Synlait Milk Limited

ANNUAL REPORT 2021

Doing Milk Differently For A Healthier World

ABOUT THIS 
REPORT 

Welcome to our Annual Report.  
This Annual Report reviews 
Synlait Milk Limited’s (Synlait) and 
subsidiaries’ financial performance 
and business achievements for the 
year ended 31 July 2021. 

We always look for ways to improve 
our reporting, please email any 
feedback to: investors@synlait.com  

An online copy of this report and 
our previous annual, interim and 
sustainability reports are available 
at: synlait.com/investors/ 

CORPORATE 
GOVERNANCE 

SUSTAINABILITY 
REPORTING 

Good corporate governance is critical 
to protect all stakeholder interests. 
Our Corporate Governance Statement 
describes Synlait’s current compliance 
with the NZX Corporate Governance 
Code recommendations in the year 
to 31 July 2021. In order to enable 
us to update this more regularly, this 
section of the Annual Report has been 
moved to Synlait’s website: synlait.
com/investors/corporate-governance

For shareholders interested in 
Synlait’s environmental and social 
impact, a standalone sustainability 
report will be released in November. 
This report will review Synlait’s 
strategy and initiatives to deliver 
on our sustainability objectives and 
targets. It remains our intention to 
merge the sustainability and annual 
reports over time. 

Synlait’s commitment to elevating 
people and planet to the same level 
as profit was recognised in June 2020 
when it became part of the  
B Corp™ community.

B Corp™ is a community of leaders 
driving a global movement of people 
using business as a force for good. 
Certified B Corporations™ consider 
the impact of their decisions on 
their workers, customers, suppliers, 
community, and the environment.

B Corp™ resonates strongly with 
Synlait’s purpose of Doing Milk 
Differently For A Healthier World.

Learn more about what being a  
B Corporation™ means for our people,  
our community, and our customers  
at: synlait.com/bcorp

ANNUAL REPORT 2021PAGE 02 & 03

SYNLAIT DUNSANDEL’S 
RAIL SIDING

Our rail siding at Synlait Dunsandel 
benefits people, planet and profit 
while further extending our highly 
integrated manufacturing facility 
from farm-to-port. The 30-wagon 
rail siding at Synlait Dunsandel 
opened in May. Containerised 
goods are now transported by rail 
between Synlait Dunsandel and 
Lyttelton Port significantly reducing 
Synlait’s environmental footprint, 
with approximately 16,000 truck 
movements removed from State 
Highway One saving an estimated 
888 tonnes of CO2-e annually.

Our world class and sustainable 
value chain is part of what makes 
Synlait unique. The rail siding 
significantly simplifies Synlait’s supply 
chain network providing greater 
control and traceability of product. 
It also improves responsiveness to 
customers.

ANNUAL REPORT 2021PAGE 04 & 05

CONTENTS

About this report 

Chair review 

CEO review 

Meet the team 

 Our board  

 Our executive team 

Review of financial performance 

 Financial and performance metrics  

 Milk price 

Financial contents 

Financial statements 

Auditors report 

Statutory information 

Directory 

01

08

16

28

28

29

32

44

45

49

49

122

129

148

A forklift moves a pallet of Skim Milk Powder in our 

new Dry Store 4 at Synlait Dunsandel.

ANNUAL REPORT 2021PAGE 06 & 07

MADE WITH 
BETTER MILK 

In April, we were proud to launch 
Made With Better Milk, a value-add 
premium ingredients offering built 
upon the sustainability credentials 
of Synlait’s best practice Lead With 
Pride™ farming system, our integrated 
manufacturing and supply chain, and 
our people and planet focus as a B 
Corp™ certified business. New Zealand 
made milk nutrition ingredients are 
well known for quality and safety, 
however, we need to keep raising the 
game to differentiate ourselves. That 
game is being played out in terms of 
environmental and social performance 
and we are excited about having a 
product that allows us to better meet 
what our customers are asking for.

Made With Better Milk provides 
Synlait’s global customers with 
the opportunity to differentiate the 
products they market to consumers 
based on a supply chain that takes 
better care of people and animals, 
and generates better outcomes for 
climate, water, soil, and biodiversity. 
Synlait farmers have been building 
up their credentials since Lead With 
Pride™ was launched 2014. After years 
of hard work, Synlait’s most innovative 
and determined farmers are now 
being rewarded with the recognition 
they deserve. Our inaugural Made 
With Better Milk customer is a 
prominent consumer brand owner in 
Asia. The Made With Better Milk range 
initially includes whole milk and skim 
milk powder.

ANNUAL REPORT 2021PAGE 08 & 09

CHAIR   
REVIEW

A challenging trading environment.

My last year as Synlait’s Chair was 
an unexpected and challenging one. 
Our financial result for the 12 months 
to 31 July 2021 (FY21) unfortunately 
reaffirmed our over reliance on one 
product, one customer, and one 
market. While we have invested 
significantly in our diversification 
strategy, we did not anticipate the 
impact COVID-19 would have on The 
a2 Milk Company, our key customer, 
and consequently, our own financial 
performance. 

Heading into FY21 we had 
experienced a period of strong 
orders from The a2 Milk Company. 
Our team worked around the clock 
to respond to the pantry stocking 
behaviour experienced after the first 
wave of the pandemic. However, the 
revised consumer-packaged infant 
formula demand forecast received 
from The a2 Milk Company five 
months into FY21 was massive and 
sudden. The delayed impacts of 
COVID-19 on consumer behaviour, 
channel dynamics and supply chain 
disruptions became very real. 

The drop in demand resulted 
in an immediate change to our 
manufacturing plans as we switched 
to ingredients production for the 

Synlait Chair Graeme Milne ONZM

remainder of FY21. This happened 
as global commodity markets firmed, 
and global shipping delays intensified, 
making it harder for our team to find 
new customers and achieve our usual 
ingredient premiums.

A result that reflects the environment 
we found ourselves 
These trading headwinds were 
significant and meant our result at an 
EBITDA level reduced 78% to $37.3 
million, further resulting in an NPAT 
loss of $(28.5) million. This is very 
disappointing. It is our first loss since 
listing on the NZX in 2013. 

Sales of nutritionals declined 35% 
to 34,362 MT. The a2 Milk Company 
sells product via two main channels: 
directly into China via bricks and 
mortar Mother and Baby Stores; and 
via the daigou channel. COVID-19 shut 
down the daigou channel as border 
closures meant Chinese operators 
were unable to travel. While direct 
export sales to China have grown, 
and we expect a further recovery over 
the next year or two, the unknown is 
still COVID-19. Despite the removal 
of China’s one-child policy, the 
number of babies born has also 
fallen, slowing the industry’s recovery. 
Synlait must therefore continue to 
take a conservative approach to its 
forecasting in this area. 

Challenging trading conditions and a 
poor financial performance meant our 
share price underperformed. As our 
performance improves, we expect our 
share price will follow. Improving future 
earnings, and consequently share 
price performance, continues to have 
everyone’s full focus.

A strategy that remains fit for purpose 
While this is an extremely disappointing 
financial result, we continued to 
execute our strategy and are planning 
a strong recovery. Key highlights 
include:

•  Modifications to Synlait Pokeno 
for our new multinational 
customer, which remain on track. 
Building and installation is now 
well underway and commercial 
production will commence in 
late 2022. In our first full year of 
production in FY24 we expect to 
increase our nutritional consumer-
packaged volumes by 35% to 40%.

•  Dairyworks extended its range of 

products with the launch of protein 
and muesli yoghurts and finishing 
butters. It continues to position 
itself as a provider of innovative 
dairy products packed in a way 
that makes them easy to store, 
open, and use.

ANNUAL REPORT 2021PAGE 10 & 11

• 

The team are in the final stages 
of preparing to launch our 
Foodservice UHT whipping 
cream product internationally, 
with strong revenues to flow 
through from FY23. 

•  Our new Enterprise Resource 

• 

Planning system has been built 
and is being tested. It is due 
to be rolled out by the end of 
this calendar year. Productivity 
benefits will include the 
automation of several manual 
processes and operational 
efficiencies such as improved 
inventory management, and 
real-time data insights.

Finally, next month we will 
launch Synlait Swappa Bottle 
our first consumer product under 
Synlait’s own brand. This 1.5 litre 
reusable, stainless steel bottle of 
homogenised milk, exclusively 
sourced from Synlait’s highest 
performing farms will deliver on 
our intention to move closer to 
the consumer and complement 
our existing business portfolios. 

A balance sheet ready for what 
comes next 
We have invested heavily in our 
growth initiatives over the last few 
years. Due to the uncertainty of 
COVID-19, we raised $200 million 
of equity in November 2020. This 
had strong support from our existing 
shareholders – thank you. The equity 
raise was considered prudent at the 
time and has proven to be the case 
given the negative change to our 
trading conditions from December 
2020.

New funding arrangements with our 
banking syndicate were announced 
in July. ANZ and BNZ have been 
supportive of the Synlait story and 
strategy since the early 2000s and 
2011 respectively. We are pleased 
to have completed this refinancing 
exercise and to provide increased 
certainty for all our stakeholders.

A changing team 
Executive changes 
The pandemic’s impact on Synlait is 
obvious and unfortunate. During the 
year CEO Leon Clement, CFO Angela 
Dixon, and Director Operations Mark 
Toomey resigned. We thank them all 
for their contribution and commitment 
to Synlait. 

John Penno, Synlait Co-Founder, 
Former CEO, and current Director 
stepped into the Interim CEO role. 
From John’s 1 May start date, he set 
about formulating a plan for our return 
to profitability. John has been ably 
assisted by Robert Stowell, a long-
term senior leader at Synlait, who 
has been appointed as our CFO, and 
by Matthew Foster, a retired senior 
manager who returned as Acting 
Director Operations. 

Earlier this month we announced a 
consultation process had commenced 
with staff to update our organisational 
structure. The changes, which are now 
finalised and included in the Investor 
Presentation released alongside this 
Annual Report, align leadership and 
resourcing around key business units 
(Nutritionals, Ingredients, Liquids and 
Consumer Foods). 

As a final step in the process to reset 
Synlait, today we announced our 
new CEO. Grant Watson will join the 
Synlait team in January 2022. Grant 
is currently CEO of dairy company, 
Miraka. Prior to Miraka, He spent 
10 years at Fonterra where he held 
several senior roles including Director 
of Global Foodservice, Acting 
Director of Sales Fonterra Brands 
New Zealand, Managing Director of 
Tip Top and Director of Route and 
Foodservice Fonterra Brands New 
Zealand. Prior to Fonterra, Grant built 
his executive career at McDonalds 
New Zealand to become Chief 
Operating Officer. He has also held 
several governance and directorship 
roles for private and publicly listed 
companies.

Grant has a track record of materially 
transforming and accelerating 
businesses by setting clear 
strategies, surrounding himself 
with diverse and talented people, 
and relentlessly driving execution 
to deliver strong sustainable 
results. Prior to Miraka, Grant led 
the significant growth of Fonterra’s 
Global Foodservice business 
and has overseen the successful 
commercialisation of numerous 
value-added dairy products. This 
is a key part of Synlait’s strategy 
going forward and we look forward 
to benefiting from his skills and 
experience.

Grant will be supported by Nigel 
Macdonald who was appointed as 
our new Director Operations last 

month. Nigel has had a lengthy tenure 
in the global dairy industry and has 
led operations, manufacturing, and 
supply chain teams in the areas of 
infant nutrition, fast moving consumer 
goods, and ingredients in New 
Zealand, the Middle East, and Latin 
America. He is currently General 
Manager, Manufacturing at Baladna 
Food Industries, Qatar’s leading dairy 
company.

We look forward to Grant and Nigel 
joining our team over the coming 
months.

Governance changes  
As announced in 2018 when standing 
for re-election, I intended for this 
to be my last three-year term as a 
Director and Chair. Having been 
Synlait’s inaugural Chair, and on the 
Board for some 17 years, it is certainly 
time to hand over to a successor. Our 
poor financial performance, however, 
does not make it an ideal time to lose 
industry knowledge and experience. 
Therefore, when Grant starts as CEO, 
I will retire as Chair and be appointed 
as a Board Advisor for one year.

John Penno will assume the role 
of Chair. This is a very logical step 
for Synlait. John has been the chief 
architect of our recovery plan and is 
the best position to Chair the Board 
and guide Grant through his induction 
and establishment. 

As John is a Board Appointed Director 
the Board will seek ratification from 
shareholders at the Annual Meeting in 

December via a change to Synlait’s 
constitution. The constitution 
will be amended to remove the 
requirement for the Chair to be an 
Independent Director. This will be a 
temporary measure as the Board is 
aware it is best practice to have an 
Independent Chair.

slowly and our Dairyworks business 
to trade well. The increased size of 
our ingredients business also has the 
right customer base to support our 
expanded capacity. However, it will 
be FY23 before our new multinational 
customer at Synlait Pokeno adds 
significant value to our performance. 

When I retire in 2022 the Board 
will appoint Paul McGilvary as an 
Independent Director. Paul has 
extensive experience in the dairy 
sector. He is currently Deputy Chair 
of AsureQuality, Chair of BVAQ 
Australia, and a Non-Executive 
Director of Waikato Milking Systems. 
Paul previously held several 
executive roles including, CEO of 
Tatua Co-operative Dairy Company 
Limited, CEO of HortResearch, 
and Managing Director, Fonterra 
(Europe). Paul’s strong dairy 
experience gives the Board every 
confidence that this will make him 
an asset to the Synlait Board. Paul’s 
appointment will be ratified by 
shareholders at the 2022 Annual 
Meeting.

As a shareholder you will have the 
opportunity to ask questions and 
vote on these changes at our Annual 
Meeting to be held on 1 December in 
Christchurch. We hope to have your 
support. 

A return to sustainable profitability 
Our key priority is to return Synlait to 
profitability in a sustainable manner. 
We expect our consumer-packaged 
infant formula business to recover 

Under these conditions we do see 
a return to profitability, but not 
immediately to previous levels. Synlait 
expects its Net Profit After Tax result 
to return to robust profitability in 
FY22 based on tighter management 
of its Ingredient business, improved 
infant base powder volumes and 
cost savings. By the end of FY23, the 
recovery plan will have seen Synlait 
return to similar levels of profitability, 
operating cash flows, and debt ratios 
as the years leading into FY21. The 
full guidance statement can be found 
in the Investor Presentation.

A final thanks 
The last 12 months has also been 
challenging for our farmer suppliers 
as they battle a rapidly changing 
regulatory environment, labour 
shortages due to COVID-19, and 
a significant flooding event in 
Canterbury. I acknowledge that the 
impact of COVID-19 and Synlait’s 
financial performance has been 
unsettling. The importance of our 
relationship with you cannot be 
overstated. I thank you for your loyal 
support.

ANNUAL REPORT 2021PAGE 12 & 13

When I joined Synlait in 2004, we 
set out to develop a billion-dollar 
company, and we did. It is unfortunate 
that the timing of my retirement as 
Chair coincides with one of our poorer 
financial performances, however, 
I remain very proud of the company 
we have built. There have been 
many ups and downs, but COVID-19 
has certainly been a rollercoaster, 
particularly for our staff whose initial 
pandemic response started with 
strong consumer-packaged infant 
formula orders and ended with 
the reorientation of our facilities to 
manufacture ingredients. Doing Milk 
Differently For A Healthier World once 
again proved its resilience and value 
as we navigated the challenges of the 
last 12 months, and I have no doubt it 
will continue to do so as we focus on 
rebuilding the business and returning 
to profitability. 

Thank you to our shareholders, 
farmer suppliers, customers, and 
staff for your continued belief in the 
Synlait story. We could not do this 
without you.

Graeme Milne, ONZM 
Chair

Our Liquids business started with a 10-year supply 

agreement with Foodstuffs South Island for the 

exclusive manufacture of their private label brands 

of Pams and Value fresh milk and cream which 

commenced in April 2019.

ANNUAL REPORT 2021PAGE 14 & 15

SYNLAIT SWAPPA 
BOTTLE

We will launch our first consumer 
foods product under our own brand – 
Synlait Swappa Bottle – next month.  

Synlait Swappa Bottle is a 1.5 litre 
reusable, stainless steel bottle of 
homogenised milk exclusively 
sourced from Synlait’s highest 
performing farms. The Synlait 
Swappa Bottle concept is simple – 
drink, return, repeat.

New Zealanders have been telling 
us for years that they are deeply 
concerned about plastic waste, but 
in milk, there haven’t been many 
options. Synlait Swappa Bottle 
is a step in the journey towards 
eliminating plastic waste. Each time 
we drink, return, repeat, we contribute 
to a better future.

Synlait Swappa Bottles are initially 
being launched in South Island New 
World stores, with plans to widen 
distribution over time.

We have signalled our intention to 
move closer to the consumer for some 
time. Our acquisition of Dairyworks in 
2019 was the start of this and adding 
Synlait-branded product strengthens 
and complements our business 
portfolio and expertise.

The Synlait Swappa Bottle carries the 
B-Corp stamp representing our 2020 
certification and commitment to using 
business as a force for good.

ANNUAL REPORT 2021PAGE 16 & 17

CEO 
REVIEW

Dear Shareholders

The past year proved to be very 
challenging for Synlait Milk.

After nine straight years of 
solid profitability, we are bitterly 
disappointed to post our largest ever 
financial loss. While the reasons for 
this have been widely canvased and 
signalled in our half year results, it is 
important we go over these to ensure 
you understand the drivers, and more 
importantly feel confident in our path 
forward.

During the last quarter of this financial 
year the Board and management 
worked together to build a clear and 
accurate picture of our performance 
over the last five years. We needed 
to quickly understand what must be 
done to rebuild Synlait’s financial 
strength, because this business has 
far from reached its potential.

I hope this report demonstrates that 
we have taken stock, understood, 
and learnt from what went wrong, and 
that we have a clear plan to return to 
profitability.  

Our strategy remains fit for purpose 
As part of this process, we paused 
and reconsidered Synlait’s strategy 

Synlait Co-Founder, Director and Current CEO 

Dr John Penno

to ensure we remained confident in 
it. We are. Synlait Milk has always 
had the enormous advantage of 
starting fresh some 13 years ago, as a 
small part of a large, successful, and 
well-established global industry. Our 
strategy fundamentally plays to this 
competitive advantage and is driven 
by our purpose: Doing Milk Differently 
For A Healthier World.

As obvious as it seems, we are 
focused on the things consumers 
increasingly value. While everyone 
wants great tasting and performing 
dairy products at a fair price, there is 
a growing focus on where products 
come from and how they are made. 
Like you and me, consumers are 
demanding more information about 
where their food comes from and are 
increasingly supporting brands and 
companies that are doing their part 
to protect and nurture people and 
planet. In all that we do, from the way 
we work with our farmers, to how we 
operate our manufacturing processes, 
we have invested in developing a 
leadership position in our industry. 
We are very proud of the industry-
wide changes we have been part 
of delivering, particularly on-farm 
sustainability. This is part of what 
makes Synlait unique. 

To support this, our strategy has 
matured into four parts:

• 

Ingredients – an efficient 
and focused business that 
manufactures high-quality whole 
and skim milk powder and milk fat 
products from a differentiated milk 
supply for leading multinationals 
and large Chinese customers. 

•  Nutritionals – offers a whole of 
supply chain solution for large-
scale, world-class, multinational 
brand owners of infant, children, 
and adult formulated nutritional 
powders. This business also 
manufactures specialised 
nutritional ingredients such as 
base powders for others to blend 
and package, and lactoferrin as a 
high value ingredient.

• 

• 

Liquids – a growing business 
focused on product development 
and innovation to manufacture 
high-specification, long-life 
consumer-packaged beverages, 
foodservice cream products and 
ready to feed infant formula.

Consumer Foods – a manufacturer 
of consumer fresh milk, cheese, 
butter, and yogurt products in 
the New Zealand and Australia 
domestic markets under our own 
and/or private label brands.

ANNUAL REPORT 2021PAGE 18 & 19

Ingredients 
From day one we worked hard to build 
a strong dairy ingredients business 
based on the fundamentals of being 
a small, but respected manufacturer 
of high-specification milk powders 
and cream products. This enabled us 
to develop meaningful relationships 
with the world’s leading consumer 
dairy and infant formula companies, 
and this created a solid foundation 
for everything else we do. Synlait 
built its profitability from operating its 
Ingredients business to the highest 
quality standards, facility utilisation, 
and low-cost structures, as we learnt 
our way in the global dairy industry. 

Nutritionals  
The second part of our strategy was 
to add as much value as we could 
to the products we manufactured. 
Our aspiration at the beginning was 
to simply: Make More From Milk. By 
the time we built our small-scale high 
specification specialty milk dryer at 
Synlait Dunsandel in 2009 it was clear 
that the enormous growth of China’s 
infant formula market would play a key 
role in our future. 

By 2010 we had raised the 
necessary capital to build New 
Zealand’s first global scale infant 
formula manufacturing facility 
and since then we have built out 
a highly integrated infant formula 
manufacturing organisation that 
meets the high standards of both 
multinational customers and the 
increasingly demanding Chinese 
regulatory regime, the world’s 
largest infant nutrition market. 
We have invested significantly in 
regulatory management, product 

formulation, quality, full laboratory 
services, procurement, supply 
chain management, wet mix, spray 
drying, dry blending and consumer 
packaging. These services are what 
makes Synlait truly unique.

In parallel, we developed our own 
proprietary lactoferrin manufacturing 
process which has become world 
leading and delivers high quality 
lactoferrin. This process was 
specifically designed by our research 
and product development team to 
manufacture lactoferrin product for 
use in infant formula. A study by the 
University of California Davis which 
tested key biological functions of 
lactoferrin relevant for infant nutrition, 
found that Synlait lactoferrin was 
one of the best performing products 
among ten commercial samples, 
with researchers highlighting its 
purity which was similar to human 
lactoferrin. We have built a successful 
business using our own formulations 
and product is sold to our well-
established multinational customer 
base and leading Chinese infant 
formula customers.

As our Nutritionals business 
developed, we built a strong 
partnership with The a2 Milk 
Company, who Synlait have an 
exclusive manufacturing and supply 
arrangement with for a2 Platinum® for 
the New Zealand, Australia, and China 
markets. This business grew fast, as 
other early partners in our portfolio 
fell away failing to achieve the various 
regulatory hurdles needed for the 
China market. Our partnership with 
The a2 Milk Company remains our 
most important, and we believe it will 

continue to be for some years. While 
our relationship continued to grow, we 
also recognised it came with customer 
and market concentration risk. To 
address this, we looked to diversify 
within the broader formulated milk 
products category and into new 
markets.  

Almost 12 months ago we signed a 
third-party manufacturing agreement 
with an established, global category 
leader in the Asia Pacific region, for 
spray-dried and consumer packaged 
nutritional powder products. In 
our first full year of production in 
FY24, these high value plant-based 
products are expected to increase 
our nutritional consumer-packaged 
volumes by 35%-40%. We expect 
to grow volumes and add further 
markets and products to this 
agreement over time. 

We are investing approximately 
$85 million in the processing and 
packaging customisation needed to 
support this new customer at Synlait 
Pokeno and Auckland. The sachet 
filling line being installed will expand 
our nutritional consumer-packaging 
capability from cans to sachet and 
enable bag-box type formats, which 
are in demand in specific markets. 
Commercial production remains on 
track to start in late 2022. 

Over recent years China’s infant 
nutrition market has swung in 
favour of locally manufactured 
brands. Initially, this meant our infant 
formula base powder business to 
multinationals fell away as demand 
growth had fallen for their products.  
However, we are starting to see new 

demand emerging from large Chinese 
manufacturers as their market 
share growth exceeds their own 
manufacturing capacity presenting 
an opportunity for us to rebuild this 
business with new partnerships.

Over the next two years we expect to 
see our Nutritionals business mature. 
It has an excellent foundation with The 
a2 Milk Company, and our second, 
large-scale, long-term relationship 
with the multinational customer 
at Synlait Pokeno is an enormous 
opportunity, as are the relationships 
we are building with new, emerging 
infant formula players in China. Our 
strong position in the global lactoferrin 
market also remains a cornerstone of 
this business.

Liquids 
The third part of our strategy is 
Liquids. It is based on a strongly held 
view that in time China will move away 
from powdered products to fresh or 
long-life milk products packaged at 
source and shipped to market ready 
for distribution and sale.

Taking the same approach as we 
did with our lactoferrin business, we 
invested in building a facility at Synlait 
Dunsandel to make these products. 
We also invested in the establishment 
of a research and development team 
at Massey University in Palmerston 
North. This team has developed 
high performing processes and 
products in the formulated creams, 
ambient drinking yogurt, and ready-
to-feed infant formula categories 
– all fast growing, or high potential 
opportunities in affluent regions 
of China.

Our Liquids business began with a 
10-year agreement with Foodstuffs 
South Island signed in December 
2017 for the exclusive manufacture 
of their private label brands of Pams 
and Value fresh milk and cream 
commencing in April 2019. To build 
on this we are about to launch Synlait 
Swappa Bottle next month, our first 
product under our own brand. The 1.5 
litre reusable, stainless steel bottle 
of homogenised milk is exclusively 
sourced from our highest performing 
farms and will be available in South 
Island New World stores. 

Consumer Foods 
We have signalled our intention to 
move closer to the consumer for some 
time. The Dairyworks acquisition was 
the start of this and forms the fourth 
part of our strategy. Our ambition is to 
become the second largest player in 
New Zealand’s consumer dairy food 
category, and in time, use this, and our 
wider Synlait capability, to develop our 
own branded consumer dairy foods 
export business.  

After fresh milk, cheese is the second 
largest part of the consumer dairy 
food category. Dairyworks’ portfolio 
of cheese and butter brands has 
national reach and is growing steadily 
in Australia. Dairyworks packages 
approximately 60% of New Zealand 
domestic consumer cheese sales; 
made up of around 30% of Dairyworks 
own branded products, and cheese it 
packages for other household brands.   

While dominant in the cheese 
category, the strategy is to move 
from cheese to dairy and build out a 
portfolio of butter, yoghurt, and fresh 

milk products. So far this is going 
well with Dairyworks’ Protein Yoghurt 
& Muesli launched in New Zealand 
during FY21, with sales 106% ahead 
of forecast. Dairyworks’ Flavoured 
Butters also launched in Australia, 
with sales 132% ahead of forecast.

We have also been working with the 
Dairyworks team to leverage Synlait’s 
liquids capability and in September 
started to manufacture Dairyworks 
fresh milk. Initially this will focus on 
the Foodservice channel with an 
ambition to extend into retail and have 
national distribution. 

Dairyworks has been part of the 
Synlait family for around 18 months. 
Dairyworks’ EBITDA contribution for 
FY21 was disappointing and lower 
than anticipated at $10.3 million. 
This was mainly due to a profit drag 
caused by the Talbot Forest Cheese 
Temuka site because of whey stream 
losses and the high comparative 
cost of manufacturing due to its 
low utilisation, butter margins being 
squeezed by the high cost of milk and 
a new entrant in the market, and one-
off write-downs of inventory balances. 
While earnings were disappointing in 
FY21 we anticipate a strong bounce 
back in FY22 and FY23 as we rectify 
these issues and continue to grow the 
business.

