Synlait Milk Limited (SML.NZ) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us. I'm Hannah Lynch from Synlait. And before our Chair, George Adams formally open today's annual meeting, I'll cover off several housekeeping points. Today's meeting is being held in Christchurch and online. A few housekeeping matters for those here in person, welcome. In the unlikely event of an emergency, follow the instructions of the automated emergency system and the Te Pae team. All emergency exits are clearly marked behind you. The assembly area is located directly opposite the Exhibition Hall, next to the Riverwalk. Please note that smoking and vaping are not permitted anywhere inside the building. I'll now explain how to vote and ask questions. There are 4 ordinary resolutions to vote on today. All resolutions will be conducted via poll. To provide online attendees with enough time to vote, online voting is now open. If you are joining us online, welcome. To vote click on the vote tab and select your preferred option. Once your vote has been cast, a tick will appear. A reminder that there is no submit or send button. Once you have selected an option, your selection is automatically recorded. If you would like to change your vote, click on the words, change your vote. For those here in person, you should have received a white voting card on arrival. If you are a shareholder, proxyholder or corporate representative and you have not received a white voting card, please raise your hand now. A reminder that Computershare will act as scrutineers today for the results and the results will be posted to the NZX and ASX following today's meeting. For those of you attending the meeting online, questions can be submitted at any time. To ask a question, click on the Q&A icon, type your question, and press submit. Our team is monitoring the questions and will ensure that they are addressed at the relevant part of the meeting. Please note that questions may be moderated or if we receive multiple questions on the same topic, amalgamated together. For shareholders here in the room, if you have a question, please raise your hand when asked and a member of our team will bring the microphone to you. Finally, if you are having difficulty asking a question or voting online, you can refer to the Notice of Meeting and the online meeting guide, which was issued ahead of the meeting. You can also use the Q&A function to message the Computershare team. Computershare's phone number is also on screen now and will be on screen during each of the resolutions. With the housekeeping out of the way, I'll now hand over to George Adams, our Chair to officially open today's meeting.

Thank you, Hannah, very much. Good afternoon, everyone, and thank you for joining us. My name is George Adams, and I am the Independent Chair of Synlait. So before we begin today, I would like to confirm that there will be no new announcements. I'm pleased to confirm that we have a quorum, and I declare Synlait's Annual Shareholder Meeting open. So firstly, a summary of our agenda today. I'll speak first, and then we will hear from Richard, our CEO, who joined us in May. And then we'll move to formal business and vote on the 4 resolutions Hannah has outlined. And before that, I'll make a short presentation. I would like to introduce our Board. So we have our Bright appointed Directors, Julia Zhu over here. Thanks, Julia. Leon Fung, Edward Yang and Tao Zhang, and we have our independent directors, Paul McGilvary and Paul Washer, thank you. Paul, we will be farewelling today. Leaves us with our very best wishes and the Board's sincere thanks for your significant contribution including his leadership of the Audit and Risk Committee during what can only be described as a period of fairly intense activity. So thank you, Paul. And the other person sitting at the front is, of course, our CEO, Richard Wyeth, Richard. So I'd like to take this opportunity to update you on our Board structure. The Board has determined that it will remain at 6 directors with 2 independent directors. In line with this decision, we will not proceed with a search for a replacement independent director at this time. We have refreshed the membership of our 2 committees following Paul's departure. And subject to the resolutions passing today, the members of the Audit and Risk Committee will be Julia as Chair, myself and Paul McGilvary as independents. Leon Fung, Paul and I will be the members of the People, Environment and Governance Committee with Leon as Chair. The Board acknowledges that these arrangements do not fully align with all recommendations of the NZX Corporate Governance Code. For example, the preference for an independent director to chair the Audit Risk Committee. After consultation, our major shareholder considers this structure appropriate for now, given Synlait's current priorities, but has committed to review this arrangement in May 2026. The Board remains committed to strong governance and transparent reporting. So now with those formalities and introductions out of the way, let's move on to my formal Chair's address. FY '25 for Synlait's Board is at best described as a prolonged period of firefighting. I won't talk you through each point on the slide, but you can see that the major hurdles we overcame during the year, solvency, settling our disputes with The a2 Milk Company, raising $218 million in new equity, securing our milk supply. And just when we thought we were through all of that, resolving a number of challenges in manufacturing at Dunsandel. Add to that, the departure and arrival of members of our executive team, including the recruitment of our new CEO, Richard, it was a very busy time for the Board. There were periods when our Board was meeting multiple times a day to ensure our company's survival. To be here today is a real win that many of us thought would be impossible, and I'm glad we fought for that. Comparatively FY '26 has been a more settled year. While our Board agendas are just as full, our priorities are the execution of our 2 major work streams. Firstly, delivering a fulsome balance sheet reset through the sale of our North Island assets; and secondly, resetting our strategy for the company's future. Today, our shareholders will vote on the sale of the assets to global health care leader Abbott, a valuable customer of Synlait. Our directors unanimously recommend shareholders exercise their right to vote and vote in favor of the resolution before you. The sale price, approximately USD 178 million, equates to around NZD 307 million currently. This reflects the strategic value of these world-class assets to Abbott and the fact that they are the right company to own them. The sale proceeds will be used to significantly reduce Synlait's debt. This will provide us with a rich turning point we haven't had for some time to move beyond planning Synlait's survival to planning a real and vibrant future for the company. This is something we have fought hard for, and we are ready to embrace. As I said before, to be here today is a real win. The price, of course, is the opportunity to return Synlait to being one of New Zealand's business success stories. The Board, together with Synlait's executive leadership team is determined to chart a path that will realize the company's potential. We are carefully working through how we best use, optimize and develop our world-class facilities at Dunsandel and strengthening our brand credibility to grow new strategic partnerships and strengthen those we already have. We're exploring a wide range of opportunities to diversify the high market value products Synlait makes and who we make them for, and we're improving Synlait's resilience to ensuring that we are doing all we can to put our days of firefighting behind us. The goal, of course, is to ensure we create sustainable growth that delivers long-term value. And I'm looking forward to providing you with an update on the strategy reset when we present our half year results in March 2026. So in the meantime, I'm going to hand over to our CEO, Richard Wyeth. Richard?

