportunity to look at their factory. While all the fizz has been already released to the NZX (i.e. no need to repeat) - here are some of my impressions and observations (in no particular order):

Good attendance (certainly better than last year where it was still off site). Maybe around one hundred share holders?

All board members attending, but not all of them at all times focussed on the meeting. kept their smart phones busy during the presentations.

Very young new director - Albert Lu (33yrs) appointed by Bright Dairies. Good to see a younger face around the board table - and hey, he appeared to be even focussed on the AGM proceedings (in contrast to some of his older peers).

Amazing company growth over the last year - staff increased from 200 to 360 (and by now nearly 400); Must be an interesting challenge to integrate all these new people into the workplace. Good processes?

I learned that the milk price is linked to the oil price. This is how it goes: cheap oil means less need for ethanol (to mix into the oil), less need for grain (to produce the ethanol), which means grain is cheaper and can be used to feed cows (well, in other parts of the world), which means that these grain feeding farmers can sell cheaper milk. Interesting. So its the Saudis, which cause all the trouble in the world milk markets. Did you know that?

On the other hand - Synlait's margins are not really correlated to the milk price (more to the volume processed) - i.e. it does not really matter that much for Synlait where the milk price is.

They managed to produce this year about half of the lactoferrin they planned for and sold it for roughly half the price they intended to. Ouch ... Expect however production (but not the price) to double this year. Maybe SML pushed too much lactoferrin too fast into the market (they are one of the big producers)?

Expect most growth from A2 milk and "grass fed milk" for Munchkin ...

Very high debt to EBIT ratio (6.4) ... as well addressed in a question from the share holder association. Seems they feel comfortable with it, and some of the debt are only timing issues (they paid their suppliers early during the bad times) and indicated that they are within the (not disclosed) banking covenants. Expect to have passed peak debt and to reduce over the next years. Renegotiated banking facility and pushed average loan duration from something like 1.3 years to something like 3.5 years (form memory, but should be in the presentation).

One shareholder question referred to the recent animal cruelty publicity. Answer: while they obviously can't control everything their suppliers are doing, they do have a policy on animal welfare;

Factory tour: indications for lean working environment everywhere (open office space - even the CEO works in the open plan area), plenty of white boards and corridor walls are full with stickers and improvement ideas; important production data are in real time visible to all on big screens;

Canning line (sorry, no photo's allowed) looks cool - amazing what robots can do ... though they still seem to work on achieving the designed for throughput.

Huge towers, parts of the plant look like a refinery (well, they do refine mik, don't they?) and lots of milk powder (canned and bagged) everywhere. Latter might be an opportunity to improve (lean manufacturing and storage), but might be difficult, though. I guess they can't just open and close the milk tap on the farm ...?)


Overall impression: not everything is perfect yet, but good overall impression - and it felt that the team is capable doing its job and loving to do it. Looking forward to next years AGM ... and a somewhat appreciated share price.