The year that’s been – what we learnt  
During the final quarter of FY21, 
the Board and management team 
completed a comprehensive 
review of Synlait to ensure we 
had a robust understanding of our 
underperformance. What quickly 
became clear is that while the sudden 

ANNUAL REPORT 2021PAGE 20 & 21

and unexpected downturn in The a2 
Milk Company’s demand explained 
much of our underperformance 
in FY21, it also revealed other 
inefficiencies within Synlait that had 
been developing over a longer time. 
We have learnt that:

New business areas had been slower 
to develop than planned 
While major capital facilities had 
largely been built to budget, and 
operational costs remain within 
forecast, inadequate focus and 
investment in business development 
means new opportunities have been 
slow to develop. 

Cost structures had been allowed to 
grow at a faster rate than earnings 

Some of this was due to new facilities, 
new locations and business areas 
being developed, but closer analysis 
highlighted that in general costs 
had grown unnecessarily in well-
established parts of Synlait.

The use of capital has become 
suboptimal in three areas:

1. 

Large capital projects were 
completed delivering capacity 
well ahead of demand coming 
onboard. Further, this capacity 
was held in reserve for high value 
opportunities rather than utilising 
it earlier on lower value products 
while a pipeline of high value 
opportunities was developed.

2.  Maintenance CAPEX was too 

high and smaller capital projects 
had failed to deliver expected 
outcomes.  

3.  While COVID-19 was a factor, 
other issues such as sales 
phasing, overly onerous 
contractual arrangements, raw 
material management, and 
unnecessarily high inventory 
levels consumed significant 
amounts of working capital.

The path to recovery  
Developing a clear understanding 
of the drivers of Synlait’s 
underperformance enabled a clear 
mandate to turnaround performance. 

Synlait’s structure has been 
reorganised around the four business 
units: Ingredients, Nutritionals, Liquids 
and Consumer Foods. Leadership 
and resourcing now aligns with these 
business units. Manufacturing facilities 
and teams are organised horizontally 
by business unit which are led by 
Synlait’s consumers and customers. 
Network planning, quality and 
laboratory, and corporate services run 
across the whole business. 

Our aim is to reduce silos and give our 
teams the flexibility to plan, execute 
and monitor performance, while 
recognising the clear differences in 
customers and markets they serve. In 
addition, new processes have 
been implemented around 
maintenance and capital expenditure 
to reduce investment in the coming 
years as most of our facilities are 
relatively new.

numbers by 15%, delivering estimated 
annual savings of $10 to $12 million 
and approximately $6 to $8 million in 
FY22. These estimated savings are 
in addition to what was identified and 
discussed at our half year result, and 
with our focus on increasing sales and 
reduced cost and capital expenditure 
in FY22, we expect a reversal of some 
significant one-off costs we faced in 
FY21 as well.

Ingredients  
Separating out the Ingredients 
business will enable a renewed focus 
on facility utilisation, supply chain and 
manufacturing efficiency. It will also 
generate a cost structure more on par 
with our competitors. Sales strategies 
will be an optimum blend of long-
term relationships with multinational 
customers, delivering premium pricing 
for high specification products, and 
a sufficient spot business to optimise 
product mix as market pricing 
fluctuates.

Our Ingredients business under-
performed in FY21 relative to our 
expectations. Our management 
of sales pricing and phasing was 
disappointing, and our product mix 
was at times uncompetitive relative to 
the New Zealand milk price because 
of our reliance on AMF where returns 
lagged behind butter. This happens 
on a cyclical basis and has since been 
unwound.

As recently announced, this change 
in organisational structure identified 
an opportunity to reduce our staff 

Nutritionals  
The Nutritionals business will focus 
on developing and maintaining 
strong relationships with large 

multinational and Chinese customers. 
We will continue to focus on product 
innovation and quality, and ensure 
pricing rewards the capability we 
provide across our highly integrated 
manufacturing and supply chain. 
We anticipate that this business will 
grow to high levels of utilisation 
over the next three years, with 
some recovery expected in The a2 
Milk Company’s volumes, and as 
commercial production starts for our 
new multinational customer at Synlait 
Pokeno.

Liquids  
Our Liquids business will be managed 
separately with a focus on developing 
and nurturing our new high-value, 
future-focused product suite 
predominately for the China market.

Consumer Foods  
Dairyworks is the centre point of 
our Consumer Foods business and 
is focused on building new market 
opportunities that are adjacent to its 
well-established cheese business. 
Operational efficiency and cost 
control remain a focus as Dairyworks 
leverages Synlait’s expertise. 

Working with the wider Synlait team 
we are developing a project that will 
be executed over the next two years 
to deliver a standardised cheese milk 
from Synlait Dunsandel with whey and 
lactose removed to greatly reduce 
the loss of valuable solids from the 
cheese manufacturing process. This 
will enable cheese manufacturing to 
start at Synlait Dunsandel from FY24.  

We are confident in 
our immediate outlook 
Over the past year we have faced 
several financial challenges that we 
would not expect to repeat.

In summary, we came into FY21 with 
large volumes of nutritionals powders 
on hand (40% of forward demand 
at that time) on the expectation that 
consumer-package infant formula 
volumes would grow. The eventual 
35% drop in sales volumes translated 
into a 67% reduction in nutritionals 
powder production due to a forward 
view of FY22 – and with it a very large 
reduction in fixed cost recoveries 
which were carried through the P&L. 

Our current FY22 forecast for 
consumer-packaged infant formula 
volumes is conservative and will result 
in a further reduction in infant formula 
base powder stocks for this financial 
year. However, manufactured volumes 
will increase roughly 30% to 40% 
this year relative to last year bringing 
greater fixed cost recoveries. 

As part of the year-end process, we 
have taken a high amount of inventory 
provisions as we have high relative 
amounts of distressed stock due to 
the consumer-package infant formula 
demand volume downgrade and 
some quality and aging stock issues in 
quarter four. 

At some level, most of the above 
points to the need for greater 
precision of planning and execution.  
In addition to the organisational 
restructure, we have a renewed 
emphasis on reviving our integrated 
planning processes which will 

remain centrally organised across 
the different business units. The 
implementation of our Enterprise 
Resource Planning system will provide 
an operating platform to support our 
growth well into the future.   

Our expectation is for a return to 
robust profitability in FY22 based on 
a return to normal trading conditions 
and tighter management of our 
ingredient business, improved infant 
base powder volumes, a growing 
contribution from our Liquids and 
Consumer Foods businesses, and 
targeted and significant cost savings 
from Synlait, Dairyworks and Talbot 
Forest Cheese. 

FY22 will also include a one-off gain 
on sale of approximately $17 million 
from the sale and leaseback of the 
land and building at Synlait Auckland. 

Our performance will build into FY23 
as our new multinational customer 
at Synlait Pokeno ramps up, and 
the Liquids and Consumer Foods 
businesses continue to grow.

Planned reductions in inventory at 
Synlait and Dairyworks will generate 
operating cashflows in excess of 
earnings. These strong cashflows 
will enable us to complete our capital 
expenditure programme and reduce 
debt to comfortable levels over the 
next two years. 

By the end of FY23, the recovery plan 
will have seen Synlait return to similar 
levels of profitability, operating cash 
flows, and debt ratios as the years 
leading into FY21.

CEO REVIEW CONTINUES ON PAGE 25 >

ANNUAL REPORT 2021PAGE 22 & 23

THE PATH TO RECOVERY: ALIGNING STRUCTURE 
TO STRATEGY AND RESETTING HOW WE OPERATE

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NUTRITIONAL 
PRODUCTS

Supply

Order

Supply

Synlait Pokeno and Auckland: 
D4, wetmix and blending and canning

Synlait Dunsandel: D3, wetmix, 
lactoferrin, blending and canning, whey

INGREDIENT 
PRODUCTS

Optimise

LIQUID 
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Talbot Forest Cheese

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D1, D2, AMF

Synlait Dunsandel: 
DLP1

DAIRYWORKS

Supply

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PROCUREMENT AND MILK SUPPLY

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ANNUAL REPORT 2021 
 
 
 
 
 
 
 
 
 
PAGE 24 & 25

THE PATH TO RECOVERY: 
SYNLAIT’S NEW ORGANISATIONAL STRUCTURE

Grant Watson*** 
Chief Executive Officer

Suzan Horst 
Quality, Regulatory and 
Laboratory Services

Nigel Macdonald** 
Director, 
Operations

Robert Stowell*  
Chief Financial 
Officer

Boyd Williams 
Director, People 
and Culture

Deborah Marris 
Director, Legal, Risk 
and Governance

Chris France  
Director, Strategy and 
Business Transformation

NUTRITIONAL PRODUCTS

Sales and Business 
Development

Quality Management

Synlait Dunsandel: D3, 
wetmix, lactoferrin, whey 
and blending and canning
Synlait Pokeno 
Synlait Auckland

Dedicated Finance 
Manager 

Business teams with P&L responsibility

Martijn Jager 
Director, Sales and 
Business Development

INGREDIENT PRODUCTS

Sales and Business 
Development

Quality Management

Synlait Dunsandel: 
D1, D2 and AMF
Talbot Forest Cheese

Dedicated Finance 
Manager 

Business teams with P&L responsibility

Marketing and Business 
Development

Quality Management

Synlait Dunsandel: 
DLP1

Dedicated Finance 
Manager 

Business teams with P&L responsibility

LIQUID PRODUCTS

Hamish Reid 
Director Sustainability, 
Brand & Liquid Products

Tim Carter 
Dairyworks Chief 
Executive Officer

Marketing, Sales 
and Business Development

Operations

Chief Financial Officer

DAIRYWORKS

*  Robert has been appointed CFO after acting in the role for the last five months.
**  Nigel will join Synlait in November subject to completing MIQ requirements.
*** Grant will join Synlait in January 2022.

Thank you 
I would like to thank the management 
team for their work, particularly over 
the last six months. Facing into and 
executing this level of change has been 
great to be part of again. I am very 
proud of the way you met the challenge 
head on and delivered. I would 
particularly like to thank Matthew Foster 
and Robert Stowell who both stepped 
into key roles at short notice and have 
driven the changes required with true 
professionalism.

Today we announced a new Synlait 
CEO, Grant Watson, who will join 
the team in 2022. I look forward to 
introducing you to Grant next year. Grant 
will be joined by Robert Stowell who has 
been appointed CFO after acting in the 
role for the last five months.

Thanks also to our suppliers, including 
our farmers, who have continued to 
partner and support us through a 
challenging year.

To our shareholders, I thank you for your 
patience. We have fallen far short of our 
own, and I am sure, your expectations 
over the past period. Having read this 
report, I trust you recognise a business 
that has taken the opportunity to pause, 
learn, change, and then double down 
on delivering the potential that the 
Board, management, and I firmly believe 
is there for the taking. You have my 
commitment that we will work to get the 
job done.

Dr John Penno  
Co-Founder, Director and Current CEO

ANNUAL REPORT 2021PAGE 26 & 27

CELEBRATING 
OUR FARMERS

The annual Synlait Dairy Honours 
Awards recognise best in class dairy 
farming. We presented four national 
awards along with eight regional 
awards at our 2021 Synlait Winter 
Farmer events. 

The Kotahitanga Award focuses on 
the all-important people side of dairy 
farming, and it recognises the team 
spirit of a farming operation. The 
winners this year were Glen Ashford 
and Shelley Lawson of Kaimai Dairy 
Farm Ltd. (pictured).

The judges for the award remarked 
“the minute Shelley and Glen’s 
employees start, they are welcomed 
into a culture of collaboration, support 
and clarity. There is an exceptional 
induction process; and a calendar 
of events is put together in the first 
few weeks. The unique job title 
structure put in place on-farm ensures 
employees have complete clarity over 
their roles and a clear pathway of 
progression. Shelley and Glen have 
fostered an inclusive and collaborative 
approach to improvement and 
problem solving. Staff members 
are given the opportunity to share 
feedback and ideas. Shelley and Glen 
also go the extra mile for their farm 
team, whether it is takeaway nights, 
or going fishing or hunting with Glen. 
These two are true role models of 
Kotahitanga.”

ANNUAL REPORT 2021PAGE 28 & 29

OUR BOARD

OUR EXECUTIVE TEAM

Graeme Milne ONZM (Chair)

Dr John Penno

Min Ben

Dr John Penno
Chief Executive Officer

Robert Stowell
Chief Financial Officer

Boyd Williams
Director, People, Culture  
and Performance

Hon. Ruth Richardson

Sam Knowles

Sihang Yang

Chris France
Director, Strategy and Business 
Transformation

Deborah Marris
Director, Legal, Risk and 
Governance

Hamish Reid
Director, Sustainability, Brand and 
Liquid Products 

Simon Robertson

Qikai Lu

LEARN MORE

The Board’s full profiles are available 
on our website: synlait.com/people

Martijn Jager
Director, Sales and Business 
Development

Matthew Foster
Acting Director, Operations 

Dr Suzan Horst
Director, Quality, Regulatory and 
Laboratory Services

LEARN MORE

Our Executive Team’s full profiles  
are available on our website:  
synlait.com/people

ANNUAL REPORT 2021PAGE 30 & 31

WHAKAPUĀWAI -
To cause to blossom, develop, 
flourish, prosper, thrive

Almost 80,000 plants went into the 
ground during the 2021 planting 
season as part of our Whakapuāwai 
programme. Whakapuāwai connects 
our people, our farmers, and our 
community through the planting of 
native trees. This year we also began 
on-farm planting in the North Island. 
Six Waikato farms took part with 
around forty staff planting 7,500 trees 
alongside our farmers.

ANNUAL REPORT 2021PAGE 32 & 33

REVIEW OF FINANCIAL 
PERFORMANCE

Dear Shareholders

FY21 proved to be a very challenging year for Synlait Milk. After nine years of profitability, it is disappointing to post 
the company’s largest ever loss. 

COVID-19 hit Synlait late and hit the company hard. Following the initial COVID-19 upside caused by pantry stocking 
of consumer-packaged infant formula, the market corrected as channels shut down due to boarder closures. When 
this business fell away other areas of underperformance were identified within Synlait that contributed to this result. 

Today’s result is within the guidance range provided in May of a loss of $20 million to $30 million NPAT. More 
importantly however, are the actions taken in the last quarter of FY21 to review the strategy, align structures, 
refinance the business, and turn around financial performance through a combination of initiatives that will set the 
company up for the future growth.

In this Annual Report, and accompanying Investor Presentation, business performance is presented under our four 
new and revised key business units: Nutritionals (consumer-packed nutritional products, base infant formula sold to 
external customers and consumed into consumer-packaged infant formula, and lactoferrin), Ingredients (commodity 
ingredients – whole milk powder, skim milk powder, anhydrous milk fat, butter milk powder), Liquids, and Consumer 
Foods (Dairyworks). Downgraded product has been allocated to the business unit to which it relates.

Synlait CFO Robert Stowell

ANNUAL REPORT 2021PAGE 34 & 35

FINANCIAL PERFORMANCE

Sales and gross profit performance
Total revenues of $1,367.3 million are $65.3 million, or 5%, higher than FY20. Total sales volume of 218,758 MT are 12% 
higher. Revenue growth was largely driven by the first full year contribution from Dairyworks of $229.0 million (FY20 
$92.0 million). Dairyworks’ revenue increase was offset by a $72.2 million reduction in Synlait’s revenue contribution 
driven by the well-canvased impact COVID-19 has had on our key customer, The a2 Milk Company. This resulted in a 
significant product mix shift from higher value consumer-packaged infant formula to ingredients.

Sales (metric tonnes)

Nutritionals
Ingredients
Liquids
Consumer Foods
Total

Gross profit by business unit1 

FY21

FY20

% Change

Sales Volume (MT)
Gross Profit ($)
Gross Profit/MT

Sales Volume (MT)
Gross Profit ($)
Gross Profit/MT

Sales Volume
Gross Profit
Gross Profit/MT

FY21

34,362
125,914
31,499
26,983

218,758

FY20

52,871
97,561
32,803
12,015

195,250

Nutritionals

Ingredients

Liquids Consumer Foods

34,362
42.8
1,246

52,871
170.0
3,215

(35%)
(75%)
(61%)

125,914
14.5
115

97,561
31.3
321

29%
(54%)
(64%)

31,499
(4.9)
(154)

32,803
(2.2)
(66)

(4%)
(125%)
(135%)

26,983
15.3
568

12,015
2.2
186

125%
587%
206%

Growth %

(35%)
29%
(4%)
125%

12%

Total

218,758
67.7
310

195,250
201.3
1,031

12%
(66%)
(70%)

1 Gross profit per MT includes downgrade product related to each business unit. Gross profit not attributable to business units is not included

Nutritionals
Our Nutritionals business unit includes consumer-packaged infant formula, base infant formula both sold to external 
customers and consumed into consumer-packaged infant formula, and lactoferrin. Nutritional volumes fell 35% to 
34,362MT. This was driven by the material reduction in consumer-packaged infant formula demand. Nutritionals gross 
profit per MT decreased significantly to $1,246 due to the high level of under-recovered manufacturing overheads 
resulting from the significant reduction in base infant formula manufactured. The lactoferrin business continues to 
perform, despite unfavourable market pricing. Lactoferrin sales increased 10% to 33MT driven by increased production 
and demand. Gross profit at $25.1 million and gross profit per MT at $758,264, both decreased.

Ingredients
As a result of a drop in consumer-packaged infant formula demand, and significant volume of base infant formula carried 
forward from FY20, Synlait immediately turned to manufacturing ingredient products. Consequently, sales of ingredients 
increased 29% to 125,914MT. A few factors affected margins in a challenging year for ingredients - the most notable of 
which was butter prices being very high relative to AMF prices when Synlait is not a butter producer. The sudden nature 
of the change in the sales product mix, together with a sharp increase in global dairy commodity prices, meant we did 
not achieve our usual ingredients premiums. Global shipping delays due to the pandemic, and late season volumes, also 
meant we ended the financial year with ingredients inventory at historically high levels. Ingredients gross profit per MT of 
$115 is down 64% as a result. 

Separating out the Ingredients business in FY22 will enable a renewed focus on pricing performance, manufacturing 
efficiencies and supply chain management, and generate a cost structure more on par with Synlait’s competitors. 
Therefore, we expect this business should see a material improvement over the coming year.

Liquids
Sales volumes of liquid milk and creams in FY21 were down 4% under our agreement with Foodstuffs South Island due to 
the positive impact COVID-19 lockdowns had on consumer demand in FY20. The focus in this business is on developing 
and nurturing new high-value, future focused product suites aimed at both the domestic market and maturing China 
market. Volumes and profitability will increase overtime as several initiatives are launched over the next 12 months. 
Overall, the Liquids business delivered a gross loss of ($4.9) million.

Consumer Foods
Synlait benefited from the first full year of Dairyworks’ operations with sales volumes of 26,983 MT (FY20: 12,015MT). 
The divestment of the Deep South brand and associated ice cream operations to Talley’s in November 2020 enabled 
Dairyworks to focus back onto core business and continued progression of strategy to move from cheese to dairy. This 
has been successful with Dairyworks launching a range of products over the past 12 months including Dairyworks Protein 
Yoghurt & Muesli launched in New Zealand, sales 106% ahead of forecast and Flavoured Butters launched in Australia, 
sales 132% ahead of forecast. Dairyworks’ full year gross profit contribution is $15.2 million. EBITDA contribution of $10.3 
million is lower than expected due to profit drag caused by Talbot Forest Cheese (whey stream losses and low utilisation), 
butter competition, and one-off inventory write-downs. 

Milk price and milk supply
Raw milk remains Synlait’s most significant component of our cost of goods sold. 

Our final base milk price for the 2020/21 season is $7.55 per kgMS, compared to our 2019/20 base milk price of $7.05 
per kgMS. In addition, we paid out an additional $0.27 per kgMS in incentive and premium payments through a2, Lead 
With Pride™ and winter milk payments, increasing the average total milk price to $7.82 per kgMS compared with $7.30 
per kgMS in 2019/20. Premiums and incentive payments are higher in 2020/21 predominantly through an increase in our 
winter milk and Lead With Pride™ payments. This resulted in our contracted suppliers receiving a total of $23.5 million in 
additional value-added premiums in the 2020/21 season, compared to $19.3 million in 2019/20.

ANNUAL REPORT 2021PAGE 36 & 37

We received 86.8 million kgMS from our contracted suppliers, 10.3 million kgMS more than FY20, as we increased our 
farm supplier network across both of our sites. We also sold (net) 4.1 million KgMS over the season, resulting in an overall 
17%, or 12.3 million kgMS, increase in milk processed in FY21. 

Net financing costs
Net financing costs increased 0.5% to $21.5 million.

Average reference commodity prices increased sharply through the 2020/21 milk season until March after which they 
remained relatively steady through to the end of the season. The average reference basket price in the 2020/21 season 
increased to USD$3,358, a 7% increase vs the 2019/20 season. This increase is the key contributor to the $0.50 increase 
in the average base milk price paid to our suppliers in 2020/21.

Overhead expenditure 
Overhead expenses increased $6.7 million to $88.8 million. This was driven by the inclusion of Dairyworks overhead 
expenditure ($6.8 million), employee costs ($1.3 million), provisions and write-downs ($1.5 million), and IT costs relating to 
software as a service and cyber security costs ($1.3 million) offset by lower multi-site distribution costs (-$1.1 million) and 
other controllable costs (-$3.1 million). 

Operating cost saving initiatives announced at HY21 on the organisational reset, production efficiencies, and 
discretionary spend delivered $9.3 million of the $10.8 million savings targeted. Value chain cost saving initiatives 
delivered $3 million of benefit. Dry Store 4 and the Rail Siding delivered part year benefit of $3 million with the project 
still being on track to deliver annualised benefits of $8 million.

EBITDA
Earnings before interest, tax, depreciation, and amortisation (EBITDA) decreased $132.3 million to $37.3 million.  

$ million

Profit before tax
Add back: net financing costs

EBIT
Add back: depreciation and amortisation

EBITDA

FY21

($39.2)
$21.5

($17.7)
$55.0

$37.3

FY20

$100.7
$21.4

$122.1
$47.5

$169.6

Gross term debt interest
Less capitalised interest

Net term funding interest
Working capital funding interest
Interest received
Loss on derecognition of financial assets

Net short-term funding interest
Interest on lease liabilities 

Net finance costs

FY21

(16.2)
2.3

(13.9)
(6.0)
0.0
(1.0)

(7.0)
(0.6)

(21.5)

FY20

(15.2)
2.1

(13.1)
(6.2)
0.1
(1.7)

(7.8)
(0.5)

(21.4)

Var.

(1.0)
0.2

(0.8)
0.2
(0.1)
0.7

0.8
(0.1)

(0.1)

The $0.1 million uplift in net financing costs is due to an increase in average interest-bearing debt due to continued 
capital expenditure, offset by lower interest rates. 

Gross interest on term debt increased by $1 million to $16.2 million with higher average interest-bearing debt year-
on-year, with lower interest rates providing some offset. Capitalised interest increased by $0.2 million to $2.3 million. 

Working capital funding interest decreased $0.2 million due to lower interest rates, with similar facility utilisation to 
prior year.  

Loss on derecognition of financial assets is the financing cost associated with our receivables financing programme. 
It decreased $0.7 million to $1 million with lower interest rates and lower utilisation due to the reduction in sales 
volumes of consumer-packaged infant formula. 

Further, Synlait incurred $0.6 million interest on lease liabilities, up $0.1 million. 

Foreign exchange
Management of foreign exchange exposure is one of Synlait’s key risks with many product sales being to overseas 
markets, creating a primarily United States Dollar (USD) exposure risk. Our foreign exchange policy seeks to achieve 
the lowest annual average New Zealand Dollar (NZD)/USD exchange rate for the year. In FY21 we achieved a net 
annual average NZD/USD exchange rate of 0.6659 (FY20: 0.6651).

Earnings per share and return on capital employed 
Our reported basic and diluted earnings per share (EPS) was (13.77) cents and (13.75) cents respectively, against 
41.45 cents and 41.35 cents in FY20. The dilutive shares are basic EPS adjusted for contingently issuable shares in 
accordance with the Employee Share Scheme. Synlait also generated a pre-tax return on average capital employed 
of (1.5%) in FY21 compared with 12.6% in FY20.

ANNUAL REPORT 2021PAGE 38 & 39

FINANCIAL POSITION

Overview
During FY21 the Group’s investment phase began to wind down. Synlait raised $200 million of share capital to repay debt 
and support the conclusion of several growth initiative projects.

Our reported net loss after tax of ($28.5) million, plus the net proceeds from the capital raise and the movement in 
reserves, has increased total equity to $767.1 million at 31 July 2021 from $604.5 million in FY20. 

We successfully refinanced maturing syndicated bank facilities in July on new terms. The banking syndicate was very 
supportive of the Synlait story and our future. The renegotiated facilities give us a sound, secure, and certain platform to 
build from.

Trade and other receivables 
At $108.4 million, trade and other receivables have increased by $45.3 million on FY20 ($63.1 million). The increase 
primarily relates to the change in product mix sold reducing the balance of receivables assigned as at 31 July 2021 (FY21: 
$112.4 million, FY20: $131.3 million) and changing our customer mix, together with an increase in Dairyworks’ receivables 
year-on-year. 

Inventories
Our inventory holdings have remained relatively unchanged at $270.9 million (FY20: $269.4 million), although there 
have been material movements between its components. Synlait entered FY21 holding higher than prior years volumes 
of base infant formula and consumer-packaged infant formula to meet higher anticipated FY21 demand, to ensure higher 
utilisation of our plant through peak milk, and protect against potential COVID-19 related supply chain disruption. 
As at 31 July 2021, base infant formula and consumer-packaged infant formula holdings have reduced significantly due 
to a reduction of production off the back of the sudden demand reduction and outlook for a2 Milk Company nutritional 
products and to reflect our new conservative working capital approach to inventory holdings in FY22. Holdings of 
ingredients increased significantly due to the material increase in volumes manufactured in the second half and 
difficulties faced selling and shipping the product because of the pandemic.

Synlait Milk Limited
Dairyworks Limited

FY21

$ million

216.8
54.2

MT

41,099*
6,954*

FY20

$ million

216.1
53.3

MT

40,787*
6,564*

* Inventory not measured in metric tonnes is excluded as not material to our volumes.

Raw material inventories at $74.4 million (13,733 MT) increased slightly on the prior year (FY20: $71.3 million, 13,614 MT). 
Work in progress, which is primarily Dairyworks’ maturing cheese volumes, in FY21 of $16.6 million has increased from 
prior year (FY20: $11.5 million) and reflects higher and more valuable volumes of cheese maturing at Dairyworks.

Finished goods inventory, which includes base infant formula, decreased to $180.0 million (FY20: $186.5 million) despite 
tonnage of finished goods on hand increasing slightly to 32,144 MT (FY20: 32,109 MT). As noted above, this relates to 
a lower holding of our core infant formula products and a higher holding of our core ingredients products (whole milk 
powder, skim milk powder and anhydrous milk fat), offset by a higher season ending milk price.

Inventories were reviewed for impairment, resulting in a stock impairment provision totalling $8.3 million relating to 
finished goods ($7.6 million) and raw materials ($0.7 million) (FY20: $2.0 million, $1.8 million related to finished goods and 
$0.2m related to raw materials). The increase primarily relates to consumer-packaged infant formula products on hand 
that are provisioned to expire because of decreased demand.