Thank you, George. Good afternoon, everyone. It's great to see so many people in the room here today and also online. I've been at Synlait now for 6 months, and there have been times when it's felt like a bit longer than that, to be honest. When I arrived at Synlait on May 19, I entered a business facing several manufacturing challenges. These were complex issues and impacted our ability to continually deliver products on time, in spec and at scale to our customers. As we shared in our annual result, the cost of these in FY '25 was $43.5 million. There will also be related costs that flow into this financial year. Operational stability is critical for any dairy processor and our stainless steel facilities are expensive investments. If we don't get the best out of them, we don't get the best to our bottom line. My first priority, therefore, has been to support the teams on the ground to ensure that FY '26 is fundamentally different from an operational point of view. That has involved ensuring we have the right people and the right seats uplifting training and capability on our -- for our frontline staff and reinforcing a relentless focus on quality. It has also involved resetting Synlait's high-performance culture. To that end, we have launched a new framework with Synlait Spirit. Its 3 underlying values are designed to deliver behavior that will move our company forward. These are more than just words on a wall. The Synlait Spirit is being embedded in our people strategy and performance framework so that it both inspires, change and holds people to account. I'm pleased to report the team has responded, and we have a new energy in our frontline team that is translating to a lot of operational stability. We've probably had one of the smoothest peaks for many years through our operational performance. The business has 6 clear goals, 6 clear focus areas known internally as our Big 6 for '26. It won't surprise you that operational stability and quality performance are at the top of that list. As well as the progress I've already talked to, we have delivered a new quality strategy, strengthened systems and processes and are redesigning our training and development programs. Our third focus area is customer satisfaction. There is always interest in Synlait's relationship with our biggest customer, The a2 Milk Company, and I can report it remains in good shape. From a broader perspective, we have a team working on a project to further improve how Synlait serves our customers. Exactly named bigger, better and faster. All of that is powered by our newly strengthened culture, which will be further enhanced by a new people strategy in FY '26. We have taken some big steps towards improving Synlait's financial resilience. These include agreeing new arrangements with our banking syndicate and ensuring the North Island transaction is ready for today's shareholder vote. As George said, the sale will deliver a step change in Synlait's balance sheet and certainly provide a lot of stability moving forward. FY '26 will see Synlait reshaped into a South Island business that is well positioned for the future. Globally, our sector is in very good shape. The demand for New Zealand dairy is strong in existing and emerging markets. The reality is all New Zealand processes need to be operating at the best to secure our slice of the action. Synlait has always been a top performer on the world stage. My goal is to ensure that by the end of FY '26, we are in an even better position. We'll be proud of a strong South Island business with a high-quality milk supply, thanks to our farmers. And we will have grown our capability with an exceptional team and a clear path on how best to use Dunsandel's world-class assets to deliver operational excellence. Our business will have the credibility and offering needed to attract and grow strong strategic partnerships with global customers keen to leverage our connectivity to their worldwide markets. Most importantly, we will have reset our strategy and have identified high-value products we are making, which are going to sell them around the world and deliver a high-value growth strategy going forward. That growth won't just benefit our business. I'm committed to ensuring it delivers real long-term value to you, our shareholders, our farmers, our customers and our people. Thank you for support while we do that, and I will now hand back to George.

