Cash conversion fell to 43% and net debt/EBITDA jumped to 4.6x

With capex stepping up to $65.1m, free cash flow pre-lease swung to -$26.1m from +$179.1m. Funding that gap pushed gross borrowings to $422.7m (+19.3%) and net debt to $413.4m, lifting net debt/EBITDA to 4.6x from 2.6x.

Revenue fell 20.5% to $1.3b and EBITDA fell 29.7% to $90.7m. Continuing operations posted a $14.1m loss after tax against a $38.5m profit a year earlier; reported NPAT of -$4.3m was helped by a $9.9m after-tax gain from Dairyworks, now classified as a discontinued operation. PBT growth of -148.7% is the cleaner read on the underlying deterioration.

Net debt/EBITDA of 4.6x is roughly double the prior 2.6x and sits well above what is typically considered comfortable for this business. Management has signalled an intent to "address the balance sheet" through the intended divestment process; the leverage ratio explains why that work is now a stated priority rather than optional.

Inventory is the working-capital pinch. Inventory days rose to 69.1 from 51.2 (+17.9 days), with inventories up $17.3m to $250.3m despite a 20.5% revenue decline. That is the proximate driver of the cash-conversion collapse and means reported EBITDA is no longer translating into deployable cash; it also creates risk of margin pressure if any of that inventory needs to be cleared.

The discontinued-operation gain is doing real work in the headline. Continuing operations lost $14.1m after tax; the $9.9m Dairyworks contribution narrows the reported NPAT loss to $4.3m. Investors comparing -$4.3m to last year's $38.5m without that adjustment understate how much continuing-business profitability has fallen, and Dairyworks is earmarked for divestment so the contribution is not repeatable.

The strategy commentary points to a "more focused Synlait" with intended divestments to repair the balance sheet, but no quantified target, timing or sale-proceeds range is given.

First-half context shows the second half did most of the lifting on cash: HY23 operating cash flow was -$124.7m, implying roughly $163.7m generated in H2. That makes the FY23 cash result a partial recovery rather than a clean trend, and means H2 strength is already in the numbers — not an additional tailwind for FY24.

EBITDA of $90.7m converted to only $39.0m of operating cash, a 43.0% conversion that is materially below the prior 180.3% and below a level consistent with the reported earnings being self-funding. The gap is concentrated in inventory build, which is a balance-sheet outcome rather than a timing item that automatically reverses.

The reported NPAT line also flatters the underlying picture. Stripping out the $9.9m Dairyworks discontinued-operation gain leaves a continuing-operations after-tax loss of $14.1m. The current effective tax rate of 30.2% on continuing operations sits against -7.4% in the prior year, so tax is no longer flattering the result either — it is now the cleaner PBT figure (-$20.3m vs +$41.6m) that best describes the operating swing. ROE moved to -0.5% from +5.1%, consistent with a business that is not currently earning its cost of capital.

This briefing cannot assess customer-specific volume or contract dynamics behind the revenue decline, as no concentration or customer-mix disclosure is provided in the supplied material.