In addition, we have an onerous contracts provision of $2.1 million (FY20: $0.3 million); the increase from prior year is 
due to an increased weighted average cost of products on hand at balance date; the most significant driver being the 
increase in 2020/21 milk price through the second half of the season.

Property, plant and equipment
Property, plant, and equipment at $1027.1 million, is up $62.0 million. The year-over-year increase is a consequence 
of total capital expenditure of $112.0 million, less depreciation of $46.8 million, net impairment of $1.7 million, and net 
disposals of $1.4 million. The capital expenditure of $112.0 million primarily relates to our growth initiative projects with 
$88.0 million of total spend in FY21.

In November 2020, we commissioned our new Dry Store 4 facility followed by our new rail siding in May 2021. 
The construction of the project was budgeted to cost $41.3 million. Total spend on the project in FY21 was $21.6 million 
(FY20: $18.7 million, FY19: $1.1 million) for total of $41.4 million. 

In August 2020 we completed the purchase of farmland adjacent to Synlait Dunsandel for total consideration of $26.1 
million. The farmland was purchased to enable greater control over water rights, the development of the rail siding, and 
opportunities to trial sustainable farming practices. We also progressed modifications at Synlait Pokeno to support our 
new multinational customer. Total spend on the project in FY21 was $33.5 million (FY20: $1.0 million).

Operational capital expenditure in FY21 decreased to $24.7 million from $35.5 million in FY20 ($27.9 million in FY21 from 
$37.5 million in FY20 including intangible assets and net disposals).

Synlait is nearing the completion of its ERP implementation project expected to go live in the second quarter of FY22. 
Total spend in FY21 was $19.2 million (2020: $6.0 million, 2019: $2.7 million).

Trade and other payables 
Trade and other payables at $264.1 million is up $25.3 million. This is driven by higher milk payments to our farm 
suppliers due to the increased volume of milk solids collected and the higher milk price, offset by a reduction in trade 
creditors and accruals.

ANNUAL REPORT 2021PAGE 40 & 41

Total net debt 
Total net debt (excluding lease liabilities) at year end, including both current and term debt facilities less cash on hand, 
was $479.4 million, a decrease of $47.6 million.

We continue to use dairy commodity derivatives to support the management of the risk of movement in dairy commodity 
prices. Dairy commodity derivatives with a nominal balance of NZD $13.9 million were in place at year end (FY20: NZD 
$12.0). These derivatives have mark to market unrealised gains of $0.2 million after tax (FY20: $nil). 

$ million

Current debt
Term debt (carry amount)
Transaction costs 
Cash on hand

Total Net Debt (excluding lease liabilities) 

FY21

$33.3
$459.6
$2.5
($16.0)

$479.4

FY20

$102.8
$426.8
$3.2
($5.9)

$526.9

Total net debt (excluding lease liabilities) decreased with net cash from the issue of shares of $196.1 million and positive 
cash flow from operating activities of $15.9 million (FY20: $103.8 million), offset by cash spent on investing activities of 
$136.8 million (FY20: $223.2 million), interest and financing fees paid of $23.1 million (FY20: $26.4 million) and repayment 
of lease liabilities of $4.5 million. Operating cash flows are discussed further below. 

With net debt of $479.4 million, our gearing (net debt/net debt + equity) is 38.7% (FY20: 47.2%) and our leverage 
(net debt/EBITDA) is 12.85x (FY20: 3.08x).

Derivatives 
At 31 July 2021 we held USD$498.9 million (net) and AUD$7.5 million in foreign exchange contracts as detailed in note 
16 of the annual financial statements. These have been placed across a 24-month future period, in accordance with our 
Treasury Policy. 

Given the appreciation in the NZD/USD exchange rate across the last 24 months, we have mark to market unrealised 
gains associated with these contracts at year-end of $10.4 million after tax, a movement of ($7.2) million after tax. As our 
foreign exchange contracts hedge against future USD receipts and payments, this unrealised gain is recognised in other 
reserves in equity rather than through the income statement. The impact of these foreign exchange contracts will play 
out in the periods in which they mature, and they will form part of our annual average NZD/USD exchange rate in those 
periods.

We also have in place a nominal balance of $40 million of interest rate swap agreements at year-end (FY20: $57.3 
million) at various weighted average interest rates. The agreements have unrealised mark to market losses of $2.5 million 
after tax, a positive movement of $2.4m after tax on FY20. The movement is a result of historical agreements unwinding. 

Unrealised gains and losses on derivatives detailed above are deferred to the cash flow hedge reserve. Year-on-year 
there was a ($4.5) million movement in the reserve from $12.6 million in FY20 to $8.1 million in FY21. The movement is 
explained by the decrease in foreign exchange derivatives gain offset by the decrease in interest rate swap agreements 
loss.  

Price risk management 
In addition to derivatives, Synlait also carefully manages price risk. It holds carbon units to cover all forecast obligations 
three years forward, with an average purchase price well below current market pricing. We also entered into fixed price 
electricity and fixed price gas contracts in October 2020, with the contracts for five and three years respectively.  

Operating cash flows 
Operating cash flows at $15.9 million, are down $87.9 million. The decrease was due to lower profitability year-on-year 
largely due to the sales mix shift from consumer-packaged infant formula to ingredients, with EBITDA $132.3 million 
lower, together with an unfavourable movement in working capital with an increase in receivables and high holdings of 
ingredients inventory on hand at year end.

Funding facilities and covenants
As announced in July and noted above, we worked with our banking syndicate, who again showed their commitment 
to and support of Synlait, and agreed terms to refinance maturing banking facilities. Synlait has four syndicated bank 
facilities in place with ANZ and BNZ:

1.  Working Capital Facility – reviewed annually with a year-end facility limit of NZD $250 million. This facility increases 
to $330 million in September 2021 and steps down over a period of six months back to $250 million by February 
2022. This is a dual currency (NZD & USD) facility. 

2.  Revolving Credit Facility A – maturing 1 October 2023 with a fixed facility limit of $100 million, amortising $33.3 

million on 31 July 2022 and $33.3 million on 31 July 2023.    

3.  Revolving Credit Facility B (ESG loan) – maturing 1 October 2023 with a fixed facility limit of $50 million. 

4.  Revolving Credit Facility C (ESG loan) – maturing 1 October 2023 with a fixed facility limit of $50 million. 

In addition to banking facilities, Synlait has an NZX-listed $180 million unsecured, subordinated, fixed rate bond maturing 
17 December 2024.

ANNUAL REPORT 2021PAGE 42 & 43

At 31 July 2021, Synlait had five key bank covenants in place within our syndicated bank facility agreement. These were:

1. 

Interest cover ratio – EBITDA to interest expense no less than 3.0x (FY21: 1.74x). This covenant was waived for FY21. 

2.  Minimum shareholders’ funds – must exceed $400.0 million (FY21: $625.2 million). 

3.  Working capital ratio – must exceed 1.50x (FY21: 3.79x). 

4.  Total debt/EBITDA – no greater than 7.50x (FY21: 13.25x). This covenant was waived for FY21. 

5.  Senior debt/EBITDA – no greater than 4.75x (FY21: 8.43x). This covenant was waived for FY21. 

The interest cover ratio, leverage ratio and senior leverage ratio were waived for FY21 as previously disclosed to the 
market. Synlait was compliant with the shareholder’s funds and working capital ratio covenant at all times during FY21. 
Note that the covenants are calculated in accordance with our banking facilities agreement and include adjusting items 
that are not presented in the financial statements. 

Following refinancing, Synlait have five key bank covenants in place within our syndicated bank facility agreement for 
FY22. These are:

1. 

Interest cover ratio – EBITDA to interest expense of no less than 3.0x.

2.  Minimum shareholders’ funds – must exceed $600.0 million.

3.  Working capital ratio – inventory and debtors to working capital facility outstanding of no less than 1.5x

4.  Total debt/EBITDA – total debt to EBITDA is no greater than 4.5x.

5.  Senior debt/EBITDA – total debt excluding Subordinate Bond to EBITDA is no greater than 3.0x.

Robert Stowell 
Chief Financial Officer

ANNUAL REPORT 2021PAGE 44 & 45

FINANCIAL AND PERFORMANCE METRICS 

MILK PRICE

FY17

FY18

FY19

FY20

FY21

This table shows how Synlait take the milk supplied by our contracted farmer suppliers, value the milk 
components, and make a pay-out via the average base milk price.

Key financial metrics1,3
Currency as stated (in millions)

Income statement
Revenue
Gross profit
EBITDA2
EBIT2
NPAT
Revenue (USD per MT)
Gross profit per MT (NZD)
EBIT per MT sold (NZD)
Net cash from/(used in) operating activities

Balance sheet
Capital employed
Net operating assets4
Return on net operating assets
Net return on capital employed (pre-tax)
Debt/debt + equity (excl. derivatives)
Net debt/EBITDA6
Earnings per share
Average FX conversion rate (NZD:USD)
Base milk price
Total milk price (kgMs)5

Key operational metrics
Sales (MT)7
Ingredients
Nutritionals
Liquids
Consumer foods
Total sales (MT)
Production (net production) (MT)7
Ingredients
Nutritionals
Liquids
Consumer foods
Total production (MT)
Milk purchases ('000 kg MS)
Milk purchased from contracted supply
Milk purchased from other suppliers
Total milk purchases ('000 kg MS)

 759.0 
 112.1 
 88.8 
 67.6 
 39.5 
3,658
792
 478 
 115.2 

459.0
 423.5 
15.4%
14.8%
18.7%
 0.9 
 22.82 
 0.6814 
 6.16 
 6.30 

114,718
24,576 
 - 
 -
 139,295 

 109,899 
25,508
 - 
 -
135,407

 63,255 
 1,700 
 64,954 

 879.0 
 166.5 
 138.6 
 113.0 
 74.5 
4,815
1,294
879
 98.4 

538.9
 493.1 
24.6%
22.6%
20.9%
 0.8 
 41.55 
 0.7047 
 6.65 
 6.78 

 86,424 
 42,177 
-
 -
128,601

88,448
51,048
 - 
 -
 139,496

 63,639 
(2,853)
 60,785 

 1,024.3 
 186.3 
 150.8 
 123.1 
 81.2 
 4,384
1,174
776
 136.7 

824.4
 632.4 
21.9%
18.1%
39.3%
 2.2 
 45.33 
 0.6792 
 6.40 
 6.58 

 98,499 
51,231
 8,947 
 -
158,677

 96,158
50,165
 9,466 
 -
155,788

 64,189 
 1,877 
 66,066 

1,302.0
 203.7 
169.6
122.0
74.3
4,435
1,043
625
103.8

1,128.2
1,040.5
14.6%
12.5%
47.2%
3.1
41.45
0.6651
7.05
7.30

97,561
52,871
32,803
12,015
195,250

94,188
63,857
32,894
11,850
202,789

76,551
(6,079)
70,472

1,367.3
67.3
37.3
(17.7)
(28.5)
4,162
308
(81)
15.9

1,244.0
1,152.3
(1.6%)
(1.5%)
38.7%
12.9
(13.77)
 0.6659 
7.55
7.82

125,914
34,362
31,499
26,983
218,758

138,971
20,990
31,492
23,597
215,050

86,814
(4,076)
82,737

1 The group uses several non-GAAP measures when discussing financial performance. Management believes these measures provide useful insight on the performance of the 
business, to analyse trends and to assist stakeholders in making informed decisions.

2  EBIT is calculated by excluding financing costs and income tax, with EBITDA also excluding depreciation and amortisation accordingly. EBIT and EBITDA include the IFRS16 impact, 
whereas net debt excludes this impact. A reconciliation of EBIT and EBITDA is provided in the CFO Review on page 36.

3 Amounts have been restated for a change in accounting policy. Refer to note 9 of the 2021 financial statements for additional information.

4 Net operating assets includes current assets, property, plant, and equipment and intangible assets. It excludes capital work in progress, derivatives, goodwill, trade payables 
and tax liabilities.

5 Total milk price for Synlait Milk suppliers on standard milk supply contract, includes value and seasonal premiums. This is a milk season reflective payment that runs 1 June to 31 May.

6 Net debt calculation excludes lease liabilities, for banking covenant purposes lease liabilties are included.

7 Prior period volumes have been restated to conform to current year presentation.

The 2020/21 milk price has not fully been paid out at the time of annual report release, figures represent what 
has been paid and is accrued to be paid.

It also highlights the incentive payments made to our farmer suppliers in addition to the average base milk price.

This information represents payments made in the milk season which runs 1 June to 31 May as opposed to 
Synlait’s financial year.

For the recently completed 2020/2021 milk season we paid out an average base milk price of $7.55 with an 
average additional incentive payment of $0.27 per kgMS.

kgMS collected
Average fat %
Average protein %
Average lactose %

Volume of components collected (kg)
Fat 
Protein
Lactose

Component value1
Fat 
Protein
Lactose

Component value ratio
Fat 
Protein
Lactose

Total $ paid per component
Fat 
Protein
Lactose
Volume charge
Average base milk price2

2016/17

2017/18

2018/19

2019/20

2020/21

 63,249,602 
4.90
3.92
5.06

 63,616,077 
4.86
3.89
4.99

 63,438,694 
4.91
3.92
4.99

 76,550,913 
4.90
3.98
4.99

86,812,624
4.90
3.97
4.98

 35,123,275 
 28,126,327 
 36,292,742 

 35,289,377 
 28,327,076 
 36,221,310 

 35,270,506 
 28,168,188 
 35,894,766 

 42,252,084 
 34,298,829 
 42,977,611 

47,954,515
38,858,109
48,760,985

$4.70
$6.56
$1.87

1
1.397
0.398

$6.97
$4.63
$2.03

1
0.664
0.291

$7.36
$4.18
$1.53

1
0.567
0.208

$8.44
$4.20
$1.67

1
0.497
0.198

$8.73
$5.02
$1.68

1
0.575
0.193

$164,998,609
$184,528,391
$67,823,876
($27,732,308)

$245,903,402 $259,645,339
$131,063,290 $117,657,713
$54,987,988
($26,283,402)

$73,377,129
($27,289,173)

$356,688,641
$143,911,349
$71,818,527
($32,746,784)

$418,541,147
$194,874,913
$82,136,925
($40,117,675)

$6.16

$6.65

$6.40

$7.05

$7.55

Total incentive payment
Average incentive payment per kgMS3

$8,908,367
$0.14

$8,127,045
$0.13

$11,530,895
$0.18

$19,249,791
$0.25

$23,518,487
$0.27

Total average Synlait payment per kgMS4

$6.30

$6.78

$6.58

$7.30

7.82

1 Rounded to two decimal places

2 Amount paid for components + volume charge/kgMS collected = base milk price

3 Includes incentives and winter incentive payments

4 Base milk price + average incentive payment

ANNUAL REPORT 2021PAGE 46 & 47

DAIRYWORKS: 
MOVING FROM 
CHEESE TO DAIRY

Last summer Dairyworks launched 
a range of truly differentiated high 
protein yoghurts in a convenient on 
the go single format.

The range exceeded performance 
expectations and clearly signalled 
an opportunity for Dairyworks to 
expand further into the yoghurt 
space. Strategically, the entry into the 
yoghurt category allows Dairyworks 
to grow beyond its core cheese 
business, which is something we will 
continue to see more of.

The team are excited to be working 
on the next stage of our yoghurt plans 
– we’ll see you in supermarkets soon!

Last summer Dairyworks launched a range of truly 

differentiated high protein yoghurts in a convenient 

on-the-go single format.

ANNUAL REPORT 2021PAGE 48 & 49

FINANCIAL STATEMENTS 

FINANCIAL   
CONTENTS

The cafe at Synlait Dunsandel provides a wide 

range of healthy meals and snacks for staff and 

contractors.

Director’s responsibility statement 

Financial statements 

 Income statement 

 Statement of comprehensive income 

 Statement of changes in equity 

 Statement of financial position 

 Statement of cash flows 

Notes to the financial statements 

 Performance 
 01  Revenue recognition 
 02  Segment reporting 
 03  Expenses 
 04  Reconciliation of (loss)/profit after income 

tax to net cash inflow from operating activities 

 Working Capital 
 05  Trade and other receivables 
 06 
 07  Trade and other payables 

Inventories 

 Long Term Assets 
 08  Property, plant and equipment 
 09 
 10  Leases 

Intangible assets 

 Debt and Equity 
 11  Finance income and expenses 
 12  Loans and borrowings 
 13  Share capital 
 14  Share based payments 
 15  Reserves and retained earnings 

 Financial Risk Management 
 16  Financial risk management 
 17  Financial instruments 

 Other 
 18 
Income tax  
 19  Other investments 
 20  Related party transactions 
 21  Contingencies 
 22  Commitments 
 23  Events occurring after the reporting period 
 24  Other accounting policies 

Auditors report 

50

51

51

52

53

54

55

56

60
61
62
65

66

67
68
72
74

75
76
79
85

88
89
90
92
94
96

97
98
106

111
112
116
118
120
120
121
121

122

ANNUAL REPORT 2021 
PAGE 50 & 51

DIRECTORS’ RESPONSIBILITY STATEMENT

INCOME STATEMENT
For the year ended 31 July 2021

The Directors are pleased to present the financial statements for Synlait Milk Limited and its subsidiaries, Synlait Milk 
Finance Limited, The New Zealand Dairy Company Limited, Eighty Nine Richard Pearse Drive Limited, Synlait Business 
Consulting (Shanghai) Limited, Dairyworks Limited, Dairyworks (Australia) Pty Limited, and Synlait Milk (Dunsandel Farms) 
Limited (together “the Group”) as set out on pages 51-121 for the year ended 31 July 2021.

The Directors are responsible for ensuring that the financial statements present fairly the financial position of the Group 
as at 31 July 2021 and the financial performance and cash flows for the year ended on that date.

The Directors consider that the financial statements of the Group have been prepared using appropriate accounting 
policies, consistently applied and supported by reasonable judgements and estimates and that all relevant financial 
reporting and accounting standards have been followed.

The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the 
determination of the financial position of the Group and facilitate compliance of the financial statements with the Financial 
Markets Conduct Act 2013.

For and on behalf of the Board.

Graeme Milne 
Chairman
24 September 2021

Simon Robertson 
Independent Director
24 September 2021

Revenue
Cost of sales

Gross profit

Other income
Share of (loss)/profit from associates
Sales and distribution expenses
Administrative and operating expenses

Earnings before net finance costs and income tax

Finance expenses
Finance income
Loss on derecognition of financial assets

Net finance costs

(Loss)/profit before income tax
Income tax benefit/(expense)

Net (loss)/profit after tax for the year

Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)

Notes

1
3

1
19
3
3

11
11
11,5

18

13
13

2021

$’000

1,367,349
(1,300,042)

2020

$’000 
(restated)

1,302,025
(1,098,292)

67,307

3,870
(33)
(36,791)
(52,018)

(17,665)

(20,488)
44
(1,045)

(21,489)

(39,154)
10,703

(28,451)

(13.77)
(13.75)

203,733

404
33
(32,318)
(49,809)

122,043

(19,777)
134
(1,747)

(21,390)

100,653
(26,344)

74,309

41.45
41.35

ANNUAL REPORT 2021The accompanying notes form part of and are to be read in conjunction with these financial statements. Comparative numbers have been restated due to a change in accounting policy. Refer to note 9 for further detail.PAGE 52 & 53

STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 July 2021

STATEMENT OF CHANGES IN EQUITY
For the year ended 31 July 2021

(Loss)/profit for the period
Items that may be reclassified subsequently to profit and loss
Effective portion of changes in fair value of cash flow hedges
Exchange differences on translation of foreign operations
Income tax benefit/(expense) on other comprehensive income
Total items that may be reclassified subsequently to profit and loss

Other comprehensive income for the year, net of tax
Total comprehensive income for the year

Notes

16

18

2021

$’000

(28,451)

(6,330)
10
1,772
(4,548)
(4,548)
(32,999)

2020

$’000 
(restated)

74,309

53,882
(12)
(15,087)
38,783
38,783
113,092

Share 
capital

Employee 
benefits 
reserve

Hedging 
reserves

Group

Notes

$’000

$’000

$’000

Equity as at 1 August 2019
Change in accounting policy
Restated equity as at 1 August 2019
Profit or loss for the year (restated)

9

268,074
-

268,074
-

1,658 (26,148)
-

-

1,658 (26,148)
-

-

Other comprehensive income
Effective portion of changes in fair value of cash flow hedges
Exchange differences on translation of foreign operations
Income tax on other comprehensive income

Total other comprehensive income

Employee benefits reserve

13, 14

Total contributions by and distributions to owners

Equity as at 31 July 2020 (restated)
Equity as at 1 August 2020
Profit or loss for the year

Other comprehensive income
Effective portion of changes in fair value of cash flow hedges
Exchange differences on translation of foreign operations
Income tax on other comprehensive income

Total other comprehensive income

Issue of new shares
Employee benefits reserve

Total contributions by and distributions to owners

-
-
-

-

-
-
-

-

53,882
-
(15,087)

38,795

470
470

268,544
268,544
-

(336)
(336)

1,322
1,322
-

-
-
-

-

-
-
-

-

-
-

12,647
12,647
-

(6,330)
-
1,772

(4,558)

13
13, 14

196,082
148

196,230

-
(624)

(624)

-
-

 - 

Foreign 
currency 
translation 
reserve
$’000

Retained 
earnings

Total 
equity

$’000

$’000

(1,078)

- 248,775 492,359
-
(1,078)
- 247,697 491,281
74,309
-

74,309

-
(12)
-

(12)

-
-

-
-
-

-

-
-

53,882
(12)
(15,087)
38,783

134
134

(12) 322,006 604,507
(12) 322,006 604,507
(28,451)

(28,451)

-

-
10
-

10

-
-

-

-
-
-

-

(6,330)
10
1,772
(4,548)

- 196,082
-
(476)
- 195,606

Equity as at 31 July 2021

464,774

698

8,089

 (2) 293,555 767,114

ANNUAL REPORT 2021The accompanying notes form part of and are to be read in conjunction with these financial statements. Comparative numbers have been restated due to a change in accounting policy. Refer to note 9 for further detail.The accompanying notes form part of and are to be read in conjunction with these financial statements. Comparative numbers have been restated due to a change in accounting policy. Refer to note 9 for further detail.PAGE 54 & 55

STATEMENT OF FINANCIAL POSITION
As at 31 July 2021

STATEMENT OF CASH FLOWS
For the year ended 31 July 2021

ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Intangible assets
Goods and services tax refundable
Income accruals and prepayments
Inventories
Derivative financial instruments
Current tax asset
Other current assets
Total current assets

Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Other investments
Derivative financial instruments
Right-of-use assets
Total non-current assets
Total assets

LIABILITIES
Current liabilities
Trade and other payables
Loans and borrowings
Current tax liabilities
Derivative financial instruments
Lease liabilities
Total current liabilities

Non-current liabilities
Loans and borrowings
Deferred tax liabilities
Derivative financial instruments
Lease liabilities
Total non-current liabilities
Total liabilities

Equity
Share capital
Reserves
Retained earnings
Total equity attributable to equity holders of the Group
Total liabilities and equity

Notes

5
9

6
16, 17

8
9
9
19
16, 17
10

7
12

16, 17
10

12
18
16, 17
10

13

15

2021
$’000

2020
$’000 
(restated)

16,020
108,380
3,712
4,461
14,297
270,944
30,943
1,743
2,500
453,000

1,027,149
59,631
64,189
110
53
14,018
1,165,150
1,618,150

264,068
33,333
-
10,770
3,243
311,414

459,584
59,433
8,830
11,775
539,622
851,036

464,774
8,785
293,555
767,114
1,618,150

5,887
63,057
4,230
6,398
12,404
269,384
22,530
-
2,500
386,390

965,104
39,758
65,545
143
14,084
18,497
1,103,131
1,489,521

238,771
102,837
24,561
14,148
4,422
384,739

426,754
53,878
4,805
14,838
500,275
885,014

268,544
13,957
322,006
604,507
1,489,521

Cash flows from operating activities
Cash receipts from customers
Cash paid for milk purchased
Cash paid to other creditors and employees
Net movement in goods and services tax
Income tax payments

Net cash inflow from operating activities

Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired
Interest received
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of intangible assets
Proceeds from sale of intangible assets

Net cash outflow from investing activities

Cash flows from financing activities
Proceeds from the issuance of subordinated bonds
Transaction costs paid on issue of subordinated bonds
Repayment of borrowings
Net movement in working capital facility
Interest paid
Repayment of lease liabilities
Receipt of cash from issue of shares

Net cash inflow from financing activities

Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at end of year

Notes

4

12

13

2021

$’000

1,327,444
(653,132)
(652,402)
1,937
(7,979)

15,868

-
44
(116,163)
1,102
(24,205)
2,450

(136,772)

-
-
(50,000)
12,586
(23,108)
(4,499)
196,082

131,061

10,157
5,887
(24)

16,020

2020

$’000 
(restated)

1,316,076
(545,792)
(637,181)
(2,709)
(26,633)

103,761

(72,927)
134
(139,212)
242
(11,483)
-

(223,246)

180,000
(3,370)
(43,224)
3,211
(23,048)
(4,185)
-

109,384

(10,101)
16,007
(19)

5,887

ANNUAL REPORT 2021The accompanying notes form part of and are to be read in conjunction with these financial statements. Comparative numbers have been restated due to a change in accounting policy. Refer to note 9 for further detail.The accompanying notes form part of and are to be read in conjunction with these financial statements. Comparative numbers have been restated due to a change in accounting policy. Refer to note 9 for further detail.PAGE 56 & 57

NOTES TO THE FINANCIAL STATEMENTS

REPORTING ENTITY

The consolidated financial statements (“financial statements”) presented are those of the Group, including Synlait Milk 
Limited and its subsidiaries Synlait Milk Finance Limited, The New Zealand Dairy Company Limited, Eighty Nine Richard 
Pearse Drive Limited, Synlait Business Consulting (Shanghai) Limited, Dairyworks Limited, Dairyworks (Australia) Pty 
Limited, and Synlait Milk (Dunsandel Farms) Limited.

Readers of these financial statements should be mindful of the impact of the acquisition of Dairyworks Limited on 1 April 
2020 when making comparisons to the year ended 31 July 2020.

Synlait Milk Limited and its subsidiaries are primarily involved in the manufacture and sale of dairy products.  

Transactions and balances
Transactions in foreign currencies are translated to the functional currency at the exchange rates at the dates of the 
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to 
the functional currency at the exchange rate at that date.

Use of accounting estimates and judgements
The preparation of these financial statements in conformity with NZ IFRS requires management to make judgements, 
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, 
liabilities, income, and expenses. Actual results may differ from these estimates and assumptions.

Estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the 
period in which the estimate is revised and in any future periods affected.

The parent company, Synlait Milk Limited, is a profit oriented entity, domiciled in New Zealand, registered under the 
Companies Act 1993 and listed on the New Zealand Stock Exchange and the Australian Securities Exchange. Synlait Milk 
Limited is an FMC reporting entity under the Financial Market Conducts Act 2013 and its financial statements comply with 
that Act.

Key sources of estimation uncertainty and key judgements relate to derecognition of financial assets, the assessment 
of impairment of inventory and property plant and equipment, the capitalisation of costs to intangible assets, and the 
assessment of impairment for goodwill and any other indefinite life intangible assets. The individual notes in the financial 
statements provide additional information. 