Thank you, Richard. So we'll now take questions on the presentations. Anyone in the room? First of all. If you want to raise your hand, we'll give you a microphone. Thank you. Oliver?

Oliver Mander from the Shareholders' Association. So it was interesting in your opening presentation, you talked about Paul Washer's departure and the recomposition of the Audit and Risk Committee. So how should -- what would you say as an independent director? How do you feel? And how would you say to minority shareholders about that loss of a key shareholder protection in terms of ensuring independent chair of that committee?

Yes. That's -- I think there's probably 3 things, I'd say. One is, strictly speaking, we're in compliance with the NZX requirements. We're not in compliance with the NZX code of best practice. So I think that's absolutely fair. My strong preference would be that we have an independent chair, and certainly, that's been the representations that we as independents have made. I've got a lot of confidence in Julia, I have to say, as a member of the team who is taking that role on at the moment. But I think ideally, going forward, I'd like to see us move back towards best practice.

And look, just to stress, this is not a conversation about Julia's capability in that right.

No. I fully appreciate that.

So just then in terms of -- you talked about a review of that situation in May 2026. So at the moment, you're saying there's no intent to replace Paul Washer as a director, you're keeping the board to 6 directors, which again further reduces the independent composition of that Board, of course. Does that indicate that you're prepared to revisit that in May 2026?

I have confirmation from our majority shareholder that the intention is to revisit the structure in May 2026, including the number of independent directors.

So that's both a succession plan to some extent, albeit delayed and also in terms of the audit and risk committee is that...

Correct?

All right. Thanks. We'll be keeping an eye on that.

Ruth?

Thank you, Mr. Chairman and to the Board, greetings. The quality issue goes to the heart of Synlait's value proposition. That's effectively what we're trading in, assured quality. The hit that the company took through a quality failure is therefore, concerning. You indicated that -- I think Richard did that would flow through into the next financial year. Can you just outline to us what the fix looks like? I mean, there's no use looking back, but you need to be able to assure shareholders that you've got the finger on why the quality issue occurred and what the fix looks like.

I'll take this first, if I could. And then if anything I missed, Richard, you could. Yes. So look, there are a number of fixes. It's not -- there no silver bullets to any one particular issue. So there was a fix in relation to capital. So we had to spend some money to upgrade facilities in the site. We then have to figure out how to improve our processes. So there's been a full review of processes, including, for example, our laboratory processes, including our testing processes. And then it's essentially a people issue. So how do you basically create people who are more capable of delivering the outcome that we need. I would just hasten to add that nothing left our site, which would have had any quality issues. But Richard, if you want to -- is there anything I've missed on that front?

No, not really, George. Just to add to that, I think in terms of the people side of things, just to touch on that, I mean, the quality framework that we've put on under our new Head of Quality has shown an exceptional step change already. And so I'm very confident that we've moved in the right direction. We've had support from Bright as well who are experts in this field. And I think that combination working together puts us in a really strong position. And we are, as I said, seeing that through September, October, November. We're already seeing those results. But you can never rest easy when it comes to quality.

Thank you. Any -- just -- we'll just get you a microphone, sir. Just so the people listening online can hear you.

John [indiscernible], shareholder. While I'm not directly relevant to achieving quality, could the audit committee share a comment on how insurance is covered -- covers Synlait against risk?

We could certainly do that. In terms of -- I mean, in terms of -- if you're okay, I might handle it to start with. We've got many insurances including business continuity insurance, which will, we believe, cover this particular issue. So we have, I believe, 100 -- where is Rob? $100-and-something million worth of cover. Yes. $100 million worth of cover. I doubt we'd be claiming $100 million, just to be really clear. But that's the extent of our cover. And our belief is that certainly some of this issue will have been covered by that. So I think having had a few experiences in insurance, we're very well covered for business continuity for particular issues which -- or incidents, I think, which strike the business from time to time. And we've got multiple insurances, obviously, on the other side for assets, et cetera. Anyone else in the room?

So my question relates to the debt reduction. You mentioned product diversification opportunities and value-add products. The product diversification and the value add, can this be done in the existing plants? Like are you looking for new customers, new markets, new products that you can make? Or are you actually looking at what else you can make to generate money? Because obviously, that's going to have quite a significant capital cost to it. So I was just curious how the debt reduction and these opportunities link together.

Yes. Good question. So the debt reduction is going to happen 1 way or the other because obviously, we get money in next year, assuming it's moved on today, and that will automatically reduce our debt. But in terms of looking forward, I mean, we've got -- the answer to your question is actually both. So we have significant opportunity to expand our current program beyond our existing customers. And we actually have a number of customers who we've engaged with who are very keen to do business with us on an advanced nutrition basis going forward. So that's existing assets. If I look into our food services product, again, we can expand that on the existing platform, and that's going extremely well. I mean that business has pretty much doubled in the past year in China. But then there will be other opportunities, which we will work through. For example, I'm not saying for a second, we will do this. But if we wanted to manufacture butter, for example, instead of AMF, then we would, for sure, have to spend some money to do that. How much and when, I couldn't exactly say. But we are looking at largely how do we maximize the value from existing assets first. So that's customers and type of products to move yourself up the value chain, the first one. And then the second one is, are there complementary offers, for example, butter, which would provide a better return than AMF, which we currently process instead and that would require capital. So yes, we're very open to all of those opportunities.

Just a follow-up question, because I'm a bit out of touch. Do you still own the site in Temuka? Or is it being sold already?

We own that site.

So are you looking to sell it or you're just holding it?

If you have an offer for me today, honestly, we can sort something out. It's -- yes, look, it's on our books. We own it. It's currently not operating. And I think it's fair to say that if we had an offer that was reasonable, we'd certainly look at that. This would be a hard one.

I appreciate that Bright Dairy and a2Milk put on $217 million to save the company and as a small shareholder, very grateful. The issue I have is that you own 85.1%. As a shareholder, I've only got to sell the 15% of the other stakeholders because you guys aren't buying our shares. So how am I going to increase my value? Yes, I might get a dividend in a couple of years' time, but my pool of buyers is now only 15% of the total shareholders. So is that going to stay that way? Or do you think at some time, you'll either make a buyout to get rid of us, small shareholders and take it back to yourselves? Or do we just stay as a minority and sell to each other?

That's a good question. I mean, ultimately, that's the way the stock market works, as you know. But it was -- well, not true. But I mean, if you're in Briscoes, for example, you've only got a small sort as well. But if I was to look at -- I think the question is, are we going to look to create a bigger pool of shareholding or floating shareholding effectively over time. And I'm reminded of a question I was asked, I think, at a previous general meeting by Mr. Mander to that effect. So look, once again, all I can say is I'm clearly not speaking for Bright when I'm here. But my understanding, having spoken to them 2 weeks ago is that they remain of the view that they are rational shareholders. And at some point in time in future, they are open to reducing their shareholding. So that would, I think, be the easiest and quickest way to boost the pool of floating shareholding available. Young man over here.

First thought is in the marketing area, the dimensions of your vulnerability to one market as against other markets that exist in the world, the proportion of sales that are dependent through The a2 Company as against alternate markets is an interesting issue because it talks around, again, risk and potential growth. So that's -- the first question is around what proportions of sales are vulnerable to one customer?

So I think today -- I mean, it's a really good question. And in fact, it's a question that we discussed when we had a joint meeting with ourselves and a2 some months ago. They have a concentration risk, which is essentially us as a sole supplier. And we have a concentration risk on the other side, which is them as a very large customer. So I think essentially, we are managing that and they're managing that as well. So over time, while we might be doing, let's say, 1/4 of our volume in total tonnage, it's probably a little bit more than that through a2. I expect in the next 12 months that will reduce materially over time. So that's, in all likelihood, they've obviously bought their facility in Pokeno. So our expectation is that we will have a long-term relationship with them, but it will be a smaller relationship than we currently have. And that's one of the reasons to the other question in terms of are we looking to other customers and other clients to basically build out our capacity and the number of clients that we deal with. And the answer to that is obviously, we are. But that actually will be the biggest single reduction in customer concentration risk that we can deliver to this business. And that will happen in the next 12 to 36 months, you're going to see a reasonably material change.