BASIS OF PREPARATION

MATERIAL EVENTS DURING THE YEAR

The financial statements of the Group have been prepared in accordance with Generally Accepted Accounting Practice. 
They comply with New Zealand equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other 
applicable Financial Reporting Standards, as applicable for profit oriented entities. The consolidated financial statements 
also comply with International Financial Reporting Standards (‘IFRS’).

Certain comparative figures have been reclassified during the year for consistency with the current year presentation and 
in account of trivial rounding differences. These classifications had no effect on the reported results of operations. 

The financial statements were authorised for issue by the directors on 24 September 2021.

Basis of measurement
These financial statements have been prepared on the historical cost basis except for certain items as identified in 
specific accounting policies.

Functional and presentation currency
Items included in the financial statements of the Group are measured using the currency of the primary economic 
environment in which the entity operates (‘the functional currency’). The financial statements are presented in New 
Zealand Dollars ($), which is the Company’s functional currency and are rounded to the nearest thousand ($000).

These financial statements include the impact of a number of material events which occurred during the year, including 
the renegotiation of key terms of financing arrangements, the issue of new shares by way of an equity raise and share 
placement, and multiple financial forecast downgrades. As a result of the COVID-19 pandemic, the Group announced 
to the market in the period that it forecast a full year loss for the year ended 31 July 2021. This constituted an indicator 
of impairment under NZ IAS 36 “Impairment of Assets” and triggered the impairment testing of all Group assets in 
addition to the annual impairment test for goodwill and intangible assets. It was determined that no assets, except for the 
immaterial write-offs as noted in notes 8 and 9, were impaired.  

COVID-19
In the prior financial year, the World Health Organisation declared a global pandemic because of the international 
outbreak and spread of COVID-19. During the year, the COVID-19 pandemic resulted in a shift for Synlait in product 
mix from high margin nutritional powders to lower margin ingredient powders due to a significant decrease in demand 
for consumer-packaged infant formula. This was a key factor in the forecast earnings downgrades which were 
communicated to the market in the year. Current global economic conditions continue to be highly volatile due to the 
COVID-19 pandemic. Ongoing uncertainty around the magnitude, duration, and severity of the COVID-19 pandemic 
could affect the significant estimates and judgements used in the preparation of the consolidated financial statements. 
Management continues to assess the impact of COVID-19 on all aspects of the Group’s supply chain and financial 
performance and position, in particular the carrying value of receivables and inventory, the impact of key customer 
demand on revenue, the timing of receivables collection on cashflows, impairment of assets such as goodwill and 
intangibles, and any impact from currency volatility on the Group portfolio of derivatives.

ANNUAL REPORT 2021PAGE 58 & 59

MATERIAL EVENTS DURING THE YEAR (CONTINUED)

SIGNIFICANT ACCOUNTING POLICIES

Renegotiation of financing arrangements
As a result of the impact of the forecast earnings downgrades during the period, the Group forecast a potential 
breach of covenants which were scheduled to be tested as at 31 July 2021. In response, the Group engaged its 
banking syndicate and successfully refinanced its key banking facilities and obtained waivers for the period ended 
31 July 2021. Revised terms for all financing arrangements was concluded in July 2021 with new covenant terms 
agreed. Refer to note 12 for details of revised loan maturity dates and covenant waivers. 

Share issue
In November 2020 the Group completed an issue of ordinary shares and an underwritten share placement for net 
proceeds of $196.1 million. The proceeds were used to retire existing debt and fund ongoing capital improvements. 
Refer to note 13 for further detail. 

Impairment testing
The forecasted full year loss for the Group and resulting decrease in market capitalisation constituted an indicator of 
impairment in accordance with NZ IAS 36 “Impairment of Assets.” As a result, all assets, which are allocated to either 
the Synlait Milk cash generating unit (CGU) or Dairyworks CGU, were impairment tested (refer to note 9 for further 
detail). It was determined that there was no impairment present at a CGU level. Individual assets totalling $2.2m 
were determined to be impaired in the year (refer to note 8 and 9 for further detail) and provisioned. In addition, 
$1.4m of goodwill and $1.0m of brand assets were derecognised in relation to the sale of the Deep South brand and 
related assets. 

GOING CONCERN

In preparing these financial statements, the Directors have assessed the Group’s ability to continue as a going concern. 
In making this assessment, the Directors have considered the level of debt and facilities the Group had available at 31 
July 2021, the Group’s renegotiation of financing arrangements, and the Group’s forecast financial results for the 12 
months subsequent to the date of issue of these financial statements. While uncertainties continue to exist as a result of 
the COVID-19 pandemic, the Directors consider that the Group is a going concern.

BASIS OF CONSOLIDATION

The Group’s financial statements consolidate the financial statements of Synlait Milk Limited and its subsidiaries, 
accounted for using the acquisition method, and the results of its associates, accounted for using the equity method.  
Intercompany transactions and balances between group companies are eliminated upon consolidation.

Accounting policies, accounting estimates and judgements that summarise the measurement basis used and are 
relevant to the understanding of the financial statements are provided throughout the accompanying notes and are 
designated by a shaded area.

The accounting policies adopted have been applied consistently throughout the periods presented in these 
financial statements, except for a change in accounting policy relating to the implementation of the IFRS 
Interpretation Committee’s (“IFRIC”) April 2021 agenda decision on the capitalisation of cloud software costs.

Standards, amendments and interpretations to existing standards that are not yet effective
IFRS 9, IAS 39, IFRS 7, IFRS 4, Insurance contracts and IFRS 16 Leases – Interest Rate Benchmark Reform, Phase 2

In August 2020, the IASB issued amendments to IFRS 9, Financial Instruments (IFRS 9), IAS 39, Financial Instruments: 
Recognition and Measurement (IAS 39), IFRS 7, Financial Instruments: Disclosures (IFRS 7), IFRS 4, Insurance Contracts 
(IFRS 4) and IFRS 16, Leases (IFRS 16) as a result of Phase 2 of the IASB’s Interest Rate Benchmark Reform project. The 
amendments address issues arising in connection with reform of benchmark interest rates including the replacement of 
one benchmark rate with an alternative one. The amendments are effective for the Group from 1 August 2021. 

As at 31 July 2021, these amendments did not affect the Group’s financial statements as it has not yet transitioned any 
agreements that are exposed to Inter-bank Offered Rates (IBOR) to an alternative benchmark interest rate. While there 
remains some uncertainty around the timing of adoption and the precise nature of an alternative benchmark rate, the 
replacement of the rate is not expected to result in a significant change in the Group’s interest rate risk management 
strategy or interest rate risk. The Group continues to monitor developments on alternative benchmark interest rates and 
expect to transition to alternative rates as widespread market practice is established.

There are no other standards that are not yet effective and expected to have a material impact on the entity in the current 
or future reporting periods and on foreseeable future transactions.

Implementation of IFRIC agenda decision
During the period the Group recognised the impact of a new IFRIC agenda decision on cloud software costs. Refer to 
note 9 (Intangible assets) for further information.

ANNUAL REPORT 2021PAGE 60 & 61

PERFORMANCE

This section covers the Group’s financial performance and includes the 
following notes: 

01.  REVENUE RECOGNITION

01  Revenue recognition 

02  Segment reporting 

03  Expenses 

04  Reconciliation of (loss)/profit after income tax to net cash inflow  

from operating activities 

61

62

65

66

Sales of goods
The Group manufactures and sells a range of milk powder, milk powder related products, liquid milk, cheese, and 
butter to customers. Revenue from contracts with customers is recognised when the control of the goods has been 
transferred to customers, being at the point when the goods are delivered. Delivery of goods is completed (i.e.. 
the performance obligation is fulfilled) when the goods have been delivered pursuant to the terms of the specific 
contract agreed with the customer and the risks associated with ownership have been transferred to the customer.

Revenue is measured according to the contracted price agreed with customers, which represents fair value of the 
consideration received or receivable, net of returns, discounts, and allowances. Revenue is only recognised to the 
extent that it is highly probable that a significant reversal will not occur. The payment terms vary depending on the 
individual contracts. No deemed financing components are present as there are no significant timing differences 
between the payment terms and revenue recognition. 

Dairy products
Other sundry income

Total income

2021

$’000

1,367,349
3,870

1,371,219

2020

$’000

1,302,025
404

1,302,429

The increase in other sundry income is primarily attributable to short-term rental income earned in the period.

ANNUAL REPORT 2021 
PAGE 62 & 63

02.  SEGMENT REPORTING

Reportable segments
NZ IFRS 8 Operating Segments requires disclosure of information about operating segments, products and 
services, geographical areas of operation, and major customers. Information is based on internal management 
reports, both in the identification of operating segments and measurement of disclosed segment information.

The Group’s chief operating decision maker is the Synlait Milk Limited Board of Directors (“the Board”). Previously 
the Board made resource allocation decisions based on expected cash flows and results of the Group’s operations 
as a whole rather than on a segment basis. In prior years, the Group has therefore reported that it operates in one 
segment, being the manufacture and sale of fresh milk and milk powder related products.

During the period ended 31 July 2020, the Group acquired selected assets in Talbot Forest Cheese Limited through 
its newly incorporated subsidiary Synlait Foods (Talbot Forest) Limited and also acquired Dairyworks Limited. On 
31 December 2020, Synlait Foods (Talbot Forest) Limited was amalgamated into Dairyworks Limited. Following 
the acquisition, the Group has determined that the company (and its predecessor companies) operates in the 
manufacture and sale of cheese and other products segment, and that this segment exceeds the quantitative 
thresholds for a reportable segment under NZ IFRS 8.

As such, although the Group continues to report internally on a consolidated Group basis, the Group has identified 
the following segments for external reporting purposes:

•  Manufacture and sale of fresh milk and milk powder related products (nutritionals, ingredients, fresh milk).

•  Manufacture and sale of cheese and other products (cheese, butter, yoghurt).

The accounting policies of the Group have been consistently applied to the operating segments. Net Profit After 
Tax (NPAT) is the measure reported to the chief operating decision-maker for the purposes of resource allocation 
and assessment of performance for the Group. A consistent measure has been used for the purpose of reporting 
the performance of each operating segment. Inter-segment pricing is determined on an arm’s length basis.

(a) Segment revenues and results
The following is an analysis of the Group’s revenue and results by reportable segment:

External revenue
Inter-segment revenue from sale of goods
Revenue from sale of goods

Net (loss)/profit after tax for the period

Finance income
Finance expense
Depreciation and amortisation
Income tax benefit/(expense)

Total assets
Total liabilities
Net assets

External revenue
Inter-segment revenue from sale of goods
Revenue from sale of goods

Net profit/(loss) after tax for the period

Finance income
Finance expenses
Depreciation and amortisation
Income tax (expense)/benefit

Total assets
Total liabilities
Net assets

(28,451)

31 July 2021
$000’s
Nutritionals,
ingredients,
fresh milk

31 July 2021
$000’s
Cheese,
butter,
yoghurt

31 July 2021
$000’s
Eliminations

31 July 2021
$000’s
Total

1,138,302
12,785
1,151,087

(28,802)

14
(16,876)
(48,855)
10,985

1,405,478
(737,675)
 667,803

31 July 2020 
$000’s 
(restated)
Nutritionals,
ingredients,
fresh milk

1,209,980
13,296
1,223,276

76,435

125
(18,661)
(44,831)
(27,541)

1,291,997
(786,450)
505,547

229,047
-
229,047

351

30
(3,612)
(6,117)
(282)

212,672
(113,361)
99,311

-
(12,785)
(12,785)

-

-
-
-
-

-
-
-

31 July 2020
$000’s

31 July 2020
$000’s

Cheese,
butter,
yoghurt*

92,045
-
92,045

(2,126)

9
(1,116)
(2,698)
1,197

197,524
(98,564)
98,960

Eliminations

-
(13,296)
(13,296)

-

-
-
-
-

-
-
-

1,367,349
-
1,367,349

(28,451)

44
(20,488)
(54,972)
10,703

1,618,150
(851,036)
767,114

31 July 2020
$000’s 
(restated)
Total

1,302,025
-
1,302,025

74,309

134
(19,777)
(47,529)
(26,344)

1,489,521
(885,014)
604,507

* Results for the 31 July 2020 period for the cheese, butter, yoghurt segment reflect 4 months of results for Dairyworks Limited which 
was acquired on 1 April 2020.

ANNUAL REPORT 2021PAGE 64 & 65

02.  SEGMENT REPORTING (CONTINUED)

03.  EXPENSES

(b) Sales by geographical area
The Group operates in one principal geographical area being New Zealand. Although the Group sells to many different 
countries, it is understood that a significant portion of both infant nutritional and ingredients sales are ultimately 
consumed in China.

The proportion of sales revenue by geographical area is summarised below:

China
Rest of Asia
Middle East and Africa
New Zealand
Australia
Rest of World

Total

Year ended 
31 July 2021
$’000

Year ended 
31 July 2020
$’000

14%
24%
5%
47%
8%
2%

100%

5%
19%
8%
43%
22%
3%

100%

All Group non-current assets are in New Zealand, other than $0.5m (2020: $0.7m) located in China.

(c) Major customers
Revenues of approximately 42% (2020: 64%) are derived from the top three external customers.

The following items of expenditure are included in cost of sales
Depreciation and amortisation
Employee benefit expense
KiwiSaver contributions
Export freight
Rent and storage
Increase in inventory provision
Increase/(decrease) in onerous contract provision

The following items of expenditure are included in sales and distribution expense
Depreciation and amortisation
Employee benefit expense
KiwiSaver contributions
Rent and storage

The following items of expenditure are included in administrative and operating expenses
Depreciation and amortisation
Employee benefit expense
KiwiSaver contributions
Information services
Directors’ fees
Share based payments (recovery)/expense
Impairment of intangible assets
Consultancy
Strategic Initiatives

Deloitte services included in administrative and operating expenses
Statutory audit fee
Half year accounts review
Other assurance services
Taxation compliance

Total

2021

$’000

45,638
80,926
1,941
10,846
4,028
6,257
1,777

5,579
16,177
419
1,971

3,755
25,201
604
8,218
829
(610)
530
4,623
1,181

270
62
23
69

424

2020

$’000 
restated

38,852
78,748
1,841
11,104
2,471
1,702
(156)

5,936
13,137
307
1,284

2,741
21,467
502
6,897
802
523
1,561
3,268
1,362

276
57
130
53

516

ANNUAL REPORT 2021PAGE 66 & 67

04. RECONCILIATION OF (LOSS)/PROFIT AFTER INCOME 
TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES

WORKING CAPITAL

The working capital section gives information about the short term assets and 
liabilities of the Group. This section includes the following notes: 

05  Trade and other receivables 

06 

Inventories 

07  Trade and other payables 

68

72

74

(Loss)/profit for the year

Non-cash and non-operating items
Depreciation and amortisation of non-current assets
Depreciation of right-of-use assets
Loss on sale of property, plant and equipment
Impairment of property, plant and equipment and intangible assets
Impairment recovery on property, plant and equipment
Share of loss/(gain) from associate
Non-cash share based payments (recovery)/expense
Interest costs classified as financing cash flow
Interest received classified as investing cash flow
Loss on derecognition of financial assets
Deferred tax
Gain on derivative financial instruments
Unrealised foreign exchange losses

Movements in working capital
(Increase)/decrease in trade and other receivables
Increase in prepayments
Increase in inventories
Decrease/(increase) in goods and services tax refundable
Increase in trade and other payables
Decrease in current tax liabilities
Working capital items acquired

Net cash inflow from operating activities

2021

$’000

(28,451)

50,236
4,736
100
2,242
-
33
(476)
20,488
(44)
1,045
7,329
(64)
24

(45,323)
(1,893)
(1,561)
1,937
31,814
(26,304)
-

15,868

2020

$’000 
(restated)

74,309

42,581
4,948
355
4,761
(2,958)
(33)
523
19,777
(134)
1,747
8,942
(23)
6

1,833
(2,850)
(104,533)
(2,709)
34,673
(4,659)
27,205

103,761

ANNUAL REPORT 2021PAGE 68 & 69

05.  TRADE AND OTHER RECEIVABLES

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary 
course of business. If collection is expected in one year or less they are classified as current assets. If not, they are 
classified as non-current assets.

Impairment
The Group recognises a loss allowance for expected credit losses (“ECL”) on trade and other receivables. 

The Group measures the provision for ECL using the simplified approach to measuring ECL which uses a lifetime 
expected loss allowance for all trade receivables. The Group’s credit loss model requires the Group to account for 
expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in 
credit risk since initial recognition of the financial assets. Therefore, it is no longer necessary for a credit event to 
have occurred before credit losses are recognised.

The model is based on the Group’s historical credit loss experience, adjusted for factors that are specific to the 
debtors, general economic conditions, and an assessment of both the current as well as the forecast direction of 
conditions at the reporting date. 

Lifetime ECL represents the expected credit losses that will result from all possible default events over the 
expected life of a financial instrument. The expected credit loss is estimated as the difference between all 
contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the 
Group expects to receive, discounted at the original effective interest rate.

The Group writes off a financial asset when there is information indicating that the debtor is in severe financial 
difficulty and there is no reasonable and realistic prospect of recovery. 

Furthermore, other impairment losses on an individual basis are determined by an evaluation of the exposures 
on an instrument-by-instrument basis. All individual instruments that are considered significant are subject to this 
approach. 

Credit Risk Management
The Group activities expose it to credit risk which refers to the risk that a counterparty will default on its contractual 
obligations resulting in financial loss to the Group. Trade and other receivables are potentially subject to credit risk. The 
Group performs credit evaluations on trade customers. The Group continuously monitors the credit quality of its major 
receivables and does not anticipate non-performance of those customers, nor has there been historical non-performance 
of these customers. The Group also maintains strict controls for any credit reviews such as credit increases. 

The receivables assignment processes ensure that the Group’s trade receivables are materially managed in an efficient 
and effective basis. 

The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to 
credit risk. 

Included in trade receivables are debtors which are past due at balance date, as payment was not received within 30 
days, and for which no provision has been made as there has not been a significant change in credit quality and the 
amounts are still considered fully recoverable. No collateral is held over these balances and trade credit insurance cover 
was not obtained in respect of these receivables. Interest is not charged on overdue debtors.

In the past seven financial years, the Group has not written off any bad debts, although it has recognised provisions for 
debts when collection was considered doubtful. The historical analysis of bad debts on a customer basis assists in the 
determination of any increases in credit risk since initial recognition. There are no significant credit risk concentrations 
as at 31 July 2021. Three customers represent 70% of the overdue receivables. There were no other forward-looking 
indicators to indicate increases in credit risk. Refer to the “material events during the year” section of the accounts for 
further detail on the impact of COVID-19 on receivables.

For cash and cash equivalents the Group has determined that all bank balances have low credit risk at each reporting 
period as they are held by reputable international banking institutions. 

The Group has not changed its overall strategy regarding the management of risk from 2020.

Trade receivables
Provision for doubtful and impaired receivables

Net trade receivables

Other receivables

Total receivables

2021

$’000

101,243
(2,583)

98,660

9,720

108,380

2020

$’000

56,484
(977)

55,507

7,550

63,057

ANNUAL REPORT 2021PAGE 70 & 71

05.  TRADE AND OTHER RECEIVABLES (CONTINUED)

(a) Impaired receivables
As at 31 July 2021, trade receivables of $13.3m were overdue (2020: $9.2m). These relate to several independent 
customers for whom there is no recent history of default. The majority has since been collected except for $4.7m which 
remains unpaid and is expected to be collected in the 2022 financial year. 

The aging analysis of these overdue trade receivables is as follows:

Overdue by
0 to 30 days
30 to 60 days
Over 60 days

Total overdue trade receivables

2021

$’000

8,306
673
4,330

13,309

2020

$’000

5,950
549
2,725

9,224

(b) Allowance for bad and doubtful receivables 
The Group has recognised a loss of $1.5m in relation to unrecoverable trade receivables during the year (2020: $0.4m). 
This relates to debtors that are overdue by more than 60 days. The Group has also recognised a loss of $0.1m for 
estimated receivables impairment under NZ IFRS 9 Financial Instruments (2020: $0.1m).

(c) Trade and other receivables
Accounts receivable are amounts incurred in the normal course of business.

Receivables denominated in currencies other than the functional currency comprise NZ$59.4m (2020: $38.5m) of USD 
and AUD denominated trade receivables.

(d) Derecognised financial assets
The Group has derecognised trade receivables that have been sold to two banks under the terms of receivables 
purchase agreements entered into during January 2015 and January 2016. The Group routinely assess the terms of 
the agreements and has determined that substantially all the risks and rewards have been transferred to the banks. 
Receivables selected for assignment are with customers with strong credit ratings and good payment histories. This 
minimises the risk (and therefore consequences) of late payment or default, as well as resulting in little volatility in 
the present value of future cash flows in relation to assigned receivables under the various scenarios detailed in the 
terms of the two agreements. An evaluation of external evidence of credit risk has also been performed for each 
customer. The Group has assigned $112.4m of receivables as at 31 July 2021 (2020: $131.3m).

The Group has assessed its continuing involvement in the assigned receivables and determined that the fair value 
of continuing involvement is immaterial. The Group reassesses the facility for qualification for derecognition at 
each reporting date, when the terms of the facility are amended, and assesses each new customer at the initial 
assignment of a receivable. No new customers were assigned during the period. 

If the Group’s customers defaulted on all trade receivables that have been derecognised at balance date, the 
Group would be required to pay a late payment charge of $4,550 per day (2020: $5,351) for each day that these 
receivables remain overdue, assuming that market conditions remain unchanged from reporting date. The likelihood 
that debtors will fall overdue or remain overdue for a long period of time is small, given the strong credit ratings and 
good payment histories of the customers whose receivables have been selected for assignment.

The loss for the period of $1.0m (2020: $1.7m) arising from derecognition of assigned receivables is the discount paid 
to the banks for acquiring these receivables.

ANNUAL REPORT 2021PAGE 72 & 73

06.  INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where 
applicable, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being 
allocated on the basis of normal operating capacity. Cost is determined on a weighted average basis and in the 
case of manufactured goods, includes direct materials, labour and production overheads. Net realisable value is the 
estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated 
costs necessary to make the sale.

Raw material inventories at $74.4m (13,733 MT) have increased slightly from the prior year. (2020: $71.3m, 13,614 MT).

Finished goods have decreased to $180.0m despite holding slightly more product on hand (32,144 MT) (2020: $186.5m, 
32,109 MT). The decrease in the value relates to a lower holding of our core infant formula products and a higher 
holding of our core commodity products (whole milk powder, skim milk powder and anhydrous milk fat), offset by a 
higher season-ending milk price. Finished goods held at net realisable value have increased as a result of a higher stock 
condition provision and onerous contracts provision.

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous 
contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the 
obligations under the contract exceed the economic benefits expected to be received under it.

The cost of inventories recognised as an expense during the year was $1,300.0m (2020: $1,098.3m). The cost of 
inventories recognised as an expense includes $10.1m (2020: $10.9m) in respect of write downs of inventory to net 
realisable value.

The total inventory provision as at reporting date was $8.3m, of which $7.6m related to finished goods and $0.7m to 
raw materials (2020: $2.0m, $1.8m related to finished goods and $0.2m related to raw materials). The increase primarily 
relates to infant formula products on hand that are provisioned to expire because of decreased demand.

In addition, the total onerous contracts provision as at reporting date was $2.1m (2020: $0.3m). Onerous contracts have 
increased due to an increased weighted average cost of products on hand at balance date; the most significant driver 
being the increase in 2020/21 milk price through the second half of the season.

Key management judgement is applied in assessing inventory impairment, and therefore net realisable value 
of inventory. Impairment is tested in three ways, stock provision, onerous contracts provision, and inventory 
impairment. The stock provision considers the condition of inventory and therefore requires a high level of 
management judgement, whereas the onerous contracts and impairment calculations are largely formulaic.

The stock provision tests for the physical impairment of both raw materials and finished goods. Physical impairment 
can be for a variety of reasons, including damage, expiry, or obsolescence. Management judgement is required as 
often indicators of impairment can be removed through further investigation or rework meaning that no write-down 
to net realisable value is required. Management consider historical rework process results and future rework plans 
in making that judgement.

Estimates are required in relation to net realisable value, which is the estimated selling price in the ordinary course 
of business, less the estimated costs of completion and selling expenses. Net realisable value is determined 
by reference to historic achieved market prices, future contracted sales, and global dairy trade auction results. 
Reviewing the net realisable values is carried out by management on a monthly basis, using their judgement in 
determining expected future proceeds based on current indicators of the condition of inventory.

A key management estimation in determining inventory cost is the Monthly Milk Price which is derived from a 
forecast milk price for the year. The Monthly Milk Price forms a key component of the product cost through the year.

Raw materials at cost
Work in progress at cost
Finished goods at cost
Finished goods at net realisable value

Total inventories

2021

$’000

74,390
16,589
148,554
31,411

270,944

2020

$’000

71,305
11,573
178,336
8,170

269,384

ANNUAL REPORT 2021PAGE 74 & 75

07.  TRADE AND OTHER PAYABLES

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of 
business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or 
less otherwise, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value plus any directly attributable transaction costs and 
are subsequently measured at amortised cost using the effective interest method. Payables that are settled within 
a short duration are not discounted.

Trade payables
Accrued expenses
Employee entitlements
Other payables

Total trade and other payables

2021

$’000

101,121
150,378
12,569
- 

264,068

2020

$’000

106,942
118,854
12,809
166

238,771

Payables denominated in currencies other than the functional currency comprise NZ$4.5m (2020: $11.9m) of USD, EUR, GBP, RMB, 
SGD, and AUD denominated trade payables and accruals.

LONG TERM ASSETS

The assets section provides information about the long term investments 
made by the Group to operate the business and generate returns to 
shareholders. This section includes the following notes: 

08  Property, plant and equipment 

09 

Intangible assets 

10  Leases 

76

79

85

ANNUAL REPORT 2021PAGE 76 & 77

08.  PROPERTY, PLANT AND EQUIPMENT

Recognition and measurement
Property, plant and equipment are initially measured at cost less accumulated depreciation.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed 
assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to 
a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site 
on which they are located where the Group has an obligation to remove and restore.

When a self-constructed asset meets the definition of a qualifying asset under NZ IAS 23 Borrowing Costs, 
borrowing costs directly attributable to the construction of the asset are capitalised until such a time as the asset is 
substantially ready for its intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

When major components of an item of property, plant and equipment have different useful lives, they are 
accounted for as separate items of property, plant and equipment.

Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the 
item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost 
can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in 
profit or loss as incurred.

Depreciation
Depreciation of property, plant and equipment is recognised in profit or loss on a straight-line basis over the 
estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated.

Capital work in progress is not depreciated. The total cost of this work is transferred to the relevant asset category 
on the completion of the project and then depreciated. 

Estimation and judgement is also required in the selection and application of useful lives. It is management’s best 
estimate that the useful lives adopted adequately reflect the flow of resources and the economic benefits required 
and derived in the use and servicing of property, plant, and equipment. 

The estimated useful lives for the current and comparative periods are as follows:

Buildings 

10 - 60 years

Plant and equipment  3 - 35 years

Fixtures and fittings  2 - 25 years

Depreciation methods, useful lives and residual values are reassessed at each reporting date.