If I may follow up with a second question. What are the advantages legally and financially of holding a 15% New Zealand share-based shareholding, even if I don't live in New Zealand.

Well, I mean what you're essentially asking, I think, is the difference between being a public company or going private. Now the fact is if we were not public, I think Bright wouldn't have been able to have bought into the company back in 2010 -- whenever '10, '11 when they originally did. It's a little bit like asking an Irishman for directions because they normally will tell you, I know where you want to go, but I wouldn't start from here. And it's a little bit like that. We are here today. We are a public company. Would I change that? I mean the answer is I wouldn't. I mean it served us actually very well last year when we had to raise capital, to be fair. But are there advantages? I don't think there are any -- there's any tax advantages that I'm aware of. But you essentially open the company to a broader pool. You're able to access a broader pool of capital as a public company than you would be as a private company, by and large. So I don't think there are any legal advantages in that as such. I think it's more about essentially the access to capital. I mean at some point in time in the future, if we come up with a fabulous idea, I'm not saying we won't, we might do. And we would go to the market and say, look, we've got this great idea. We're going to raise $250 million and build a new factory near Pokeno. Something tells me we'd probably find it easier to raise that capital in public than it would necessarily do so in private. It would have to be a really good story to be fair. But probably not Pokeno. We might put up somewhere else. But the thing is that I think from the perspective of public versus private markets, for a company our size, I think the public market is the right place for it to be. I prefer to have a float which was stronger than 15% for sure. But ultimately, most people will actually forget about that if the performance warrants the value. And usually, it's the performance which drives the value and actually stops you worrying about other questions. I think that's my answer.

Well, thank you. Although I have an alternate view to you.

That's absolutely fine. Thank you.

I'm Stephen Bryant. I'm a shareholder. Julia, this is a question for you. Bright has invested a lot of money in this company over about 10 years. I guess a lot of it has been internally focused. I don't see maybe it's under the counter what really big efforts you're doing to assist us in China, perhaps it's a lot, but I just want to know, are you in a position through Bright to really help with this diversification that has been mentioned by a number of people here away from a2 and perhaps Abbott as well.

You have that, Julia?

Yes. First of all, thank you for asking this question, and it's very obvious that Bright Dairy as a dairy company back in China is a strategic investor, and we know dairy industry intimately. So that's why we've weathered our own share of industry cycles and challenges, and that's why we emphasize on Synlait's journey. And until today, we still remain confident in its future and potential. And secondly, speaking of the so-called collaborations, actually, Bright Dairy is very keen on creating some synergies with Synlait in the past as well. But given that in the past 10 years, I think Synlait was growing on such a rapid rate that it was able to attract business globally, even outside of China. So there were discussion between Bright China, Bright and Synlait, but we really didn't have a chance to implement it in a real work plan. But going forward, as we know that a2 has been diversifying and as we know that we will be needing more connection with Synlait because we are now a major shareholder, more than 51%. And obviously, we are studying very hard on -- between the 2 markets and the resources that we have in New Zealand, what we can do to help Synlait. I think you will be seeing joint venture collaborations on many areas, including food service segments as well. We are developing a strategy. And I believe Richard will be able to share more details in the upcoming months.

As a minority shareholder, can I wish you all the best with that?

Although I don't have any share, but I do wish all the best as well.

Noted. Thank you. We'll just get you a microphone.

You've introduced obviously -- an expanded question. What proportion of Bright Dairy's business is Synlait?

Yes. Revenue?

In terms of revenue, it's quite a lot actually. It's 20% to 25% of Bright Dairy's consolidated revenues coming from Synlait. So that's how, as I said, how important Synlait is to Bright Dairy.

Thankfully significant.

That's quite significant. Yes. But when Synlait is in trouble, then we were in trouble as well.

Thank you. Any more in the room? Or can we go -- we got another one in the room.

Second annual meeting. Last year, you mentioned that you were working very hard with your dairy farmers to make sure we didn't lose a percentage. And I don't know what the figures are. But assuming there was 100 people supplying your milk last year, have you still got 100? Or have you increased that to 110? Or where are we with all the current farmers that are your providers?

Net-net, we retained all of the milk that we needed for this year, which was terrific. And I have to take my hat off to Charles and the on-farm team. He did a great job. But we actually not only retained milk, but we actually gained probably 5% or 6% new milk joined us during the year. So by the end of March, April -- end of March, we were still very nervous. But by the end of April, we were all very pleased with ourselves. But yes, we actually managed to retain all of the milk that we had. We certainly lost some farmers for sure, but we gained back more than that actually on new milk coming in. So very pleased. Anything online?

Just one question online from Terence. Mr. Chair, could you please confirm what the company's debt projection is once we've sold the North Island assets?

Yes. So look, our peak debt this year is $550-ish, so less $300 million. Our peak would normally be on the order of $250 million during that kind of mid-November to kind of February period. That will be about as much as I expect next year. But essentially, our core debt will go, and we'll just essentially have working capital debt going forward. Andy, if that's correct. That's -- and that's just at a very short peak period. Oliver?

I'm not sure if it strictly relates to the presentation, I'll try...

Well, we've opened Pandora's box, so we might as well carry on.

So just in terms of your reporting, and we've seen a significant increase in the quality and level of disclosure related to CEO remuneration disclosure in the past 2 years, and that follows the implementation of the NZX template and pressure from investors like ourselves as well. Synlait hasn't really participated in that process. Your rem disclosure is still, I would argue, relatively weak. And if you consider that in the context of the transformational initiatives you need to improve the value of the company, there's clear shareholder alignment between performance and the achievement of, say, milestones -- relevant milestones by Richard. What can you tell me about Synlait's efforts to improve remuneration disclosure, particularly for short-term and long-term incentives? Can you commit to looking at that heading into the next financial cycle?

I'll commit that next year, you won't be asking me that question. How is that?

Sounds good, George.

Andy? Sorted. Done No more? Excellent. Okay. Well, thank you for those questions. We'll now move on to the formal part of the meeting. Got this great picture. Anyway, as outlined in the notice of the meeting, there are 4 ordinary resolutions to vote on today. The first 3 resolutions are straightforward, 2 relate to director expense -- sorry, director elections and the third relates to the auditor's fees and expenses. The fourth resolution is significant and relates to the sale of our North Island assets. So this is a defining moment, I believe, for Synlait. In addition to the usual matters, shareholders are being asked to approve the sale of Synlait's North Island assets. As we spoke about earlier, these assets are the Pokeno factory, the blending and canning facility at Richard Pearse Drive and the warehouse facility at Jerry Green Street. So your Board unanimously recommends that all shareholders vote in favor of all resolutions at today's annual meeting. So we'll move on to our first resolution. So our first resolution is an ordinary resolution relating to the reelection of Paul McGilvary. Paul was elected to the Board last in December 2022. And accordingly, Paul must now retire and being eligible to do so, offers himself for reelection as an independent director. Paul has played a vital role in sharing Synlait's People, Environment and Governance Committee and is also a member of our Audit and Risk Committee. He has extensive dairy sector experience, having previously held several executive roles, including CEO of Tatua Co-operative Dairy company Ltd, CEO of HortResearch and Managing Director, Fonterra Europe. The Board has assessed Paul to be an independent director under the definitions set out in the NZX listing rules and the NZX Corporate Governance Code. The Board supports Paul's reelection as a director, and I now invite Paul to address the meeting on his proposed reelection. Paul?