Impairment
Estimation and judgement is required in the impairment of property, plant, and equipment. The Group estimates or 
exercises judgement in assessing indicators of impairment, forecasting future cash flows, and determining other 
key assumptions used for assessing fair values (less costs of disposal) or value in use.

Balance as at 31 July 2020

36,765

290,776

720,882

Cost
Balance as at 1 August 2019

Additions
Additions through business combinations
Reclassification/transfer
Impairment
Disposals

Additions
Reclassification/transfer
Impairment
Disposals

Balance as at 31 July 2021

Accumulated depreciation
Balance as at 1 August 2019

Depreciation (note 3)
Impairment
Disposals

Balance as at 31 July 2020

Depreciation (note 3)
Impairment
Disposals

Balance as at 31 July 2021

Carrying amounts
As at 31 July 2020
As at 31 July 2021

Land

Buildings

$’000

$’000

Plant 
and 
equipment
$’000

Fixtures 
and 
fittings
$’000

Capital work 
in progress

Total

$’000

$’000

34,957

183,039

513,208

12,774

240,209

984,187

-
1,350
458
-
-

-
4,610
103,202
-
(75)

-
26,060
185,441
(1,050)
(2,777)

-
23,890
-
-

60,655

-
33,584
-
(185)

324,175

-
59,679
(969)
(3,471)

776,121

-
2,021
11,213
-
(746)

25,262

-
4,338
-
(982)

129,381
233
(300,314)
(2,301)
-

129,381
34,274
-
(3,351)
(3,598)

67,208

1,140,893

111,955
(121,491)
(1,244)
(11)

111,955
-
(2,213)
(4,649)

28,618

56,417

1,245,986

-

-
-
-

-

-
-
-

-

22,550

110,943

6,909
-
(33)

29,426

7,393
-
(158)

36,661

29,869
(151)
(2,300)

138,361

35,068
(500)
(2,188)

170,741

5,493

3,177
-
(668)

8,002

4,379
-
(946)

11,435

-

-
-
-

-

-
-
-

-

138,986

39,955
(151)
(3,001)

175,789

46,840
(500)
(3,292)

218,837

36,765
60,655

261,350
287,514

582,521
605,380

17,260
17,183

67,208
56,417

965,104
1,027,149

ANNUAL REPORT 2021PAGE 78 & 79

08.  PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

09. INTANGIBLE ASSETS

(a) Impairment
During the period, property, plant, and equipment have been examined for impairment. A $1.7m (2020: $3.2m) 
impairment charge has been recognised to reflect the write-down of select assets to the higher of their fair value less 
costs of disposal (FVLCOD) and value-in-use. Of the $1.7m write-down, $1.2m relates to work in progress costs for 
projects which have been indefinitely deferred, and $0.5m relates to the derecognition of assets which were determined 
to no longer meet the definition of an asset.

(b) Capital work in progress
Assets under construction includes capital expenditure projects until they are commissioned and transferred to property, 
plant and equipment. Capital work in progress of $56.4m is lower than 2020 ($67.2m) due to the completion of the 
Dry Store 4 project and a lower level of capital expenditure in 2021. The current work in progress balance is comprised 
primarily of $34.5m (2020 - $1.0m) of costs relating to the Group’s ongoing Pokeno processing upgrade project and the 
balance comprises of routine operational capital expenditure.

(c) Capitalised borrowing costs
During the year, the Group has capitalised borrowing costs amounting to $2.3m (2020: $2.1m) on qualifying assets. 
Interest has been capitalised at the rate at which borrowing has been specifically drawn to fund the qualifying asset. 
In the year, borrowing costs were capitalised for the Dry Store 4, Pokeno modifications, and ERP implementation 
(refer to note 9) projects.

Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the cost of the acquisition over the 
net of the fair values of the assets and liabilities of the subsidiaries acquired. Goodwill is tested for impairment 
annually and is carried at cost as established at the date of acquisition of the subsidiary, less accumulated 
impairment losses, if any. 

For the purposes of impairment testing, goodwill is allocated to cash-generating units (CGU) that are expected to 
benefit from the business combination in which the goodwill arose. The recoverable amount of CGUs is the higher 
of fair value less costs to sell and value in use. If this recoverable amount is less than the carrying amount of the 
CGU an impairment loss is recognised immediately in the profit and loss, and it is not subsequently reversed.

Brands
Purchased brands have been assessed as indefinite life intangible assets, after considering factors such as the 
expected use of the assets, the period of legal control, the typical product life cycle of these assets, the industry in 
which the assets are operating, and the level of maintenance expenditure required. Purchased brands are initially 
recognised at fair value if acquired as part of a business combination, and are tested for impairment annually, 
or more frequently if there are any indicators of impairment, on the same basis as goodwill.

Patents, trademarks and other rights
Separately acquired patents, trademarks, and other rights are shown at historical cost. Patents, trademarks, 
and other rights have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is 
calculated using the straight-line method to allocate the cost of patents, trademarks, and other rights over their 
estimated useful lives of 10 to 20 years.

Computer software
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. 
Development costs that are directly attributable to the design, testing, and implementation of identifiable and 
unique software products controlled by the Group are recognised as intangible assets. Amortisation is calculated 
using the straight-line method to allocate the cost of computer software over an estimated useful life of 4 years.

ANNUAL REPORT 2021PAGE 80 & 81

09. INTANGIBLE ASSETS (CONTINUED)

Change in computer software capitalisation policy as a result of the IFRIC agenda decision on cloud software 
(software as a service or “SaaS”) implementation costs.

In April 2021 IFRIC released an agenda decision in contradiction of the Group’s historical policy of capitalising cloud 
software implementation costs. The agenda decision disallows the capitalisation of costs for the implementation 
of cloud software except for costs relating to the development of customised software code where the customer 
maintains control of the code and its future benefits.

The Group has historically capitalised implementation phase costs and subsequently depreciated the costs over 
the life of the underlying software service contract (over a period not exceeding 4 years). In the year, the Group 
made the decision to align its accounting policy with the IFRIC agenda decision and retrospectively derecognise 
cloud software implementation costs which had been recognised as intangible assets. The Group has also made 
the decision to disallow future capitalisation of cloud software costs except for those instances where the Group 
maintains control of any custom software code and has the ability to restrict others’ access to those benefits.

For the avoidance of doubt, the Group’s current ERP implementation of SAP is not within the scope of the agenda 
decision as the underlying ERP license is perpetual, on-premise, and the Group has control over the infrastructure 
on which the ERP runs.

The change in accounting policy has had the following impacts on the current and prior years presented in these 
financial statements:

Increase in software expense
Decrease in depreciation expense
(Increase)/decrease in tax expense

Increase/(decrease) in profit for the year

Decrease in intangible assets
Decrease in deferred tax liability
Decrease in retained earnings

Decrease in basic and diluted earnings per share ($)

2021

$’000

(585)
914
(92)
237

(2,417)
677
1,740

0.001

2020

$’000

(1,780)
532
349
(899)

(2,746)
769
1,977

0.005

2019

$’000

(1,469)
92
386
(991)

(1,498)
420
1,078

0.006

2018

$’000

(121)
-
34
(87)

(121)
34
87

0.000

New Zealand Units (NZU)
New Zealand Units are purchased to offset carbon emissions under the New Zealand Emissions Trading Scheme. 
The units are measured at cost and expensed on a first-in first-out basis. The units are surrendered in May of each 
year to meet obligations for the previous calendar year.

Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether 
there is any indication of impairment.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its recoverable amount. 
A CGU is the smallest identifiable asset group that generates cash flows that are largely independent from other 
assets and groups.

Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill 
allocated to the units and then to reduce the carrying amount of any other assets in the unit (or group of units) on a 
pro rata basis.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. 
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax 
discount rate that reflects current market assessments of the time value of money and the risks specific to 
the asset.

Impairment losses are recognised in profit or loss.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss 
has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates 
used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s 
carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or 
amortisation, if no impairment loss has been recognised. An impairment loss in relation to goodwill is not reversed. 

ANNUAL REPORT 2021PAGE 82 & 83

09. INTANGIBLE ASSETS (CONTINUED)

Year ended 31 July 2020
Opening net book amount (restated)
Additions (restated)
Acquisition through business combination
Development costs recognised as an asset (restated)
Impairment charge
Amortisation charge (restated) (note 3)
Asset disposals/surrendered

Goodwill

Brands

$’000

$’000

6,026
-
59,519
-
-
-
-

-
-
17,545
-
-
-
-

Closing net book value (restated)

65,545

17,545

Year ended 31 July 2020
Current
Non-current (restated)

Closing net book value (restated)

Year ended 31 July 2021
Opening net book value
Additions
Development costs recognised as an asset
Impairment (note 3)
Amortisation charge (note 3)
Asset disposals/surrendered

Closing net book value

Year ended 31 July 2021
Current
Non-current

Closing net book value

-
65,545

65,545

65,545
-
-
-
-
(1,356)

64,189

-
64,189

64,189

-
17,545

17,545

17,545
-
-
-
-
(976)

16,569

-
16,569

16,569

Patents, 
trademarks 
and other 
intangibles
$’000

Computer 
software

Intangibles 
in progress

New 
Zealand 
Units

Total

$’000

$’000

$’000

$’000

718
908
107
25
-
(344)
-

1,414

-
1,414

1,414

1,414
-
-
-
(414)
(52)

948

-
948

948

4,395
3,455
263
15
-
(2,281)
-

5,847

6,528
9,548
160
(4,404)
(1,561)
-
-

10,271

6,976
4,138
-
-
-
-
(2,203)

24,643
18,049
77,594
(4,364)
(1,561)
(2,625)
(2,203)

8,911

109,533

-
5,847

5,847

-
10,271

10,271

4,230
4,681

4,230
105,303
8,911 109,533

5,847
1,249
-
-
(2,982)
(4)

10,271
23,167
(1,249)
(530)
-
-

8,911
3,672
-
-
-
(2,526)

109,533
28,088
(1,249)
(530)
(3,396)
(4,914)

4,110

31,659

10,057

127,532

-
4,110

4,110

-
31,659

3,712
6,345

3,712
123,820

31,659

10,057

127,532

Intangibles in progress of $31.7m at balance date is comprised primarily of project to date spend on the Group’s implementation of an 
on-premise, perpetually licensed ERP system.

Opening balances, additions, and amortisation for the year ended 31 July 2020 have been restated to reflect a change in policy 
relating to the IFRIC Agenda decision on cloud software costs as detailed in the accounting policy section of this note. 

In the year, $1.4m of goodwill and $1.0m of brands were derecognised when the Group disposed of its Deep South ice cream 
manufacturing operation.

(a) Impairment tests for indefinite life intangibles
As at 31 July 2021 management has determined that there is no impairment of any CGU’s containing goodwill.

For the purposes of goodwill impairment testing, goodwill has been allocated to two CGU groups; the Synlait Milk CGU 
(nutritionals, ingredients, fresh milk) and Dairyworks CGU (cheese, butter, yoghurt). The Group’s CGU’s were aligned with 
the Group’s operating segments in the year. The impact of this alignment is the reallocation of $6.0m of goodwill and all 
other assets from the previous Auckland Blending and Canning CGU to the Synlait Milk CGU.

At 31 July 2021, $58.2m (2020: $59.5m) of goodwill and $16.6m (2020: $17.5m) of brand assets were allocated to the 
Dairyworks CGU. $6.0m (2020: $nil) of goodwill and $nil (2020: $nil) of brand assets were allocated to the Synlait 
Milk CGU. 

The value-in-use calculation uses five-year future cash flows based on Board approved business plans. Based on 
projected future cash flows, management has determined that the recoverable amount of each CGU exceeds its carrying 
amount and therefore goodwill is not impaired. The business plans were modelled using the following key assumptions:

Annual revenue growth rates
Allowance for increase in expenses
Pre-tax discount rate
Terminal growth rate

2021

2020

(7.2%) - 15.3%
(9.7%) - 8.6%
9.5% - 11.7%
2.0%

(0.6%) - 7.9%
1.9% - 4.0%
10.7% - 15.2%
0.0% - 2.0%

The range of annual revenue growth rates and allowance for increase in expenses is primarily attributable to a significant 
drawdown of inventory anticipated over the course of the 2022 financial year, followed by a return to a more balanced 
level of inventory in the following year.

ANNUAL REPORT 2021PAGE 84 & 85

09. INTANGIBLE ASSETS (CONTINUED)

10.  LEASES

Indefinite life intangibles, which is comprised entirely of brands, have been tested using the relief from royalty method. 
Brand royalty rates for the year ended 31 July 2021 are based on a percentage of revenue (2020: percentage of earnings 
before interest and taxes). The impairment testing was modelled using the following key assumptions:

Annual revenue growth rates
Allowance for increase in expenses
Royalty rate
Post-tax discount rate
Terminal growth rate

2021

2020

1.5% - 6.4%
2.0% - 4.0%
3.75% - 4.25%
11.0%
2.0%

(30.0%) - 7.9%
1.9% - 4.0%
25.0%
8.5% - 11.2%
0.0% - 2.0%

Management has carried out a sensitivity analysis and believe that any reasonably possible change in the key assumptions 
would not cause the book value of any of the CGU’s, or groups of CGU’s, to exceed their recoverable amount. 

(b) Forward cover of emissions units
The following table summarises the Group’s emissions units forward cover as at 31 July 2021.

2021 (January to July)

2022
2023
2024
2025

Total

NZUs held Average cost per unit

# of units

48,543

99,185
101,665
101,665
651

351,709

$

25.36

25.01
24.48
37.67
40.85

28.59

Total

$’000

1,231

2,481
2,489
3,829
27

10,057

At 31 July 2021 the total fair value of units held by the group was $17.1m based on a quoted price of $48.60 per unit. 

Right-of-use assets and lease obligations
Right-of-use assets are initially measured equal to the corresponding present value of the remaining lease liability. 
Subsequent additions are measured at the initial amount of the lease obligation adjusted for any lease payments 
made at, or before, the commencement date, plus any initial direct costs incurred, less any lease incentives 
received.

The ROU asset is subsequently depreciated on a straight-line basis over the shorter of the term of the lease, or 
the useful life of the asset determined on the same basis as the Group’s property, plant and equipment. The ROU 
asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease 
obligation.  

Lease obligations
The lease obligation is initially measured at the present value of lease payments remaining at the lease 
commencement date, discounted using the Group’s incremental borrowing rate. Lease payments included in the 
measurement of the lease obligation, when applicable, may comprise fixed payments, variable payments that 
depend on an index or rate, amounts expected to be payable under a residual value guarantee and the exercise 
price under a purchase, extension or termination option that the Group is reasonably certain to exercise. 

The lease obligation is subsequently measured at amortised cost using the effective interest method. It is 
remeasured when there is a change in future lease payments arising from a change in an index or rate, if there 
is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or 
if the Group exercises a purchase, extension or termination option. When the lease obligation is remeasured, a 
corresponding adjustment is made to the carrying amount of the ROU asset.   

The Group does not recognise ROU assets and lease obligations for short-term leases that have a lease term of 
twelve months or less or for leases of low-value assets. Payments associated with these leases are recognised as 
an operating expense on a straight-line basis over the lease term within costs and expenses on the consolidated 
income statement. The Group has also elected to apply a single discount rate to portfolios of leases with 
reasonably similar characteristics. 

ANNUAL REPORT 2021PAGE 86 & 87

10.  LEASES (CONTINUED)

RIGHT-OF-USE ASSETS
Cost
Balance as at 1 August 2019
Additions and acquisitions
Acquisitions through business combinations
Foreign exchange differences

Balance as at 31 July 2020

Balance as at 1 August 2020
Additions and acquisitions
Disposals
Foreign exchange differences

Balance as at 31 July 2021

Depreciation
Balance as at 1 August 2019
Depreciation
Foreign exchange differences

Balance as at 31 July 2020

Depreciation
Balance as at 1 August 2020
Disposals
Depreciation
Foreign exchange differences

Balance as at 31 July 2021

Carrying amounts
Balance as at 31 July 2020
Balance as at 31 July 2021

Buildings

$’000

Plant and 
equipment
$’000

6,726
6,497
8,992
(9)

22,206

22,206
-
(3,939)
22

18,289

-
4,702
(5)

4,697

4,697
(3,939)
4,362
8

5,128

17,509

13,161

466
60
708
-

1,234

1,234
243
(88)
-

1,389

-
246
-

246

246
(88)
374
-

532

988

857

Total

$’000

7,192
6,557
9,700
(9)

23,440

23,440
243
(4,027)
22

19,678

-
4,948
(5)

4,943

4,943
(4,027)

4,736
8
5,660

18,497

14,018

LEASE OBLIGATIONS
Contractual, undiscounted cash flows associated with the Group’s lease obligations are as follows:
Within one year
Between one and five years
Beyond five years

Total undiscounted lease obligations

Discounted lease obligations recognised on the Company’s consolidated balance sheet are as follows:
Current
Non-current

Total discounted lease obligations

2021

$’000

2020

$’000

3,760
11,325
1,455 
16,540

3,243
11,775

15,018

5,061
15,015
2,443
22,519

4,422
14,838

19,260

Interest expense on lease obligations for the year ended 31 July 2021 was $0.6m (2020: $0.5m) and is included in finance expense. 
Operating lease expense relating to short-term and low-value leases not included in the measurement of lease obligations for the year 
ended 31 July 2021 is $1.7m (2020: $1.4m). The Group’s weighted average cost of borrowing at 31 July 2021 was 3.53% (2020: 3.49%).

ANNUAL REPORT 2021PAGE 88 & 89

DEBT AND EQUITY

The debt and equity section gives information about the Group’s capital 
structure and financing costs related to this structure. This section includes 
the following notes: 

11.  FINANCE INCOME AND EXPENSES

11  Finance income and expenses 

12  Loans and borrowings 

13  Share capital 

14  Share based payments 

15  Reserves and retained earnings 

89

90

92

94

96

Interest income is recognised using the effective interest method. When a loan or receivable is impaired, the Group 
reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the 
original effective interest rate of the instrument and continues unwinding the discount as interest income. Interest 
income on impaired loans and receivables is recognised using the original effective interest rate.

Interest expense on borrowings, bank and facility fees and transaction costs are recognised in the income 
statement over the period of the borrowings, using the effective interest rate method, unless such costs relate 
to funding capital work in progress. Interest expense on lease obligations are also recognised in the income 
statement in accordance with NZ IFRS 16.

Interest income on loans and deposits

Total finance income

Interest and facility fees
Capitalised borrowing cost
Interest on leases

Total finance costs
Loss on derecognition of financial assets

Net finance costs

2021

$’000

44

44

(22,223)
2,325
(590)

(20,488)
(1,045)

(21,489)

2020

$’000

134

134

(21,414)
2,089
(452)

(19,777)
(1,747)

(21,390)

ANNUAL REPORT 2021PAGE 90 & 91

12.  LOANS AND BORROWINGS

Interest bearing liabilities are recognised initially at fair value, net of transaction costs incurred. Interest bearing 
liabilities are subsequently carried at amortised cost; any difference between the proceeds (net of transaction 
costs) and the redemption value is recognised in the profit and loss component of the statement of comprehensive 
income over the period of the borrowings using the effective interest method.

Working capital facility NZD
Working capital facility USD
Revolving credit facility

Current liabilities

Working capital facility NZD
Working capital facility USD
Retail bonds
Revolving credit facility

Non-current liabilities

Drawn facility 
amount
$’000

Transaction 
costs
$’000

-
-
33,333

33,333

60,495
54,928
180,000
166,667

-
-
-

-

-
-
(2,353)
(153)

2021
Carrying 
amount
$’000

-
-
33,333

33,333

60,495
54,928
177,647
166,514

462,090

(2,506)

459,584

Drawn facility 
amount
$’000

Transaction 
costs
$’000

68,910
33,927
-

102,837

-
-
-

-

2020
Carrying 
amount
$’000

68,910
33,927
-

102,837

180,000
250,000

430,000

(2,987)
(259)

(3,246)

177,013
249,741

426,754

(a) Terms of loans and borrowings
The revolving credit facility and working capital facility within the Group are secured under the terms of the General Security 
Deed dated 26 June 2013, by which all present and future property is secured to the ANZ Bank and Bank of New Zealand. 

The Group facilities include:

• 

• 

• 

• 

A secured revolving credit facility (Facility A) of $100m maturing 1 October 2023, with $33.3m amortising 31 July 
2022 and 31 July 2023.

A secured revolving credit facility (Facility B) of $50m maturing 1 October 2023.

A secured revolving credit facility (Facility C) of $50m maturing 1 October 2023.

A secured working capital facility of NZD $250m maturing 1 October 2022 and temporarily increasing by $80m to 
$330m in September 2021, stepping down over six months back to $250m in February 2022.

The Group is subject to capital requirements imposed by its banking syndicate through covenants agreed as part of the 
lending facility arrangements. The Group had the interest cover ratio, the total debt to EBITDA ratio and senior debt to 
EBITDA ratio covenants as at 31 July 2021 waived in the current year. The Group met all other externally imposed capital 
requirements for the twelve months ended 31 July 2021 and 31 July 2020.

The following summarises banking covenants effective for the year ending 31 July 2022:

1. 

Total shareholder funds of no less than $600.0m at all times.

2.  Working capital ratio of no less than 1.5x at all times.

3. 

Interest cover ratio of no less than 3.0x on and from 31 July 2022.

4.  Leverage ratio of no greater than 4.5x for the 31 July 2022 reporting date, increasing to no greater than 4.0x on 

and from 31 July 2023.

5.  Senior leverage ratio of no greater than 3.0x on and from 31 July 2022.

Retail Bonds
Borrowings under the retail bond programme are supported by a Master Trust Deed and supplemented by the Series 
Supplement entered into between the Group and the New Zealand Guardian Trust Company Limited. The retail bonds are 
unsecured and unsubordinated. At 31 July 2021, the retail bond had a fair value of $175.0m, based on NZDX valuation.

Nominal interest 
rate %

Financial year of 
maturity

Carrying 
amount 2021

Carrying amount 
2020

Secured revolving credit facility (Facility A, B & C) - ANZ/BNZ
Secured working capital facility - ANZ/BNZ - USD
Secured working capital facility - ANZ/BNZ - NZD
Subordinated retail bonds

2.21%
1.52%
1.96%
3.83%

2023
2023
2023
2025

200,000
54,928
60,495
180,000

250,000
33,927
68,910
180,000

The nominal interest rate is calculated by adding the BKBM rate for NZD facilities, US LIBOR rate for USD facilities and the applicable 
margin rate. It excludes line fees and swap costs. Nominal interest rate for the subordinated retail bonds excludes transaction costs.

ANNUAL REPORT 2021PAGE 92 & 93

13.  SHARE CAPITAL

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a 
deduction from the proceeds.

During the reporting period, 59,068 new ordinary shares were granted to participants of the Group’s Long Term Incentive 
scheme as a result of share options that were granted under the scheme vesting and being converted to ordinary shares 
(2020: 83,880). These shares were issued to the participants at no cost. Refer to Note 14 for further information.

On 18 November 2020 32,785,933 shares were granted to participants of an underwritten placement announced on 
10 November 2020 for total proceeds of $167.2m. On 1 December 2020 a further 6,429,752 shares were granted to 
participants of a share purchase plan for existing shareholders which was also announced on 10 November 2020 for total 
proceeds of $32.8m. Total transaction costs for shares issued under the underwritten placement and share purchase 
plan were $3.9m for net proceeds of $196.1m.

(a) Share capital
Ordinary shares
On issue at beginning of period
Issue of share capital under employee share plans
Issue of share capital under equity raise
Issue of share capital under underwritten placement
Transaction costs for issue of share capital

On issue at end of period

None of the above shares are held by the Group or its subsidiaries.

2021 Shares

2020 Shares

2021
$’000

2020
$’000

179,306,908
59,068
32,785,933
6,429,752
-

179,223,028
83,880
-
-
-

218,581,661

179,306,908

268,544
148
167,208
32,791
(3,917)

464,774

268,074
470
-
-
-

268,544

(b) Ordinary shares
All issued shares are fully paid and have no par value. Ordinary shares are entitled to one vote per share at meetings of 
Synlait Milk Limited. All ordinary shares rank equally with regard to Synlait Milk Limited’s residual assets.

(c) Capital risk management
The Group’s capital includes share capital, retained earnings and reserves.

The Group’s policy is to maintain a sound capital base so as to maintain investor and creditor confidence and 
to sustain future development of the business. The impact of the level of capital on shareholders’ return is also 
recognised and the Group recognises the need to maintain a balance between the higher returns that might be 
possible with greater gearing and the advantages and security afforded by a sound capital position. 

The Group is subject to various security ratios within the bank facilities agreement.

The Group’s policies in respect of capital management and allocation are reviewed by the Board of Directors.

(d) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by 
dividing the profit or loss attributable to shareholders by the weighted average number of shares outstanding during the 
period. Diluted EPS is determined by adjusting the profit or loss attributable to shareholders and the number of shares 
outstanding to include the effects of all potential dilutive shares.

Basic EPS for the 2021 financial period was (13.77) cents (2020: 41.45). Diluted EPS for the 2021 financial period was 
(13.75) cents (2020: 41.35).

ANNUAL REPORT 2021PAGE 94 & 95

14.  SHARE BASED PAYMENTS

(a) LTI share scheme
Under the LTI share scheme, participants receive Performance Share Rights (“PSRs”) which can be converted into 
Ordinary Shares in Synlait Milk Limited in three financial years’ time provided performance hurdles have been 
met during the assessment period (the date of award of the PSRs plus three financial years). The number of PSRs 
granted to participants is set at one quarter of their base salary divided by Synlait Milk Limited’s share price on the 
date of the award of the PSRs.

The PSRs consist of 50% Total Shareholder Return Rights (“TSR Rights”) and 50% Earnings Per Share Rights 
(“EPS Rights”). The vesting for both TSR Rights and EPS Rights is determined in accordance with progressive 
vesting scales.

Synlait Milk Limited’s TSR must be greater than or equal to the 50th percentile of the constituents of the TSR Peer 
Group over the assessment period for 50% of the TSR Rights to vest, scaled so that 100% of the TSR Rights vest 
if Synlait Milk Limited’s TSR equals or exceeds the 75th percentile of the TSR Peer Group over the assessment 
period. The TSR Peer Group is determined as at the date of award of the PSRs. 

If Synlait Milk Limited’s EPS over the assessment period equals a Board approved EPS target, 50% of the EPS 
Rights vest, scaled so that 100% of the EPS Rights vest if Synlait Milk Limited’s EPS over the assessment period 
equals the Board approved EPS target plus 10%. 

For either performance hurdle to be met, Synlait Milk Limited’s TSR must be positive over the assessment period. 
No exercise price is payable upon exercise of a PSR, Synlait Milk Limited’s ordinary shares being delivered to a 
participant for nil consideration. The LTI share scheme is an annual scheme with PSRs granted to Board approved 
participants each year, noting however that the annual award is assessed over a three-year period.

The table below sets out the movement in LTI share scheme PSR’s during the year:

Outstanding 1 August
Granted during the year
Forfeited during the year
Exercised during the year

Total

2021

334,880
197,276
(92,986)
(59,068)

380,102

2020

472,934
148,005
(202,179)
(83,880)

334,880

During the period, 59,068 new ordinary shares were granted to participants of the LTI scheme. See Note 13 for further detail.

The fair value of the PSRs awarded at grant date has been determined by an independent third party valuer, using a Monte 
Carlo simulation to model the total share return for Synlait and the TSR peer group. The fair value of the PSRs awarded, along 
with key assumptions, are listed below:

Risk free rate
Volatility
Share price at entitlement date
Share price at grant date
Total value of options granted at grant date ($000’s)

The estimated value of the PSRs is amortised over the vesting period from grant date.

2021 PSRs

2020 PSRs

0.21%
40.27%
6.97
5.52
468

0.83%
37.70%
9.79
9.18
783

(b) Expenses arising from share based payment transactions
Total expenses arising from share based payment transactions recognised during the period as part of employee benefit 
expense were as follows:

(Recoveries)/expenses for equity settled share based payment transactions

2021

$’000

(610)

2020

$’000

523

ANNUAL REPORT 2021FINANCIAL RISK 
MANAGEMENT

The financial risk management section presents information about the Group’s 
financial risk exposures and the financial instruments used to mitigate this. 
This section includes the following notes: 

16  Financial risk management 

17  Financial instruments 

98

106

PAGE 96 & 97

15.  RESERVES AND RETAINED EARNINGS

(a) Retained earnings
Movements in retained earnings were as follows:

Balance 1 August
Net (loss)/profit for the year

Balance 31 July

2021

$’000

322,006
(28,451)
293,555

Group

2020

$’000 
(restated)

247,697
74,309

322,006

(b) Nature and purpose of reserves
(i) Cash flow hedge reserve 
The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow 
hedging instruments and the cost of cash flow hedging instruments. Cash flow hedging instruments relate to hedged 
transactions that have not yet occurred. 

(ii) Employee benefits reserve
The current year movement in the employee benefits reserve of ($0.6m) (2020: ($0.3m)) is comprised of the cumulative 
share based payment expense for share options not yet vested of $0.2m (2020: $0.5m), vesting of rights during the 
period of ($0.8m) (2020: $0.5m) and the related movement in deferred tax asset of $nil (2020: ($0.3m)).

(c) Dividends
No dividends were declared by the Group during the year.

ANNUAL REPORT 2021PAGE 98 & 99

16.  FINANCIAL RISK MANAGEMENT

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate risk, 
foreign exchange rate risk, and commodity price risk including forward exchange contracts, interest rate swaps and 
commodity derivative contracts.

Interest rate risk
Interest rate risk is the risk that the value of the Group’s assets and liabilities will fluctuate due to changes in market 
interest rates. The Group is exposed to interest rate risk primarily through its bank overdrafts and borrowings. 

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk 
and commodity price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses 
on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial 
performance. The Group uses derivative financial instruments to hedge certain risk exposures.

The Group owns 100% of the shares of Dairyworks Ltd (“Dairyworks”). The financial risks to Dairyworks are similar 
to the financial risks of the Group. Dairyworks currently has its own separate treasury policy from the Group’s policy 
with the need for its own risk management parameters to reflect the business and markets that it operates in. Any 
deviation in Dairyworks’ policy from the Group is made explicit in the notes below.

Market risk
Foreign exchange risk
The Group is exposed to foreign currency risk on its sales, which are predominantly denominated in US dollars. 
The Group is also exposed to foreign currency risk on the purchase of raw materials for production and capital 
equipment purchases from overseas. The Group enters into derivative arrangements in the ordinary course of 
business to manage foreign currency risk. These instruments include forward exchange contracts, option collars 
and vanilla options. These instruments enable the Group to mitigate the risk the variable exchange rates present to 
future cash flows for sales receipts or purchases by fixing or limiting the exchange rate at which these cash receipts 
or payments are exchanged into NZ dollars. 

In relation to foreign exchange contracts that are entered into based on forecast cash receipts or payments, 
variability in the expected timing or amounts of future cash flows can lead to ineffective hedging. To mitigate the 
risk of ineffectiveness the Group’s policy is to hedge a decreasing proportion of the risk exposure the further into 
the future the exposure exists given the increasing uncertainty of cash flows. Additionally, the Group’s policy is that 
the proportion of risk exposure to be hedged changes on a monthly basis in response to the movement in market 
rates. As at 31 July 2021, the Group has hedged 40% of its exposure to forecast foreign exchange risk on sales, and 
25% of its exposure to forecast foreign exchange risk on payables, over the following 2 years.

The Group manages its interest rate risk by using interest rate swaps to convert a portion of its floating rate debt to 
fixed interest rates in relation to the benchmark interest rate element. As interest rate swaps are entered into based 
on forecast debt levels, variability in future cash flows and debt levels can lead to ineffective hedging. To mitigate 
the risk of ineffectiveness the Group’s policy is to hedge a decreasing proportion of the risk exposure the further 
into the future the exposure exists given the increasing uncertainty of cash flows.

The Group has a Board approved treasury policy that sets the parameters to the extent of the cover taken. 
The policy requires the Group to hedge 30% to 80% of its exposure to interest rate risk that matures within 3 years, 
20% to 60% of the risk that matures between 3 and 5 years, and 0% to 40% of the risk that matures between 5 and 
10 years.

Commodity Price Risk
Dairy commodity price risk is the risk of volatility in profit and loss from the movement in dairy commodity prices to 
which the Group may be exposed. Volatility in global dairy commodity prices can have an adverse impact on the 
Groups earnings and milk price by eroding selling prices and increasing input costs.

The Group primarily manages its dairy commodity price risk by:

•  Determining the most appropriate mix of products to manufacture based on the milk supply curve and global 

demand for dairy products;

•  Governing the length and terms of sales contracts so that sales revenue is reflective of current market prices 

and is, where appropriate, linked to Global Dairy Trade (GDT) prices; and

•  Using commodity derivative contracts to manage sales price volatility caused by fluctuations in GDT prices.

The Group has a Board approved treasury policy that sets the parameters under which commodity cover is to be 
taken, including permitted derivative types and volume limits.

ANNUAL REPORT 2021PAGE 100 & 101

16.  FINANCIAL RISK MANAGEMENT (CONTINUED)

Credit risk
The Group’s exposure to credit risk is mainly influenced by its customer base and banking counterparties. 
Management has a credit policy in place under which each new customer is rigorously analysed for credit 
worthiness. Investments and derivatives are only entered into with reputable financial banks.

The carrying amount of financial assets represents the Group’s maximum credit exposure. The Group also retains 
all the late payment risk in the derecognition of financial assets, as described in note 5.

Synlait Milk Limited guarantees all facilities held by Synlait Milk Finance Limited.

Liquidity risk
Liquidity risk represents the Group’s ability to meet its contractual obligations as they fall due. The Group evaluates 
its liquidity requirements on an ongoing basis and uses a variety of facilities to manage liquidity risk. The Group has 
negotiated banking facilities sufficient to meet its medium-term facility requirements.

The Group has internal limits in place in order to reduce exposure to liquidity risk, as well as having committed lines 
of credit. It is the Group’s policy to provide credit and liquidity enhancements only to wholly owned subsidiaries. 

The Group’s exposure to foreign currency in the period ended 31 July 2021 is limited to its sales of dairy products, 
purchases of raw materials for production and capital equipment purchases. As at the reporting date, the Group had the 
following foreign exchange derivative instruments outstanding in respect of future foreign currency transactions:

USD
Exports
Less than 1 year
1 to 2 years

Imports
Less than 1 year

AUD
Exports
Less than 1 year

Weighted average 
exchange rate

2021

Nominal 
balance
USD$’000

Weighted average 
exchange rate

2020

Nominal 
balance
USD$’000

0.6694
0.7084

362,390
174,200

0.6478
0.6318

379,500
192,050

0.7053

(37,671)

0.6368

(46,021)

0.9252

7,467

-

-

Market risk
(i) Foreign exchange risk
The Group’s exposure to foreign currency risk at the reporting date was as follows:

(ii) Interest rate risk
As at the reporting date, the Group had the following interest rate swap contracts outstanding:

USD

$’000

39,449
(2,618)
(38,260)
(1,429)

AUD

$’000

2,664
(179)
-
2,485

EUR

RMB

GBP

2021

SGD

USD

AUD

2020

EUR

$’000

$’000

$’000

$’000

$’000

$’000

$’000

-
(227)
-
(227)

-
(95)
-
(95)

-
(87)
-
(87)

-
(4)
-
(4)

23,039
(7,142)
(22,487)
(6,590)

3,479
(605)
-
2,874

-
(243)
-
(243)

Trade receivables
Trade payables
Working capital facility

Total

Less than 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 6 years
6 to 7 years

Weighted average 
interest rate
%

4.36%
4.36%
4.20%
3.54%
3.56%
-%
-%

2021

Nominal 
balance
$’000

40,000
40,000
30,000
15,000
10,000
-
-

Weighted average 
interest rate
%

4.26%
4.36%
4.36%
4.20%
3.54%
3.56%
-%

2020

Nominal 
balance
$’000

57,250
40,000
40,000
30,000
15,000
10,000
-

The above balances include forward start swap contracts for various periods and do not necessarily reflect the current active contracts 
held at any one point in time.

In managing interest rate risks, the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer 
term, however, changes in interest rates will have an impact on profit.

ANNUAL REPORT 2021PAGE 102 & 103

16.  FINANCIAL RISK MANAGEMENT (CONTINUED)

(iii) Sensitivity analysis 
The following table summarises the sensitivity of the Group’s profit and equity to interest rate risk and foreign 
exchange risk.

The sensitivity analysis below has been determined based on the mark to market impact on financial instruments of 
changing interest and foreign exchange rates at balance date. The analysis is prepared assuming the amount of the 
financial instrument outstanding at the balance sheet date was outstanding for the whole year, and by adjusting one input 
whilst keeping the others constant.

Interest rates
100 basis point increase in interest rate
100 basis point decrease in interest rate

Foreign exchange rates
5% increase in exchange rate
5% decrease in exchange rate

Post-tax impact on the
Income statement

Post-tax impact on cash
Flow hedge reserve (equity)

2021
$’000

(3,207)
3,207

333
357

2020
$’000

(2,879)
2,879

2021
$’000

838
(866)

2020
$’000

1,252
(1,303)

-
-

24,502
(27,067)

27,127
(29,966)

(iv) Commodity derivatives
During the reporting period the Group entered into a small number of commodity derivative contracts to further support 
the Group’s existing financial risk management strategy. The movement in the fair value of the commodity derivatives is 
included within the cash flow hedge reserve. 

Liquidity risk
The total repayments and associated maturity of financial liabilities as at balance date is reported below:

At 31 July 2021
Working capital facility
Trade and other payables
Loans and borrowings
Derivative financial instruments
Lease liabilities
Total

At 31 July 2020
Working capital facility
Trade and other payables
Loans and borrowings
Derivative financial instruments
Lease liabilities
Total

Less than 
12 months
$’000

Between 
1 and 2 years
$’000

Between 
2 and 5 years
$’000

Over 
5 years
$’000

-
264,068
32,569
10,770
3,243
310,650

102,837
238,771
-
14,148
4,422
360,178

115,423
-
32,594
7,167
3,089
158,273

-
-
149,790
835
3,206
153,831

-
-
312,331
1,663
7,275
321,269

-
-
276,964
2,782
8,106
287,852

-
-
-
-
1,411
1,411

-
-
-
1,188
3,525
4,713

Total

$’000

115,423
264,068
377,494
19,600
15,018
791,603

102,837
238,771
426,754
18,953
19,260
806,574

ANNUAL REPORT 2021PAGE 104 & 105

16.  FINANCIAL RISK MANAGEMENT (CONTINUED)

Cash flow hedges
The Group enters into cash flow hedges of highly probable forecast transactions and firm commitments, as described in 
accounting policy section of this note.

Hedging instruments used
In cash flow hedges

Nominal 
amount

Carrying amount

Assets

Liabilities

Hedge accounted 
amounts in cash 
flow reserve
 Intrinsic value

Total cash flow 
hedge reserve

$’000

NZD$’000

NZD$’000

NZD$’000

NZD’000

31 July 2021
Foreign exchange risk
Foreign exchange contracts (USD)

Interest rate risk
Interest rate swaps

Commodity price risk
Dairy commodity futures (NZD)

Total

At 31 July 2020
Foreign exchange risk
Foreign exchange contracts (USD)

Interest rate risk
Interest rate swaps

Commodity price risk
Dairy commodity futures (NZD)

Total

499,955

30,559

16,150

14,409

14,409

40,000

13,866

-

3,451

(3,451)

(3,451)

198

30,757

-

19,601

276

11,234

276
11,234

528,337

36,419

12,078

24,341

24,341

57,250

12,016

-

6,777

(6,777)

(6,777)

195

36,614

-

18,855

-

17,564

-

17,564

The above table does not include USD $1.0m (2020: $2.8m) and AUD $7.5m (2020: $0) foreign exchange contracts held by Dairyworks 
as it has not elected to cash flow hedge. 

Total movement
Closing balance

Hedging instruments are located within the derivative financial instruments line items in the statement of financial position, classified as 
assets or liabilities, current or non-current.

Effects of cash flow hedges on 
statement of comprehensive 
income

Hedging gains/(losses) 
recognised in other 
comprehensive income
$’000

Hedge ineffectiveness 
recognised in profit 
or loss
$’000

Hedging gains/(losses) 
recognised in other 
comprehensive income
$’000

Hedge ineffectiveness 
recognised in profit 
or loss
$’000

2021

2020

Foreign exchange risk
Forward exchange contracts
Foreign currency collars

Interest rate risk
Interest rate swaps

Commodity price risk
Dairy commodity futures

Total

(9,932)
3,326

-

276

(6,330)

-
-

-

-

-

53,551
-

339

(8)

53,882

Impact to reserves in equity
The impact of the Group’s hedge accounting policies on the reserves in equity is presented in the table below:

Hedge Reserves
Opening balance

Movements attributable to cashflow hedges:
Change in value of effective derivative hedging instruments
Reclassifications to the income statement as hedged transactions occurred
Tax expense/(credit)

-
-

-

(299)

(299)

2020

$’000

(26,148)

16,841
37,041
(15,087)

38,795
12,647

2021

$’000

12,647

25,944
(32,274)
1,772

(4,558)
8,089

ANNUAL REPORT 2021PAGE 106 & 107

17.  FINANCIAL INSTRUMENTS

Classification
The Group classifies its financial assets in three categories: at amortised cost, at fair value through other 
comprehensive income and at fair value through profit or loss. The classification of financial assets depends on the 
business model within which the financial asset is held and its contractual cash flow characteristics.

The Group classifies its financial liabilities in two categories: at amortised cost and at fair value through profit 
or loss.

(i) Financial instruments at amortised cost
Financial assets are classified as measured at amortised cost if the Group’s intention is to hold the financial 
assets for collecting cash flows and the contractual terms give rise on specified dates to cash flows that are 
solely payments of principal and interest.

The Group currently classifies its cash and cash equivalents, restricted cash equivalents, accounts receivable 
and other receivables as financial assets measured at amortised cost.

Financial liabilities are classified as measured at amortised cost using the effective interest method, with the 
exception of those classified at fair value.

Recognition and measurement
The Group recognises a financial asset or a financial liability when it becomes a party to the contractual provisions 
of the instrument.

Regular purchases and sales of financial assets are recognised on the trade date – the date on which the Group 
commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all 
financial assets not classified at fair value through profit or loss. Financial assets carried at fair value through profit 
or loss are initially recognised at fair value, and transaction costs are expensed in profit and loss.

Where financial assets are subsequently measured at amortised cost, interest revenue, credit losses and foreign 
exchange gains or losses are recognised in profit or loss. On derecognition, any gain or loss is recognised in profit 
or loss. Financial liabilities subsequently measured at amortised cost are measured using the effective interest 
method.

Where investments in equity instruments are designated as FVOCI, fair value gains and losses are recognised in 
other comprehensive income. Dividends earned from such investments are recognised in profit or loss.

Where financial assets are subsequently measured at FVPL, all gains and losses are recognised in profit or loss.

The Group currently classifies its accounts payable, accrued liabilities (excluding derivatives) and term debt as 
financial liabilities measured at amortised cost.

A key management judgement is the assessment that substantially all the risks and rewards of ownership have 
been transferred in the derecognition of financial assets.

(ii) Financial instruments at fair value through other comprehensive income (“FVOCI”)
The Group has elected to designate certain investments in equity instruments that are not held for trading as 
FVOCI at initial recognition and to present gains and losses in other comprehensive income. Dividends earned 
from such investments are recognised in profit or loss. 

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have 
been transferred and the Group has transferred substantially all risks and rewards of ownership.

Financial liabilities are derecognised when the contractual obligations are discharged, cancelled or expired.

(iii) Financial instruments at fair value through profit or loss (“FVPL”)
Financial assets that do not meet the criteria for classification as measured at either amortised cost or FVOCI are 
classified as FVPL.

Fair Value Estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for 
disclosure purposes.

Derivative financial instruments that are not in an effective hedge relationship are classified as FVPL.

As the Group’s financial instruments, with the exception of retail bonds, are not traded in active markets their fair 
value is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that 
are based on market conditions existing at each balance date.

ANNUAL REPORT 2021PAGE 108 & 109

17.  FINANCIAL INSTRUMENTS (CONTINUED)

All financial instruments held at fair value are included in level 2 of the valuation hierarchy as defined in NZ IFRS 13, 
with the exception of the retail bonds, which are included in level 1. The retail bonds are listed instruments on the 
NZDX and the Group is satisfied there is sufficient trading in these instruments to qualify as an active market.

The fair value of foreign currency forward contracts is determined using forward exchange rates at balance date. 
The fair value of foreign exchange option agreements is determined using forward exchange rates at balance date. 
The fair value of interest rate swaps is determined using forward interest rates as at reporting date. The fair value of 
commodity derivatives is determined using NZX settlement prices.

Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position when 
there is a current legally enforceable right to offset the recognised amounts and there is an intention to settle 
on a net basis or realise the asset and settle the liability simultaneously. There are master netting agreements in 
place for derivative financial instruments held, however these instruments have not been offset in the statement of 
financial position as they do not currently meet the criteria for offset.

Impairment of financial assets
The Group has adopted the expected credit loss (“ECL”) model. For further detail please refer to note 5. The Group 
assesses whether there is evidence that a financial asset or group of financial assets is impaired, with the exception 
of assets that are fair valued through profit or loss. A financial asset or a group of financial assets can be impaired 
and the impairment losses are recognised in accordance with IFRS 9. The Group continues to assess if historical 
and future objective evidence of impairment exists after the initial recognition of the asset.

Derivative financial instruments - hedge accounting
The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate risk, 
foreign exchange rate risk, and commodity price risk including forward exchange contracts, interest rate swaps, and 
commodity derivative contracts.

Derivatives are initially recognised at fair value at the date the derivative contact is entered into and are 
subsequently remeasured to fair value at each reporting date. For derivatives measured at fair value, the gain 
or loss that results from changes in fair value of the derivative is recognised in earnings immediately, unless the 
derivative is designated and effective as a hedging instrument. Hedges of highly probable forecast transactions or 
hedges of foreign currency risk of firm commitments are designated as cash flow hedges by the Group, with the 
exception for Dairyworks.

The full fair value of a hedging derivative is classified as a current asset or liability when the remaining term of the 
hedged item is 12 months or less from balance date, or when cash flows arising from the hedged item will occur 
within 12 months or less from balance date. The full fair value of a hedging derivative is classified as a non-current 
asset or liability when the remaining maturity of the hedged item is more than 12 months, and no cash flows will 
occur within 12 months of balance date.

(i) Hedge accounting
The Group designates certain hedging instruments in respect of foreign currency risk and interest rate risk as cash flow 
hedges. Hedges of risk on firm commitments and highly probably transactions are accounted for as cash flow hedges.

At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and 
the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. 
Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging 
instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of 
the hedged item.

(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow 
hedges are recognised in other comprehensive income and accumulated as a separate component of equity 
in the hedging reserve. The gain or loss relating to the ineffective portion and reclassification adjustments are 
recognised immediately in profit or loss, included in revenue for foreign exchange instruments and commodity price 
derivatives, and finance costs for interest rate swaps.

Amounts recognised in the hedging reserve are classified from equity to profit or loss (as a reclassification 
adjustment) in the periods when the hedged item is recognised in profit or loss, in the same line as the recognised 
hedged item.

Hedge accounting is discontinued when the Group revokes the hedging relationships, the hedging instrument 
expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss 
recognised in the hedging reserve at that time remains in equity and is recognised when the forecast transaction is 
ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative 
gain or loss that was recognised in the hedging reserve is immediately recorded in profit or loss.

The Group separates the intrinsic value and time value of vanilla option and collar contracts, designating only the 
intrinsic value as the hedging instrument. The time value, including any gains or losses, is recognised in other 
comprehensive income until the hedged transaction occurs and is recognised in profit or loss.

(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative 
instrument that does not qualify for hedge accounting are recognised immediately in the income statement.

ANNUAL REPORT 2021PAGE 110 & 111

17.  FINANCIAL INSTRUMENTS (CONTINUED)

OTHER

This section contains additional information regarding the performance of the 
group during the financial year. This section includes the following notes: 

18 

Income tax 

19  Other investments 

20  Related party transactions 

21  Contingencies 

22  Commitments 

23  Events occurring after the reporting period 

24  Other accounting policies 

112

116

118

120

120

121

121

(a) Financial instruments by category

Financial assets

At 31 July 2021
Cash and cash equivalents
Derivative financial instruments
Trade and other receivables

Instruments in equity

Total

At 31 July 2020
Cash and cash equivalents
Derivative financial instruments
Trade and other receivables
Instruments in equity

Total

Financial liabilities

At 31 July 2021
Derivative financial instruments
Working capital facility
Lease liabilities
Trade and other payables
Loans and borrowings

Total

At 31 July 2020
Derivative financial instruments
Working capital facility
Lease liabilities
Trade and other payables
Borrowings

Total

At amortised cost

$’000

16,020
-
108,380

-

124,400

5,887
-
63,057
-

68,944

At fair value through 
other comprehensive 
income
$’000

At fair value through 
profit or loss

Total

$’000

$’000

-
-
-

110

110

-
-
-
143

143

-
30,996
-

-

30,996

-
36,614
-
-

36,614

At amortised cost

$’000

-
115,423
15,018
264,068
377,494

772,003

-
102,837
19,260
238,771
426,754

787,622

At fair value through 
profit or loss
$’000

19,600
-
-
-
-

19,600

18,953
-
-
-
-

18,953

16,020
30,996
108,380

110

155,506

5,887
36,614
63,057
143

105,701

Total

$’000

19,600
115,423
15,018
264,068
377,494

791,603

18,953
102,837
19,260
238,771
426,754

806,575

All derivative financial instruments are designated in effective hedge relationships, with exception for derivative financial instruments 
held by Dairyworks.

For instruments held at amortised cost, carrying amount is considered a reasonable approximation for fair value, with exception to the 
Retail Bond (the fair value of the Retail Bond is shown at note 12).

ANNUAL REPORT 2021PAGE 112 & 113

18.  INCOME TAX

Tax expense for the period comprises current and deferred tax. Tax is recognised in the profit and loss component of 
the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive 
income or directly in equity. In this case, tax is also recognised in other comprehensive income or directly in equity, 
respectively.

Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively 
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying 
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred 
tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based 
on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against 
which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are 
reduced to the extent that it is no longer probable that the related tax benefit will be realised.

New Zealand tax consolidated group
Synlait Milk Limited and its wholly-owned New Zealand controlled entity, Synlait Milk Finance Limited, form a 
tax consolidated group. The New Zealand Dairy Company Limited, Eighty Nine Richard Pearse Drive Limited, 
Dairyworks Limited and Synlait Milk (Dunsandel Farms) Limited are not members of the tax consolidated group.

(a) Income tax expense

Current tax expense
Current tax on loss/profit for the year
Current tax on prior period adjustments

Total

Deferred tax expense
Temporary differences
Changes in tax rates and laws
Prior year adjustments
Change in estimate
Tax losses to carry forward

Total deferred tax
Income tax benefit/(expense)

(b) Reconciliation of effective tax rate

(Loss)/profit before income tax
Income tax using the Group’s domestic tax rate - 28%
Non-deductible costs

Total

Prior year adjustments
Deferred tax credit relating to changes in tax rates and laws
Deferred tax credit relating to change in estimate
Research and development tax credit
Other tax effects for reconciliation between accounting profit and tax expense

Total
Income tax benefit/(expense)

2021

$’000

17,628
404

18,032

(7,204)
-
(356)
231
-

(7,329)
10,703

(39,154)
10,963
(1,245)

9,718

47
-
232
750
(44)

985
10,703

2020

$’000 
(restated)

(21,614)
4,212

(17,402)

(6,721)
2,229
(4,473)
-
23

(8,942)
(26,344)

100,653
(28,183)
(889)

(29,072)

(261)
2,229
-
779
(19)

2,728
(26,344)

As part of the New Zealand Government’s COVID-19: Economic Response Package, depreciation deductions were 
reintroduced for new and existing industrial and commercial buildings from the 2020/21 tax year. The Group determined that, 
as a result of this legislative change, the tax base of certain assets had increased, reducing a taxable temporary difference 
(deferred tax liability) previously recognised. The impact of these changes resulted in a reduction in deferred tax liabilities and 
a reduction in tax expense of $2.2m in the 2020 financial year as noted above.

(c) Imputation credits

Imputation credits available directly and indirectly to the shareholders of the Group

84,590

98,009

2021

$’000

2020

$’000 
(restated)

ANNUAL REPORT 2021PAGE 114 & 115

18.  INCOME TAX (CONTINUED)

(d) Income tax recognised in other comprehensive income
The tax credit/(charge) relating to components of other comprehensive income is as follows:

31 July 2021
Cash flow hedges
Other comprehensive income

31 July 2020
Cash flow hedges
Other comprehensive income

(e) Deferred taxation
The balance comprises temporary differences attributable to:

Before tax Tax benefit/(expense)
$’000

$’000

(6,330)
(6,330)

53,882
53,882

1,772
1,772

(15,087)
(15,087)

Assets
Tax losses carried forward
Other items

Total deferred tax assets

Liabilities
Property, plant and equipment
Derivatives
Intangible assets

Total deferred tax liabilities
Total deferred tax

2021

$’000

49
4,297

4,346

(55,995)
(3,146)
(4,638)

(63,779)
(59,433)

After tax
$’000

(4,558)
(4,558)

38,795
38,795

2020

$’000 
(restated)

23
2,793

2,816

(46,863)
(4,918)
(4,913)

(56,694)
(53,878)

Balance
1 Aug 2019

Recognised 
in profit or 
loss

$’000 
(restated)

$’000 
(restated)

Recognised 
in other 
comprehensive 
income
$’000

Property, plant and equipment
Derivatives
Other items
Tax losses carried forward
Intangible assets

Total

(37,023)
10,169
2,128
112
-

(24,614)

(5,572)
-
1,080
23
-

(4,469)

-
(15,087)
-
-
-

(15,087)

Recognised 
directly in 
equity

$’000

-
-
(389)
-
-

(389)

Recognised 
from a 
business 
combination
$’000

227
-
(160)
-
(4,913)

(4,846)

Prior year 
adjustment

Balance 31 
July 2020

$’000

$’000

(4,495)
-
134
(112)
-

(4,473)

(46,863)
(4,918)
2,793
23
(4,913)

(53,878)

Balance
1 Aug 2020

Recognised 
in profit or 
loss

$’000

(46,863)
(4,918)
2,793
23
(4,913)

(53,878)

$’000

(8,823)
-
1,529
49
274

(6,971)

Recognised 
in other 
comprehensive 
income
$’000

Recognised 
directly in 
equity

$’000

Recognised 
from a 
business 
combination
$’000

-
1,772
-
-
-

1,772

-
-
-
-
-

-

-
-
-
-
-

-

Prior year 
adjustment

Balance 31 
July 2021

$’000

$’000

(309)
-
(24)
(23)
-

(356)

(55,995)
(3,146)
4,298
49
(4,639)

(59,433)

Property, plant and equipment
Derivatives
Other items
Tax losses carried forward
Intangible assets

Total

The opening deferred tax balance relating to intangible assets and profit or loss impact for the year ended 31 July 2020 has been 
restated to reflect a change in accounting policy. Please refer to note 9 for further detail.