Thank you, George. It would have been -- I'm sure we could have found a better photo than that. Look, through your questions, some of this will be obvious to you. But look, over the last 4 years, I think we've made great progress in sort of resetting Synlait's balance sheet. But it's fair to say, it's been a tumultuous time as shareholders will know. We've dealt with manufacturing challenges, losses from our underutilized North Island assets, rapid and sustained milk prices to record levels, changes of ownership, multiple changes of executive leadership and an almost completely new Board. So there has been significant change within Synlait. But despite that, we've refinanced the company twice. We've expanded the number of banks involved. We've grown our revenue, and we've sharpened our focus on the 2 key areas for us, which are nutritional powders and food service. I've always believed that Synlait has the greatest potential of any dairy company in New Zealand to add value to what it does. I'll just pause there. I think we have the greatest potential. And the reason I say that is because we are focused on the highest value nutritional powders that there are in the market, including infant formula. And we're also focused on food service, which is the highest value use of our cream. So we are operating in the right place. Our Dairyworks consumer business, which I chair, is kind of showing us the way. Revenue is growing rapidly from moves into Australia and Southeast Asia. There was a question here about what markets we're operating in, with profits that were less than $20 million a year, now lifting to close to $30 million and a plan to go to $40 million, which we are very confident about. Dairyworks success has been built on a relentless focus on quality. It's been built on executing capital spend to increase efficiency, which we've done well. It's got an outstanding marketing team and a very strong management team. CEO, Tim, is here with us today. But I think Dairyworks does show us a little bit the way Synlait can go. Synlait is inherently profitable at current levels of activity. We just have to get stability into the business, as Richard talked about, and put the whole package together. In terms of my background, I ran the food ingredients business for Fonterra in Australia and in Europe for more than 10 years, including advanced blended powders and functional cream products. I was CEO of the Tatua Dairy Company for 9 years. Tatua really epitomizes a value-add company with its range of sophisticated products and optimized operations, delivering market-leading returns year after year. I've been on numerous public and private company Boards in the agriculture and infrastructure space in New Zealand and in Australia. And despite all the pressures over the last 4 years, I've really enjoyed my time on the Synlait Board. I've enjoyed chairing People, Environment and Governance Committee, and I've enjoyed chairing Dairyworks. If reelected as a director, I assure you, I will continue to bring passion and energy to the role. The job is not done yet. And I really want to be part of transitioning Synlait to the high-value company and business that it can be. Thank you again for the opportunity.

Thank you, Paul. So and I move that Paul be reelected as a director. Are there any questions on this resolution? No. So if I can allow everyone -- was that wasn't the question, Ruth? Great. No. So I will allow everyone -- with assuming no questions, invite you now to mark your voting option on the resolution to reelect Paul as a director, either on your voting card or your printed card. [Voting]

So Resolution 2 is an ordinary resolution relating to the election of Julia Zhu. Julia joined the Board in 2023 as a Bright appointed director under Synlait's previous governance arrangements. These arrangements have now fallen away followed Bright's increase in shareholding in October 2024 and Synlait's constitution has been updated. As a result, Bright appointed directors are now subject to the NZX listing rules and Synlait's constitution and must retire and stand for reelection or election as appropriate. Julia is eligible and offers herself for reelection. As an executive of Bright, Julia is not considered an independent director. Julia has held various leadership roles at Bright Food Group, including Investment Director and General Manager of multiple subsidiaries and functional divisions. The Board supports Julia's election and recommends shareholders vote in favor of this resolution. So I now invite Julia to address you. Julia?

Thank you, Mr. Chair. Kia ora, everyone. My name is Julia. It's my great honor today to stand here with the support of the full Board as I share my vision on Synlait's future and ask for your trust. As many of you know that I first joined Synlait and Board member as a Bright nominated director back in year 2023. Over the last 2 years, I think many of us has already said, Synlait went through significant challenges, but we all rose to it. Under Chairman George's leadership, together with my fellow directors, and the Board has rolled out a series of targeted comprehensive initiatives, including a joint capital injection between Bright Dairy and ATM Company, a successful refinance of syndicated loan, a settlement -- commercial settlement with our major customer and also recently announced the sale of North Island assets. These strategic initiatives are designed to strengthen Synlait's capital structure, which founds a solid foundation for our next chapter. And it actually has been quite a journey. So of course, no strategic plan will succeed without a determined team to execute it. Today, our day-to-day operations still depend on the expertise, the determination and the passion and grit of our management team and our employees. And I want to recognize the incredible work they have done. Our new CEO, Richard, joined Synlait May this year, and he wasted no time actually leading our Synlait's team going through the critical production challenges that we faced at the second half last year. And to Richard and every member of Synlait, thank you for your unwavering commitment, and we are now seeing a more stabilized company. And I'm also eager to see the great things that we will accomplish together in the year coming. This spirit of partnership extends well beyond our internal group to our valued farmers who is also an integral part of Synlait's success. As many of you know that many of them actually -- we brought them to China 2 weeks ago to participate in the CIIE in Shanghai. I think there, they had a better chance to understand and deepen their understanding of Bright Dairy, Bright Food Group and also the dynamic Chinese consumer market. And I do hope that this in-person experience will let them feel firsthand Bright's steadfast support for Synlait and our philosophy of long-term and patient investment. Bright Dairy as a bright and dairy company in China, thousands of miles away from here. As I said, we know dairy industry intimately, and we also weathered our own share of industry cycles and challenges. So we understand and emphasize Synlait's journey, and we still remain confident in its potential and future. Looking ahead to year 2026, I think our focus is very clear as what Richard has demonstrated, we are going back to basics. We will stay laser-focused on operation stability. And I won't spend too much time on the detailed initiatives as Richard has already explained. So today, I humbly ask you for your support. And with your trust, we will build on Synlait's inherent strength, laser-focused on operations and work together to create a greater value for every shareholder now and the years to come. As Mr. Paul McGilvary just said, the work is not done yet, and we are determined to get it done. Thank you.

That's great. Thank you very much, Julia. So I move that Julia be elected as a director. Are there any questions on this resolution? No? Thank you. There being no questions, I invite you to vote by marking your voting option on resolution 2, either on your printed or electronic voting card. [Voting]

So let me move to Resolution #3, the auditor's remuneration. That the Board be authorized to fix the fees and expenses of our auditors, KPMG for the coming financial year. I move that the Board be authorized to fix the auditor's fees and expenses for the upcoming financial year. Are there any questions on this resolution? And I will be blown away if there were. Thank you very much. So there being no questions, I invite you to vote on Resolution 3, either electronically or on your voting card. [Voting]

So we now move on to Resolution #4, which relates to the sale of our North Island assets. So this resolution is required because of the value of the asset sale exceeds 50% of Synlait's average market capitalization as defined under the NZX listing rules. The rule states that Synlait cannot enter into a transaction to sell assets when the gross value exceeds that 50% threshold, unless approved by shareholders through an ordinary resolution. Hence, the resolution today. The Board unanimously recommends that shareholders vote in favor of this resolution. As we have spoken to already, Synlait entered into a binding conditional agreement to sell our North Island assets to Abbott for approximately NZD 307 million in late September. The sale presents a valuable reset for Synlait. The proceeds will be used to significantly reduce the company's debt, strengthening its financial position. In short, the sale will deliver a stronger, simpler and more secure Synlait. And the sale is subject to various conditions, including today's shareholder approval. Bright Dairy, our major shareholder, has confirmed it will vote in favor of this transaction. So are there any questions on this resolution? Sir, just get a microphone. We'll just get you a microphone.

You mentioned that there are other conditions that have to be met. Is this the last outstanding condition or the sale is still at risk from other conditions?

I think we're largely there. We had things like OIO, et cetera. Yes, there are a number of very minor conditions that remain, but we're -- essentially, this is the last hurdle. This is the large major hurdle.

My other question is delving through the entrails. Could you provide some estimate of the write-down and asset value that the Pokeno North Ireland facilities has inflicted on shareholders?

Look, the assets themselves, I think, top of my head, were roughly $450-ish million that was spent in terms of capital costs over the period. I couldn't tell you the losses off the top of my head, but they were, let's say, on average of $40-odd million a year for 4 or 5 years. So pretty significant, to be fair.

So you're talking about perhaps a figure NZD 600 million in round terms. Yes, sale of the asset at around NZD 300 million or so.

Correct.

It's a fact the shareholders live with.

Regrettably, it is, yes. But it is -- I think -- and I would remind you, it is something that this Board saw on its arrival, and we remedied that issue as promptly as possible.

That point is appreciated.

Any other questions on this particular resolution?

Just a quick question. Is the Pokeno facility able to be used for dairy? Or is it for nondairy?

Both. It can do both.

So Abbott could produce dairy ingredients at that facility.

If they decided to, yes, absolutely, yes. I mean it always has, to be fair, I mean, partly for us. Anything online? No.

No questions online. Thank you. Okay. So there being no more questions, I invite you to vote by marking your voting option, Resolution 4, either on your printed or electronic voting card. [Voting]

So as you can see, if we then move to show the proxies that we have in place, the proxies cast ahead of the meeting today. We are thrilled to have received very strong support, overwhelming support from all shareholders across all resolutions prior to the meeting. So thank you very much for your engagement and confidence in these matters. We look forward to posting the final results of today's voting to the NZX and ASX following the conclusion of the meeting. And this now concludes the meeting's formal resolutions. We will shortly be closing off all voting online. So if you haven't already, please finalize your votes now. And I note that Computershare are ahead of me and are already collecting votes from the room, which is terrific. So we now move to any other business, and we're happy to take any final questions either from the room or online. Nothing online, Hannah? Thank you. No. And nothing more in the room. Thank you very much. So this, ladies and gentlemen, shareholders, concludes our business for the day. There's no further discussion. I'll end the meeting here and declare the meeting closed. Thank you very much for coming today. Thank you, all.