ANNUAL REPORT 2021PAGE 116 & 117

19.  OTHER INVESTMENTS

Investments in associates
Associates are those entities in which the Group, either directly or indirectly, holds a significant but not a controlling 
interest, and has significant influence. Investments in associates are accounted for using the equity method and 
are measured in the statement of financial position at cost plus post acquisition changes in the Group’s share of net 
assets. Goodwill relating to associates is included in the carrying amount of the investment. Dividends reduce the 
carrying value of the investment.

Associates
In January 2015, the Group acquired 25% of the shares of Sichuan New Hope Nutritionals, an infant formula company 
registered in China. This company owns and markets the “Akara” and “E-Akara” infant formula brands in the Chinese 
market, which are exclusively manufactured by Synlait Milk Limited.

The investment is not individually significant to the Group. The Group’s share of this equity accounted investment is 
as follows:

Equity securities
Investment in associates

Total other investments

2021

$’000

110
-

110

2020

$’000

110
33

143

(Loss)/gain from continuing operations

Total

The carrying value of the investment in New Hope Nutritionals at balance date:

Synlait Milk Limited held, either directly or indirectly, interests in the following entities at the end of the reporting period:

Name of entity

Synlait Milk Finance Limited (Subsidiary)
The New Zealand Dairy Company Limited (Subsidiary)
Eighty Nine Richard Pearse Drive Limited (Subsidiary)
Sichuan New Hope Nutritional Foods Co. Ltd (Associate)
Synlait Business Consulting (Shanghai) Limited (Subsidiary)
Synlait Foods (Talbot Forest) Limited (Subsidiary)*
Dairyworks Limited (Subsidiary)
Dairyworks (Australia) Pty Limited (Subsidiary)
Synlait Milk (Dunsandel Farms) Limited (Subsidiary)

Country of 
incorporation

New Zealand
New Zealand
New Zealand
China
China
New Zealand
New Zealand
Australia
New Zealand

Class of 
shares

Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

*In December 2020 Synlait Foods (Talbot Forest) Limited was amalgamated with Dairyworks Limited.

Equity holding

2020 
%

100
100
100
25
100
100
100
100
-

2021 
%

100
100
100
25
100
-
100
100
100 

Opening balance
Share of (losses)/gains

Total

2021

$’000

(33)

(33)

2021

$’000

33
(33)

-

2020

$’000

33

33

2020

$’000

-
33

33

ANNUAL REPORT 2021 
PAGE 118 & 119

20.  RELATED PARTY TRANSACTIONS

Parent entity
Bright Dairy Holding Limited hold 39.01% of the shares issued by Synlait Milk Limited (2020: 39.02%). Bright Dairy 
Holding Limited is a subsidiary of Bright Food (Group) Co. Limited, a State Owned Enterprise domiciled in the Peoples’ 
Republic of China.

Other related entities
In June 2013, a subsidiary of Synlait Milk Limited, Synlait Milk Finance Limited, was set up primarily for holding all banking 
facilities for the Group and related interest rate swaps. Funds are loaned to Synlait Milk Limited and interest is charged at 
market rates.

In January 2015, the Group acquired 25% of the shares of Sichuan New Hope Nutritionals, an infant formula company 
registered in China. This company owns and markets the “Akara” and “E-Akara” infant formula brands in the Chinese 
market, which are exclusively manufactured by Synlait Milk Limited. New Hope Innovation (Hong Kong) Trading Company 
Limited is a related entity of Sichuan New Hope Nutritionals and is engaged in the import and export of dairy foods. Main 
products include whole milk powder, skim milk powder and whey powder. The company is the Hong Kong arm of the 
Chinese New Hope Dairy group, New Hope Dairy.

In May 2017, Synlait Milk Limited acquired 100% of the share capital of The New Zealand Dairy Company Limited and 
Eighty Nine Richard Pearse Drive Limited. The New Zealand Dairy Company Limited was constructing a blending and 
canning plant in Auckland, which was subsequently sold to Synlait Milk Limited. The New Zealand Dairy Company Limited 
is now a non-trading entity. Eighty Nine Richard Pearse Drive Limited owns the land and buildings at which the Auckland 
blending and canning plant was constructed. Eighty Nine Richard Pearse Drive Limited leased its land and buildings to 
The New Zealand Dairy Company Limited, and now leases them to Synlait Milk Limited.

In May 2019, Synlait Business Consulting (Shanghai) Limited was incorporated. The wholly owned foreign entity started 
operations from 1 August 2019 and the principal activity of the entity is to provide services to assist Synlait to market 
products in China.

On 1 August 2019, the Group acquired selected assets and liabilities of Talbot Forest Cheese Limited. The acquirer was 
a newly incorporated company, Synlait Foods (Talbot Forest) Limited. The acquisition included a cheese manufacturing  
plant located in Temuka, New Zealand, capable of manufacturing a variety of cheese products. On 31 December 2020, 
Synlait Foods (Talbot Forest) Limited was amalgamated into Dairyworks Limited.

On 1 April 2020, the Group acquired 100% of the share capital in Dairyworks Limited. Dairyworks Limited specialises 
in the processing, packaging, and marketing of dairy products, including cheese, butter, and milk powder. Dairyworks 
Limited owns an Australian subsidiary, Dairyworks (Australia) Pty Limited. Refer to the Group’s 31 July 2020 financial 
statements for additional information regarding the acquisition of Dairyworks Limited.

On August 2020, Synlait Milk (Dunsandel Farms) Limited was incorporated for the purposes of holding newly acquired 
land located adjacent to the Group’s Dunsandel Operations. 

Key management and personnel compensation
Other than their salaries and bonus incentives, there are no other benefits paid or due to directors and executive officers 
as at 31 July 2021. The total short-term benefits paid to the key management and personnel is set out below. 

Short term benefits
Share based payments expenses (note 14)

2021

$’000

7,121
(610)

2020

$’000

6,398
523

(a) Other transactions with key management personnel or entities related to them
Information on transactions with key management personnel or entities related to them, other than compensation, are 
set out below.

(i) Loans to directors
There were no loans to directors issued during the period ended 31 July 2021 (2020: $nil).

(ii) Other transactions and balances
Directors of Synlait Milk Limited own and control 2.4% of the voting shares of the company at balance date (2020: 3.0%)

(b) Transactions with other related parties

Purchase of goods and services
Bright Dairy and Food Co Ltd - Directors fees

Sale of goods and services
Bright Dairy and Food Co Ltd - Sale of milk powder products
New Hope Innovation (Hong Kong) Trading Company Limited - Sale of milk powder products

2021

$’000

267

10,175
1,268

2020

$’000

259

4,074
1,773

ANNUAL REPORT 2021PAGE 120 & 121

20.  RELATED PARTY TRANSACTIONS (CONTINUED)

23.  EVENTS OCCURRING AFTER THE REPORTING PERIOD

(c) Outstanding balances
The following balances are outstanding at the reporting date in relation to transactions with related parties other than key 
management personnel:

Current receivables (sales of goods and services)
Bright Dairy and Food Co Ltd - Sale of milk powder products
Bright Dairy and Food Co Ltd - Reimbursement of costs
Sichuan New Hope Nutritionals Ltd - Sale of milk powder products
Sichuan New Hope Nutritionals Ltd - Other costs
New Hope Innovation (Hong Kong) - Sale of milk powder products

21.  CONTINGENCIES

2021

$’000

3,040
(583)
-
559
272

2020

$’000

-
(492)
(71)
292
-

No significant contingent liabilities are outstanding at balance date (2020: indeterminable due to a range of possible 
outcomes for the Pokeno land covenant dispute which was settled in the year).

22.  COMMITMENTS

(a) Capital commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:

Pokeno modifications
Pokeno processing plant
Liquid dairy packaging facility
ERP Implementation
Separator capacity upgrade
Dry Store 4
Pokeno waste water Initiative
Dunsandel land and farm assets

Total

2021

$’000

16,094
2,450
-
6,657
-
758
-
-

25,959

2020

$’000

-
10,264
1,188
-
419
14,100
571
25,700

52,242

The above balances have been committed in relation to future expenditure on capital projects. Amounts already spent have been 
included as work in progress. 

On 17 August 2021 the New Zealand Government, as part of its COVID-19 response, moved the country to Alert Level 
4, subsequently moving to Level 3 on 31 August 2021 and Level 2 on 7 September 2021, except for Auckland which 
remained at Level 4 until 21 September 2021 when it moved to Level 3. The changes in domestic alert levels are not 
expected to result in any further material negative impact to the Group’s financial performance.

On 8 September 2021, the Group announced the proposed restructuring of its workforce. The proposal is not expected 
to result in any material restructuring related costs or liabilities.

On 9 September 2021 the Group announced the sale and leaseback of a building and related land located in Auckland. 
The sale price is $30.1m with settlement expected to occur on 4 October 2021. The book value of the building and 
related land as at 31 July 2021 was $12.2m.

There were no other events which occurred subsequent to balance date which require adjustment to or disclosure in the 
financial statements. 

24.  OTHER ACCOUNTING POLICIES

Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits and cash held on trust by Tax Management New 
Zealand Ltd.

Goods and Services Tax (GST)
The profit and loss components of the statement of comprehensive income have been prepared so that all components 
are stated exclusive of GST. All items in the financial position are stated net of GST, with the exception of receivables and 
payables, which include GST invoiced.

ANNUAL REPORT 2021PAGE 122 & 123

INDEPENDENT AUDITOR’S REPORT TO THE 
SHAREHOLDERS OF SYNLAIT MILK LIMITED

Opinion 
We have audited the consolidated financial statements of Synlait Milk Limited and its subsidiaries (the ‘Group’), which 
comprise the consolidated statement of financial position as at 31 July 2021, and the consolidated income statement, 
statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then 
ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements, on pages 51 to 121, present fairly, in all material 
respects, the consolidated financial position of the Group as at 31 July 2021, and its consolidated financial performance 
and cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting 
Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’).

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and International Standards on 
Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those standards are further described in the Auditor’s 
Responsibilities for the Audit of the Consolidated Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the Company in accordance with Professional and Ethical Standard 1 International Code of Ethics 
for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand 
Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ International 
Code of Ethics for Professional Accountants (including International Independence Standards), and we have fulfilled our 
other ethical responsibilities in accordance with these requirements.

Other than in our capacity as auditor and the provision of other assurance and taxation compliance services, we 
have no relationship with or interests in the Company or any of its subsidiaries. These services have not impaired our 
independence as auditor of the Company and Group. 

Audit materiality
We consider materiality primarily in terms of the magnitude of misstatement in the financial statements of the Group that 
in our judgement would make it probable that the economic decisions of a reasonably knowledgeable person would be 
changed or influenced (the ‘quantitative’ materiality). In addition, we also assess whether other matters that come to our 
attention during the audit would in our judgement change or influence the decisions of such a person (the ‘qualitative’ 
materiality). We use materiality both in planning the scope of our audit work and in evaluating the results of our work.

We determined materiality for the Group financial statements as a whole to be $4,600,000. 

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the 
consolidated financial statements of the current period. These matters were addressed in the context of our audit of 
the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate 
opinion on these matters. 

KEY AUDIT MATTER

Goodwill and Brands Impairment Assessment 
At 31 July 2021 the Group has $64.2m of goodwill and $16.6m of 
brands on the balance sheet as outlined in Note 9.

The carrying values of goodwill and brands are dependent on the 
future cash flows expected to be generated by the underlying 
businesses, and there is a risk if these cash flows do not meet the 
Group’s expectations that the assets may be impaired.

The Group tests goodwill and brands at least annually by 
determining the recoverable amount (the higher of value-in-use 
or fair value less costs to sell) of the individual assets where 
possible, or otherwise the cash generating units, or groups of cash 
generating units, to which the assets belong and comparing the 
recoverable amounts of the assets to their carrying values.

The impairment calculations prepared by the Group contain a 
number of significant assumptions. Changes in these assumptions 
might lead to a change in the carrying value of brands and goodwill.

The Group has calculated the recoverable amount of brands based 
on fair value using the relief from royalty method. 
The key assumptions applied in the above model are:

• 

• 

• 

• 

Annual revenue and expense growth rates for the 5 year 
forecast period;

post-tax discount rates;

royalty rates; and

terminal growth rates.

The Group has calculated the recoverable amount of each cash 
generating unit (“CGU”) or group of CGU’s to which goodwill has 
been allocated based on value-in-use models. The key assumptions 
applied in the value-in-use models are:

• 

• 

• 

Annual revenue and expense growth rates for the 5 year 
forecast period;

pre-tax discount rates; and

terminal growth rates.

In addition, the outbreak of COVID-19 and the subsequent 
quarantine measures imposed by the New Zealand and other 
governments as well as the travel and trade restrictions imposed 
by New Zealand and other countries have caused disruption to 
business and economic activity. The impact (known or expected) as 
a result of the above for the Group needs to be factored in to the 
annual brand and goodwill impairment assessment.

HOW OUR AUDIT ADDRESSED 
THE KEY AUDIT MATTER

We considered whether the Group’s methodology for assessing 
impairment is compliant with NZ IAS 36: Impairment of Assets. 
We focused on testing and challenging the suitability of the models 
and reasonableness of the assumptions used by the Group in 
conducting their impairment reviews.

Our procedures included:

• 

• 

• 

• 

Agreeing a sample of future cash flows to Board approved 
forecasts;

Challenging the reliability of the Group’s revenue and expense 
growth rates by comparing the forecasts underlying the 
growth rates to historical forecasts and actual results of the 
underlying businesses (where applicable). This also included 
consideration of the impact of COVID-19 on both forecast 
revenue and profitability of the CGU’s and brands;

Assessing the reasonableness of key assumptions and 
changes to them from previous years; and

Assessing management’s determination of cash generating 
units and our understanding of the Group’s business and 
operating environment.

We used our internal valuation specialists to assist with evaluating 
the models and challenging the Group’s key assumptions. 
The procedures of the specialist included:

• 

• 

• 

• 

Evaluating the appropriateness of the valuation methodologies;

Testing the mathematical integrity of the models;

Evaluating the Group’s determination of the post-tax 
discount rates and royalty rates used in the models through 
consideration of the relevant risk factors for each CGU and 
brands, the cost of capital for the Group, and market data on 
comparable businesses; and

Comparing the terminal growth rates to market data for the 
industry sectors.

We evaluated the sensitivity analysis performed by management 
to consider the extent to which a change in one or more of the 
key assumptions could give rise to impairment in the goodwill and 
indefinite life intangible assets.

ANNUAL REPORT 2021HOW OUR AUDIT ADDRESSED 
THE KEY AUDIT MATTER

Our audit procedures included:

• 

• 

• 

• 

• 

• 

• 

Discussions with management to understand the process 
undertaken and context in which management performed its 
assessment of the historical capitalised software assets and 
current year ERP implementation.

Reviewing the management assessment of previously capitalised 
costs, including the impact of the change in accounting policy.

Selecting a sample of costs from the management assessment 
to ensure the nature of these costs were consistent with 
managements assessment and the decision to adjust / not adjust 
was aligned to the IFRIC agenda decision.

Reviewing the fixed asset register to ensure that all material 
historical capitalised costs were included in the assessment.

Reviewing the relevant contractual arrangements for capitalised 
assets including those relating to the current year ERP 
implementation.

Reviewing and challenging key judgements in determining which 
costs are deemed to be in relation to Software as a Service 
arrangements.

Obtaining breakdowns of costs incurred for the ERP 
implementation and performing substantive tests of details in 
relation to the costs capitalised to ensure such costs qualified as 
capital costs.

•  

Reviewing presentation and disclosure of the change in 
accounting policy, including the correction of previously 
capitalised costs in the current year.

PAGE 124 & 125

KEY AUDIT MATTER

Capitalisation of Software Assets 
In April 2021 IFRIC released an agenda decision clarifying the 
capitalisation of certain costs related to software implementation, 
particularly in circumstances where entities use Software as a Service. 
The agenda decision disallows the capitalisation of costs for the 
implementation of software as a service arrangements except for 
costs relating to the development of customised software code where 
the customer maintains control of the code and its future benefits. 
As outlined in Note 9, during the year the Group has aligned its 
accounting policy to the IFRIC interpretation.

The Group has undertaken an assessment of its previously capitalised 
software assets, including those capitalised as part of the current year 
ERP implementation, in order to:

1. 

Determine whether each capitalised asset is within the scope of 
the IFRIC agenda decision;

2.  Whether historical adjustments are necessary to align previously 

capitalised costs to the new accounting policy.

The work undertaken by the Group identified certain historical projects 
that did not meet the capitalisation criteria under the new accounting 
policy, and which have been adjusted as a restatement of the prior 
period financial statements as set out in note 9.

Given the significance of the current year ERP implementation a 
detailed assessment of this project has also been undertaken by 
management to identify the nature of all costs incurred for the ERP 
project and an assessment whether these are capital in nature. To the 
extent costs did not meet the capitalisation criteria these have been 
expensed in the year ending 31 July 2021 consistent with when the 
costs were incurred.

These items are considered a key audit matter due to the complexity 
in applying the change of accounting policy to historical projects, as 
we all the significance of the ERP implementation project. In particular 
we note the following judgements:

• 

• 

The evaluation of whether historical and current software assets 
are within the scope of the IFRIC agenda decision; and

The decision to capitalise or expense costs relating to the 
ERP implementation. This decision depends on whether the 
expenditure is considered to relate to development costs that 
are directly attributable to the design, testing and implementation 
of identifiable and unique software products controlled by the 
Group and is guided by the IFRIC agenda decision.

Other information
The directors are responsible on behalf of the Group for the other information. The other information comprises the 
information in the Annual Report that accompanies the consolidated financial statements and the audit report.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any 
form of assurance conclusion thereon.

Our responsibility is to read the other information and consider whether it is materially inconsistent with the consolidated 
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If so, we are 
required to report that fact. We have nothing to report in this regard.

Directors’ responsibilities for the consolidated financial statements 
The directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated financial 
statements in accordance with NZ IFRS and IFRS, and for such internal control as the directors determine is necessary to enable 
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible on behalf of the Group for assessing the 
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going 
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic 
alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated financial statements 
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are 
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. 
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 
ISAs and ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error 
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the 
economic decisions of users taken on the basis of these consolidated financial statements.

A further description of our responsibilities for the audit of the consolidated financial statements is located on the 
External Reporting Board’s website at: xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/ 
audit-report-1

This description forms part of our auditor’s report..

Restriction on use
This report is made solely to the Company’s shareholders, as a body. Our audit has been undertaken so that we might 
state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no 
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the 
Company’s shareholders as a body, for our audit work, for this report, or for the opinions we have formed.

Mike Hawken 
Partner for Deloitte Limited
Christchurch, New Zealand 
24 September 2021

ANNUAL REPORT 2021PAGE 126 & 127

KEEPING OUR 
PEOPLE SAFE

Synlait Dunsandel’s pink health 
and safety walkway provides a 
healthy and efficient way for staff 
and contractors to get around site. 
The pathway gives staff moving 
between the administration building 
and our Advanced Dairy Liquid 
Packaging Facility – a distance 
of 420m – a choice of an internal 
corridor or external pathway, and 
the opportunity to walk or cycle to 
buildings along the pathway route. 

The pink, three metre wide dual lane 
pathway is well defined, has right of 
way, and stands out from the road. 
The non-slip aggregate surface 
makes it suitable for alternate modes 
of transport as well as walkers, and 
the well thought-out road signs 
add another safety dimension. 
It continues to be a huge success.

The pink pathway at Synlait Dunsandel provides 

a safe and healthy way for staff to get around site.

ANNUAL REPORT 2021PAGE 128 & 129

STATUTORY 
INFORMATION

01.  BUSINESS OPERATIONS

Synlait is a milk nutrition company. We combine expert farming with state-of-the-art processing to produce a range of 
nutritional milk products.

On 3 August 2020, Synlait Milk (Dunsandel Farms) Limited was incorporated to hold newly acquired farmland adjacent 
to our Dunsandel facility. The acquisition of the farmland enables us to pursue several strategic supply chain and 
sustainability initiatives that will support Synlait Dunsandel’s long-term operation and expansion.

On 31 December 2020, Synlait Foods (Talbot Forest) Limited was amalgamated into Dairyworks Limited to reflect the 
operational integration of the two companies.

There were no other changes to the Company or its subsidiaries during the year. 

The Synlait Dunsandel staff cafe provides ample 

space for staff to connect over their breaks.

ANNUAL REPORT 2021PAGE 130 & 131

02.  DIRECTORS 

Synlait’s Directors are profiled on our website synlait.com/people/. This table sets out the directors of the Synlait group 
companies as at 31 July 2021, with changes during the financial year also noted:

Company 

Directors 

Appointment

Appointed

Synlait Milk Limited
Synlait Milk Finance Limited

Graeme Milne ONZM (Chair) 
Sam Knowles 
Simon Robertson
Dr John Penno
Hon. Ruth Richardson
Sihang Yang
Qikai Lu
Min Ben
Bill Roest

Independent
Independent
Independent
Board Appointed
Bright Dairy Appointed
Bright Dairy Appointed
Bright Dairy Appointed
Bright Dairy Appointed
Independent

23 March 2006
4 July 2013
25 November 20201
21 July 20132
16 November 20093
11 November 2010
8 December 2015
29 November 2016
8 May 20134

Company 

Directors 

The New Zealand Dairy  
Company Limited
Eighty Nine Richard Pearse  
Drive Limited
Synlait Business Consulting  
(Shanghai) Co., Limited

Synlait Foods (Talbot Forest) Limited
Dairyworks Limited

Dairyworks Australia (Pty) Limited

Graeme Milne ONZM (Chair)  
Deborah Marris
Graeme Milne ONZM (Chair) 
Deborah Marris
Deborah Marris
Martijn Jager (Chair) 
Boyd Williams
Leon Clement until 31 December 2020
Dr John Penno (Chair) until 10 November 2020, and then re-appointed on 28 April 2021
Graeme Milne until 10 November 2020
Leon Clement until 28 April 2021
Sam Knowles until 10 November 2020
Tim Carter
Craig Stevens
Deborah Marris

Synlait Milk (Dunsandel Farms) Limited Leon Clement until 28 April 2021
Angela Dixon until 20 May 2021
Deborah Marris

1  Simon was elected to the Board by Synlait’s shareholders at the Annual Meeting held on 25 November 2020.
2  John had previously been a Director of Synlait Limited, which has since been removed from the Register of Companies. When first appointed 
to the Board of Synlait Milk Limited, John was CEO and Managing Director. In November 2018, following stepping down as CEO, he became 
the Board Appointed Director. In May 2021 John became Interim CEO following the resignation of Leon Clement. John remains the Board 
Appointed Director.

3  When first appointed to Synlait Milk Limited, Ruth was an Independent Director. In 2013, she became a Bright Dairy appointed Director.
4  Bill retired from the Board on 25 November 2020 at Synlait’s Annual Meeting.
5  Synlait Foods (Talbot Forest) Limited was amalgamated with Dairyworks Limited on 31 December 2020.

Synlait has considered the independence of its three Independent Directors against the definition in the NZX Listing 
Rules, the commentary to Recommendation 2.4 in the Code, and its Board Charter and is satisfied that its Independent 
Directors meet the requirements for independence. 

As permitted by waivers from the NZX Listing Rules, Bright Dairy Holding Limited, a shareholder in Synlait, is entitled to 
appoint four directors to Synlait’s Board. One of those Directors must ordinarily reside in New Zealand and have local 
commercial and governance experience appropriate for an NZX listed company. Currently that Director is the Hon. Ruth 
Richardson. 

03.  DIRECTOR INTERESTS

The following declarations of interest were made by Directors of Synlait and its subsidiaries under section 140(2) of the 
Companies Act 1993 during the year to 31 July 2021:

Graeme Roderick Milne ONZM

Chairman Synlait Milk Limited
Chairman Pro-Form Limited Advisory Board until 28 February 2020
Chairman Braemar Hospital Limited from 1 October 2020
Director Synlait Milk Finance Limited
Director Eighty Nine Richard Pearse Drive
Director The New Zealand Dairy Company Limited
Director of Dairyworks Limited until 10 November 2020
Chairman Terracare Fertilisers Limited 
Director Alliance Group Limited
Director Elviti Holdings Limited until 14 August 2020
Director NZP Holdings Limited until 14 August 2020
Director New Zealand Pharmaceuticals Limited until 14 August 2020
Director of Nyriad Limited until 21 October 2020
Director Nyriad Trustee Services Limited from 21 October 2020
Director of Nyriad Nominee Limited
Chairman of PF Olsen Limited
Director PF Olsen Group Ltd
Chairman of Advisory Board Rimanui Farms Limited
Council member Waikato University
Member of Zespri Director Remuneration Committee
Trustee Rockhaven Trust
Partner GR & JA Milne
Shareholder in Synlait Milk Limited
Receipt of Directors' Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

ANNUAL REPORT 2021PAGE 132 & 133

Ian Samuel (Sam) Knowles 

Director Synlait Milk Limited
Director Synlait Milk Finance Limited
Director of Dairyworks Limited until 10 November 2020
Director Rangatira Limited 
Director Westpac New Zealand Limited from 20 September 2021
Director Fire Security Services 2016 Limited
Director Umajin Limited 
Chairman On-Brand Limited 
Director On-Brand Partners Limited
Chairman CFB Group Inc from December 2020
Chairman Adminis Limited
Director Magritek Limited until 30 June 2021
Director Com Investments Limited 
Director Growthcom Limited 
Director of Montoux Limited
Trustee Ruby Family Trust 
Trustee WWF NZ
Trustee Com Trust 
Trustee Ian Samuel Knowles Children’s Trust
Shareholder in Synlait Milk Limited
Receipt of Directors' Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Simon Robertson

Director Synlait Milk Limited from 25 November 2020
Director Synlait Milk Finance Limited from 25 November 2020
Director Alliance Group Limited from 21 June 2021
Director Ballance Agri-Nutrients Limited
Director Independent Timber Merchants Co-operative Limited
Trustee Robertson Family Trust
Trustee Norman Family Trust
Trustee G R Foot Trust
Shareholder in Synlait Milk Limited
Receipt of Directors’ Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Dr John William Penno 

Board Appointed Director Synlait Milk Limited
Director Synlait Milk Finance Limited
Director Dairyworks Limited until 10 November 2020, and then from 28 April 2021
Director Sichuan New Hope Nutritional Foods Co., Limited until 24 August 2020
Director Okuora Holdings Limited 
Director Wangapeka River Hops Limited
Director The Pure Food Co Limited
Director Leaft Foods Limited
Director Thorndale Dairies Limited 
Director The New Zealand Merino Company Limited from 15 October 2020
Trustee John Penno Trust
Shareholder in Okuora Holdings Limited (and through Okuora Holdings Limited, Pastoral Robotics Limited, Signum Holdings Limited 
and The Pure Food Co Limited)
Shareholder Leaft Foods Limited
Shareholder in Thorndale Dairies Limited 
Shareholder in Synlait Milk Limited
Receipt of Directors' Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Hon. Ruth Margaret Richardson

Director Synlait Milk Limited
Director Synlait Milk Finance Limited
Director Ruth Richardson (NZ) Limited
Chair New Zealand Merino Company Limited until 15 October 2020
Director Bank of China (NZ) Limited until 11 March 2021
Shareholder in Synlait Milk Limited
Receipt of Directors' Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Qikai Lu

Director Synlait Milk Limited
Director Synlait Milk Finance Limited
Receipt of Directors' Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

ANNUAL REPORT 2021PAGE 134 & 135

Min Ben

Director Synlait Milk Limited 
Director Synlait Milk Finance Limited
Receipt of Directors' Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Sihang Yang

Director Synlait Milk Limited 
Director Synlait Milk Finance Limited
Receipt of Directors' Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Willem Jan (Bill) Roest7

Director Synlait Milk Limited
Director Synlait Milk Finance Limited
Director Housing Foundation Limited
Trustee New Zealand Housing Foundation
Trustee WJ & IJ Family Trust
Shareholder in Synlait Milk Limited
Receipt of Directors' Fees from Synlait Milk Limited at approved rate
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Leon Clement8

Director Synlait Foods (Talbot Forest) Limited until 31 December 2020 
Director Synlait Milk (Dunsandel Farms) Limited until 28 April 2020
Director of Dairyworks Limited until 28 April 2020
Director POD Farming Limited until 16 November 2020
Shareholder POD Farming Limited until 16 November 2020
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Angela Dixon9

Director Synlait Milk (Dunsandel Farms) Limited
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

7  Bill retired from the Board on 25 November 2020 at Synlait’s Annual Meeting.
8  Resigned as Synlait CEO in April 2021.
9  Resigned at CFO in May 2021.

Deborah Marris

Director Synlait Business Consulting (Shanghai) Co. Limited
Director Primary Collaboration New Zealand Limited
Director Synlait Milk (Dunsandel Farms) Limited from 20 May 2021
Director Eighty Nine Richard Pearse Drive Limited from 20 May 2021
Director Canterbury Grasslands Limited from 1 June 2021
Director BFGM Limited
Shareholder BFGM Limited
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Martijn Jager

Director Synlait Business Consulting (Shanghai) Co. Limited
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Boyd Williams

Director Synlait Business Consulting (Shanghai) Co. Limited
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Tim Carter

Director Dairyworks Limited from 10 November 2020
Director Niko Holdings 2003 Limited
Shareholder Tatahi Holdings Limited
Shareholder Niko Holdings 2003 Limited
Insurance cover arranged by Synlait Milk Limited
Deed of Indemnity and Access from Synlait Milk Limited

Robert Stowell 

Sidewinder Capital Limited
DRKM Holdings Limited 
The Bucket List Company Limited

No Director requested to disclose or use information in their possession as a Director of Synlait or its subsidiaries that 
would not otherwise have been available to him or her. As permitted by section 162 of the Companies Act 1993 and our 
Constitution Synlait indemnifies and insures Directors and Officers against liability to other parties that may arise in the 
course of their activities as a Director or Officer. Details of the indemnities and insurance are kept in Synlait’s Interests 
Register. This cover does not apply to any liabilities arising from criminal or reckless acts by our Directors or Officers.

ANNUAL REPORT 2021PAGE 136 & 137

For the purposes of section 148(2) of the Companies Act 1993, the following disclosures were made by the 
Directors in respect of the increases in their shareholdings as part of the issue of new shares completed by Synlait 
on 1 December 2020:

This table sets out total remuneration and the value of other benefits received by Synlait Directors during the year 
ended 31 July 2021:

Directors

New ordinary shares subscribed for 

Price

Graeme Milne ONZM
Sam Knowles
Simon Robertson
Dr John Penno
Hon. Ruth Richardson
Sihang Yang
Qikai Lu
Min Ben
Bill Roest10

9,803 ordinary shares
9,803 ordinary shares
3,325 ordinary shares
9,803 ordinary shares
9,803 ordinary shares
0
0
0
2,745 ordinary shares

$5.10 per ordinary share
$5.10 per ordinary share
$5.10 per ordinary share
$5.10 per ordinary share
$5.10 per ordinary share
N/A
N/A
N/A
$5.10 per ordinary share

Transaction Date

1 December 2020
1 December 2020
1 December 2020
1 December 2020
1 December 2020

1 December 2020

04.  DIRECTOR REMUNERATION 

Directors 

Graeme Milne ONZM

Sam Knowles

Simon Robertson11

Dr. John Penno
Hon. Ruth Richardson
Min Ben 
Qikai Lu
Sihang Yang
Bill Roest12 

Role 

Director 
Board Chair
Director 
People, Environment and Governance 
Committee Chair
Director
Audit and Risk Committee Chair
Director 
Director
Director 
Director 
Director
Director
Audit and Risk Committee Chair 

Remuneration 

$178,000

$100,900

$71,169

$88,900
$88,900
$88,900
$88,900
$88,900
$33,186 

The annual fees paid to Directors of Synlait, as approved by shareholders on 27 November 2019 and effective 1 
April 2020, are:

Fees are not paid to Directors or employees of Synlait for acting as a Director of any Synlait subsidiaries.

Directors, excluding the Chair and Committee Chairs
Board Chair
Audit and Risk Committee Chair
People Environment and Governance Committee Chair

$88,900
$178,000
$104,150
$100,900

05.  DIRECTOR HOLDINGS 

This table sets out the relevant interests held by Directors in securities issued by Synlait:

Directors 

Securities held (legally or beneficially) as at 31 July 2021 Securities held (legally or beneficially) as at 31 July 2020

Graeme Milne ONZM  82,556 ordinary shares
64,803 ordinary shares
Sam Knowles
13,324 ordinary shares 
Simon Robertson
Dr John Penno
5,109,803 ordinary shares 
Hon. Ruth Richardson 66,025 ordinary shares
0 
Min Ben 
0
Qikai Lu
0
Sihang Yang
Bill Roest12
30,495 ordinary shares 

72,753 ordinary shares
55,000 ordinary shares
0
5,100,000 ordinary shares
56,222 ordinary shares
0
0
0
27,750 ordinary shares

10 Bill retired from the Board on 25 November 2020 at Synlait’s Annual Meeting.

11  Simon was elected to the Board by Synlait’s shareholders at the Annual Meeting held on 25 November 2020.
12  Bill retired from the Board on 25 November 2020 at Synlait’s Annual Meeting.

ANNUAL REPORT 2021PAGE 138 & 139

06.  EMPLOYEE REMUNERATION 

During the year ended 31 July 2021, 391 employees (including former employees) of Synlait and its subsidiaries (not being 
Directors) received remuneration and other benefits, in their capacity as employees, of $100,000 or more, as set out below:

Chief Executive Officer Remuneration
The table below sets out remuneration paid to Synlait’s Chief Executive Officer in the year to 31 July 2021: 

Salary bracket ($)

100,000 – 110,000 
110,000 – 120,000
120,000 – 130,000
130,000 – 140,000
140,000 – 150,000
150,000 – 160,000
160,000 – 170,000
170,000 – 180,000
180,000 – 190,000
190,000 – 200,000
200,000 – 210,000
210,000 – 220,000
220,000 – 230,000
240,000 – 250,000
250,000 – 260,000
260,000 – 270,000
280,000 – 290,000
340,000 – 350,000
350,000 – 360,000
380,000 – 390,000
410,000 – 420,000
430,000 – 440,000
470,000 – 480,000
480,000 – 490,000
500,000 – 510,000
550,000 – 560,000
1,050,000 – 1,060,000
Total

Number of employees

Remuneration

Leon Clement13

$915,236
N/A
$27,457
$1,096
N/A
$109,828
$1,053,617

Dr John Penno14

N/A
$249,999 plus GST
N/A
N/A
N/A
N/A
$249,999 plus GST

Salary
Total fees paid
KiwiSaver employer contribution
Medical insurance employer contribution
Short term incentive scheme15
Long term incentive scheme
Total remuneration

07.  DONATIONS 

Dairyworks Limited, a subsidiary of Synlait, made cheese donations to a value of $11,200 in the year to 31 July 2021. 
These were the only donations made by the Synlait group in the financial year.

08.  AUDITORS 

In the year to 31 July 2021, Synlait’s total payments to its auditors, Deloitte, were as follows:

Audit and assurance fees
Tax compliance and accounting fees
Percentage non-audit 
Percentage audit 

$355,753
$69,217
16%
84%

103
66
61
21
32
25
10
16
7
3
10
8
6
1
3
2
1
2
1
1
1
3
2
2
1
2
1
391

These figures also include the value of shares issued to employees under the 2018 Long Term Incentive Scheme during the year 
to 31 July 2021.

Synlait’s Strategic Remuneration Policy is approved by Synlait’s People, Environment and Governance Committee. That 
Committee also reviews and recommends to the Board the remuneration of the Chief Executive Officer and the Executive 
Leadership Team.

13  Leon resigned as CEO with effect from 28 April 2021.
14  John assumed the role of Interim CEO with effect from 1 May 2021.
15  Synlait does not pay short term incentives.

ANNUAL REPORT 2021PAGE 140 & 141

09.  STOCK EXCHANGE LISTINGS 

Synlait’s ordinary shares have been listed on the NZX Main Board since 23 July 2013 (ticker code: SML). On 24 November 
2016 Synlait completed a compliance listing on the ASX as a foreign exempt issuer (ticker code: SM1). As an ASX foreign 
exempt issuer, Synlait complies with the NZX Listing Rules (other than as waived by NZX Regulation) and is exempt from 
complying with most of the ASX Listing Rules, as set out in ASX Listing Rule 1.15. In November 2020, Synlait successfully 
completed a $200 million equity raising to complete the investment phase of its strategy and strengthen its balance 
sheet. The equity raise comprised a $180 million underwritten placement at a fixed price of NZ$5.10 per share and a 
$20 million underwritten share purchase plan at the same share price. In December 2019, Synlait issued $180 million of 
unsecured, subordinated, fixed rate bonds with an interest rate of 3.83% per annum. These securities are quoted and 
trade on the NZX Debt Market (ticker code: SML010).

10.  TOP 20 SECURITY HOLDERS AND SUBSTANTIAL SECURITY HOLDERS

Synlait had the following securities on issue as at 31 July 2021:

• 

• 

218,581,661 ordinary shares 

180,000,000 subordinated bonds.

Set out below are Synlait’s 20 largest shareholders as at 31 July 2021:

Number of shares held  Percentage of ordinary shares 

01.  Bright Dairy Holding Limited
02.  The a2 Milk Company (NZ) Limited
03.  FIL Limited
04.  The Vanguard Group, Inc.
05.  John Penno  
06.  First NZ Capital Custodians Limited (Various Private Investors)
07.  Salt Funds Management Limited
08.  Oneroa Fish & Chip Family Trust
09.  BlackRock, Inc. 
10.  Abu Dhabi Investment Authority  
11.  Smartshares Limited 
12.  Guardians of New Zealand Superannuation
13.  Norges Bank Investment Management (NBIM) 
14.  Accident Compensation Corporation 
15.  Mitsubishi UFJ Financial Group, Inc. 
16.  Paul & Bronwyn Lancaster
17.  Therese Roche
18.  Dimensional Fund Advisors LP
19.  Wilson Asset Management (International) Pty. Ltd.
20.  Simplicity NZ Limited
Total 

85,266,605
43,352,509
18,462,877
5,835,225
5,109,803
2,299,827
2,238,890
1,584,000
1,559,438
1,408,448
1,407,509
1,283,902
1,227,827
1,167,666
1,070,568
1,055,623
900,000
883,113
729,646
699,383
177,542,859

39.0% 
19.8% 
8.4% 
2.7% 
2.3%
1.1%
1.0%
0.7%
0.7%
0.6%
0.6%
0.6%
0.6%
0.5%
0.5%
0.5%
0.4%
0.4%
0.3%
0.3%
81.0% 

According to notices given under section 280(1)(b) of the Financial Markets Conduct 2013, the following are Synlait’s 
substantial product holders as at 31 July 2021. The number of shares owned is as advised by the shareholder in their last 
Substantial Security Holder Notice.

Substantial Product Holder

Bright Dairy Holding Limited
The a2 Milk Company Limited
FIL Group Limited
Total

Number of ordinary shares in 
which relevant interest is held

Percentage of 218,581,661 Ordinary 
Shares on issue owned as at 31 July 2021

85,266,605
43,352,509
18,462,877
147,081,991

39.0
19.8
8.4%
67.2%

Set out below are Synlait’s 20 largest bondholders as at 31 July 2021: 

Number of bonds held

Percentage of total bonds

01.  Custodial Services Limited
02.  Hobson Wealth Custodian Limited
03.  FNZ Custodians Limited
04.  Tea Custodians Limited Client Property Trust Account  
05.  Forsyth Barr Custodians Limited
06.  Citibank Nominees (New Zealand) Limited
07.  RGTKMT Investments Limited
08.  Sierra Investments Limited
09.  National Nominees Limited
10.  JB Were (NZ) Nominees Limited  
11.  FNZ Custodians Limited 
12.  Hugh McCracken Ensor
13.  JP Morgan Chase Bank NZ Branch
14.  Francis Horton Tuck
15.  Falstaff Investments Limited
16.  FNZ Custodians Limited
17. 
18.  Sterling Holdings Limited
19.  Zhuang Yin
20.  JB Were (NZ) Nominees Limited

Investment Custodial Services Limited

Total

41,587,000
28,406,000
23,146,000
22,115,000
9,514,000
5,400,000
3,275,000
2,713,000
2,639,000
2,189,000
1,265,000
994,000
905,000
800,000
768,000
766,000
631,000
550,000
550,000
423,000

148,636,000

23.1%
15.9%
12.6%
12.3%
5.3%
3.0%
1.8%
1.5%
1.5%
1.2%
0.7%
0.6%
0.5%
0.4%
0.4%
0.4%
0.4%
0.3%
0.3%
0.2%

82.4%

ANNUAL REPORT 2021PAGE 142 & 143

11.  SPREAD OF PRODUCT HOLDERS 

13.  NZX WAIVERS

The spread of Synlait’s ordinary shareholders as at 31 July 2021 is as follows:

Size of holding 

Number of investors  Percentage of investors 

Total number of shares 

Percentage issued 

1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000 
50,001 – 100,000
100,001 and over 

Total

3,359
2,908
733
560
46
50

7656

43.8%
38.0%
9.6%
7.3%
0.6%
0.7%

100%

1,518,715
7,493,525
5,447,783
10,829,767
3,215,816
190,076,055

218,581,661

0.7%
3.4%
2.5%
4.9%
1.5%
87.0%

100%

The spread of Synlait’s bondholders as at 31 July 2021 is as follows:

Size of holding 

1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000 
50,001 – 100,000
100,001 and over 
Total

Number of holders

Percentage of holders 

Total number of bonds 

Percentage issued 

0
55
163
551
77
57

903

0%
6.1%
18.1%
61.0%
8.5%
6.3%
100%

0
275,000
1,590,000
15,544,000
6,434,000
156,157,000

180,000,000

0%
0.1%
0.9%
8.6%
3.6%
86.8%

100%

12.  CREDIT RATING 

Synlait does not have a credit rating. 

On 10 November 2020 Synlait was granted waivers by NZX Regulation in relation to the share offer completed in 2020 
(“Share Offer”) comprising a NZ$180 million placement of shares (“Placement”) and a $20 million share purchase plan 
(“Share Purchase Plan”) (“Synlait Waiver”). A condition of the Synlait Waiver was that it was disclosed in the Share Offer 
document and in our Annual Report.

The Synlait Waiver provides waivers from Listing Rules 4.5.1, 4.5.1(e)(iii), 4.19.1 and 5.2.1 as set out below (with the 
conditions):

•  Waiver from Rule 4.5.1 to the extent required to allow any shares offered in the Share Purchase Plan and not taken up 

by existing shareholders to be issued to other persons without requiring approval by ordinary resolution.

• 

Conditions: The waiver only applied to shares offered to existing shareholders under the Share Purchase Plan 
and as a result of the Share Purchase Plan being undersubscribed were offered to other persons and when 
aggregated with the number of shares under the Placement would exceed the 25% threshold in Rule 4.5.1. The 
Share Purchase Plan was required to be fully underwritten.

•  Waiver from Rule 4.5.1(e)(iii) to the extent that the level of participation of Bright Dairy would be determined according 

to criteria applying to all persons participating in the Placement. 

• 

Conditions: Two directors of Synlait (not associated with Bright Dairy) were required to certify to NZX that:

• 

• 

• 

Synlait was not unduly influenced by Bright in its decision to permit Bright to participate in the Placement at a 
higher level of participation than other persons;

Bright will not be involved in or influence any allocation decision in relation to the Placement;

Bright will not derive any benefit as a result of its higher level of participation other than to avoid its holding 
in Synlait being diluted as a consequence of the Share Offer.

•  Waiver from Rule 4.19.1 to the extent that the allotment of shares to Bright in respect of the subscriptions received 

under the Placement to occur within 10 business days of the closing date for the Placement.

• 

Conditions: The allotment of shares to Bright occurs in part on the Placement allotment date and in part on the 
Share Purchase Plan allotment date.

•  Waiver from Rule 5.2.1 to the extent that Synlait would otherwise require Synlait to obtain approval of shareholders to 

enter into a material transaction with any related party in connection with the Placement (referred to as a 
relevant party).

• 

Conditions: Two directors of Synlait (not associated with any relevant party) certifying to NZX that:

• 

• 

Synlait was not unduly influenced in its decision to undertake the Placement by the relevant parties;

The relevant parties who participate in the Placement will not be influence any allocation decision in the 
Placement;

ANNUAL REPORT 2021PAGE 144 & 145

• 

The relevant party will not derive any benefit as a result of the related party relationship other than solely 
through participation in the Share Offer on the same terms as all other participants; and

The Board comprises eight directors, made up of the following:

• 

Four directors appointed by Bright Dairy (the Bright Dairy Directors):

• 

Entry into the Placement is in the best interests of Synlait’s shareholders.

• 

The effect of the NZX Waivers in the context of the Share Offer is to permit:

• 

• 

• 

• 

an increased number of shares (from what is otherwise provided for under the Listing Rules) to be issued under 
the Share Offer without shareholder approval;

the Share Offer to be fully underwritten, to allow any shares not taken up by eligible shareholders under the 
Share Offer to be issued to other persons without requiring shareholder approval (which when aggregated with 
the number of Shares issued under the Placement, may exceed the Placement threshold provided under the 
Listing Rules as modified by the Class Waiver);

Bright, The a2 Milk Company Limited and other related parties to be issued Shares in the Placement having an 
aggregate value above 10% of Synlait’s average market capitalisation without shareholder approval; and

Bright to be issued such number of shares under the Placement that will ensure it is not diluted as a result of the 
Share Offer, which would otherwise cause Bright to lose its director appointment rights under the Constitution. 
Further details of these director appointment rights are included in the Annual Report.

Synlait also made the Share Offer relying on the Class Waiver and ruling issued by NZX Regulation dated 30 September 
2020 (Class Waiver). The Class Waiver provides a waiver from Listing Rule 4.5 and a ruling in relation to the definition of 
“share purchase plan”.

A copy of the Synlait Waiver and Class Waiver is are available at nzx.com and asx.com.au under the ticker code “SML” 
and “SM1”, respectively). All of the conditions in the Synlait Waiver have been met.

Synlait continues to rely on waivers granted on 27 November 2019 from various NZX Listing Rules, allowing our 
Constitution and Board composition to reflect our non-standard governance arrangements, as described below.

Synlait listed on the NZX on the basis that Bright Dairy and Food Co Limited would be able to continue to consolidate 
Synlait into its group financial statements (that are prepared under China GAAP). At the time, Bright Dairy agreed 
with Synlait that for so long as Bright Dairy continued to hold between the Initial Percentage (being 39.119%) and 
50% (inclusive) of the shares in Synlait in each case calculated in accordance with clause 22.5 of the Constitution 
(so as to exclude shares issued under employee share schemes or director remuneration), the following governance 
arrangements will apply to Synlait:

• 

• 

• 

none of whom (i) are required to retire from rotation under the NZX Listing Rules, or (ii) are subject to removal by 
ordinary resolution of shareholders;

one of whom must be ordinarily resident in New Zealand and be a director of such standing and with such 
commercial and governance experience in New Zealand as is appropriate for a director of a NZX listed company 
– the Hon. Ruth Richardson is the current Bright Dairy Director meeting this requirement; and

all of whom are required to have appropriate skills and experience to ensure that Synlait has a suitable mix of 
skills and experience on the Board;

• 

Three directors who are not appointed by Bright Dairy and who must be Independent Directors; and

•  One Managing Director, or, if a Managing Director is not appointed, a Board Appointed Director, who will be appointed 

by the Board. The current Managing Director or Board Appointed Director, and any Director proposed to fill that role, 
cannot vote on the appointment or replacement of the Managing Director or Board Appointed Director (as applicable). 
Consequently, Bright Dairy controls the composition of the majority of the Board as it has four out of seven votes on 
this appointment. Synlait does not currently have a Managing Director, but does have a Board Appointed Director, 
being Dr John Penno, (together, these are the Governance Arrangements).

A summary of the waivers permitting these Governance Arrangements is set out below:

• 

• 

• 

The NZX Listing Rules allow Bright Dairy to appoint representatives to the Board so long as the proportion of the 
Board made up by their representatives is not greater than the proportion of the total shares in Synlait that they own. 
A waiver was required to permit Bright Dairy to appoint four Directors, or 50% of the Board, as Bright Dairy owns less 
than 50% of the shares in Synlait.

The NZX Listing Rules prevent Directors from appointing alternates to act for in their place if they cannot attend Board 
meetings unless a majority of their co-Directors agree. A waiver has been granted to permit Synlait’s Constitution to:

• 

• 

allow a Bright Dairy Director to appoint another Bright Dairy Director to exercise their voting rights at a Board 
meeting they are unable to attend; and

prohibit the non-Bright Dairy Directors from appointing alternate Directors. Synlait considers that it is important 
that Directors are encouraged to attend all meetings.

The NZX Listing Rules require that Synlait’s constitution permit a Director to vote on a decision in which they are 
interested, where that matter is one in respect of which Directors are required by the Companies Act 1993 to sign a 
certificate or relates to an indemnity contemplated by section 162 of the Companies Act. A waiver has been granted 
to allow Synlait’s Constitution to prohibit the Managing Director (if it has one, which it doesn’t currently) from voting or 
being part of the quorum on matters relating to his/her remuneration under any circumstances.

ANNUAL REPORT 2021PAGE 146 & 147

• 

The NZX Listing Rules prevent the imposing of conditions on who may be appointed as a Director, except as 
specifically contemplated by the Rules. A waiver has been granted so that Synlait is permitted to required that 
persons who may be appointed to the three non-Bright Dairy Director positions must be independent.

These waivers are subject to the conditions that:

• 

• 

• 

• 

• 

• 

• 

Bright Dairy continues to hold no less than 39.119% of Synlait’s shares, calculated in accordance with Synlait’s 
Constitution.

the Governance Arrangements are contained in Synlait’s Constitution and will cease to apply when Bright Dairy 
ceases to own between 39.119% and 50% (inclusive) of the shares in Synlait, calculated in accordance with Synlait’s 
Constitution.

Full and accurate disclosure of all material aspects of the Governance Arrangements and Synlait’s reliance on these 
waivers is made in any offer document, and in every annual report while these waivers are being relied on.

Synlait continues to bear a non-standard designation to notify the market of its unique governance arrangements.

The quorum for a Board meeting must include two Independent Directors, and Synlait must have three Independent 
Directors (compared to the two Independent Directors required by the NZX Listing Rules).

Immediately on Bright Dairy ceasing to hold 39.119% of the shares in Synlait, Synlait comply with the provisions in 
its Constitution requiring that some of the Bright Dairy Directors must resign to keep the proportion of Bright Dairy 
Directors on the Board consistent with the proportion of the total shares in Synlait owned by Bright Dairy.

Bright Dairy Directors must retire by rotation at the next annual meeting following the drop in shareholding below that 
threshold, irrespective of whether they have been the longest in office.

A copy of these waivers, and other waivers Synlait has obtained, or relied on can be found in the investor centre of 
Synlait’s website.

14.  NZX CORPORATE GOVERNANCE CODE

Synlait’s statement on the extent to which Synlait has followed the recommendations in the NZX Corporate Governance 
Code during the year to 31 July 2021 can be found at: synlait.com/investors/corporate-governance 

Synlait’s operating subsidiaries operate largely independently from Synlait. Synlait does not require them to comply with 
the recommendations in the Corporate Governance Code.  

15.  GENDER COMPOSITION 

This table sets out the gender composition of Synlait’s Directors and Officers (CEO and direct reports to CEO) 
as at 31 July 2021. The prior year’s comparison is in brackets.

Group 

Board 
Officer 

Total

Female

2 (2) 
2 (3) 

4 (5)

Male 

6 (6) 
7 (6) 

13 (12)

Total 

8 (8)
9 (9)

17 (17)

16.  PERFORMANCE AGAINST DIVERSITY POLICY 

Synlait’s Diversity and Inclusion Policy promotes a culture of diversity and inclusiveness, putting in place appropriate 
strategies and measurable objectives. We aim to achieve three main goals:

•  Workforce diversity – employ, develop and retain more women and Māori.

•  Diversity through leadership – empower and equip our people leaders to recruit, develop and retain a diverse and 

competent workforce.

•  Workforce inclusion – foster a culture that encourages flexibility and fairness, to enable all employees to realise their 

potential, and thereby increase employee retention.

To help us meet these goals we have our Mātua (Parental Leave) Policy and our Tāwariwari (Flexible Working) Policy, 
and we offer unconscious bias training and report to the Board on candidate diversity. Our success will be measured 
against the following as at the end of 2023. The prior year’s comparison is in brackets:

Measure

Progress at 31 July 2021 – compared to FY20

Reduction of the gender pay gap to ≤ 5%
40-50% of leadership positions 
(people leaders, supervisors, specialist roles and senior leadership) held by women
No regretted losses of high potential female employees

10% (13%)
36% (38%)

1 (0)

ANNUAL REPORT 2021PAGE 148 & 149

DIRECTORY

Registered and head office 
1028 Heslerton Road 
Rakaia, RD13 
New Zealand

Contact us 
+64 3 373 3000  
info@synlait.com  
synlait.com 

You can also follow us on Facebook and LinkedIn

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Level 2 
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A staff member plants out seedlings at our 

Whakapuāwai nursery at Synlait Dunsandel.