Synlait swings to $80.6m HY26 loss as EBITDA reverses and operating cash...

What changed

Revenue from continuing operations fell 15.2% to $777.6m from $916.8m. Reported EBITDA swung from a $63.1m profit to a $34.7m loss, a $97.8m deterioration. PBT moved to -$66.1m from +$7.5m, and NPAT to -$80.6m from +$4.8m, with an $8.8m after-tax loss from discontinued operations explaining most of the gap between continuing-operations loss (-$71.9m) and total NPAT. Operating cash flow deteriorated to a $183.4m outflow from a $12.0m outflow in HY25. Gross borrowings rose 14.4% to $504.4m while cash fell to $32.3m, and equity contracted 9.9% to $717.6m. Segment mix shifted materially: Synlait's share of group revenue dropped from 84.9% to 71.7% while Dairyworks nearly doubled its share to 28.3% and remained profitable.

What matters

• Gross margin collapse. Gross profit fell roughly $83.9m to about $3.1m, compressing gross margin from 9.5% to 0.4% (-909 bps). This is the core operating problem — the EBITDA swing is largely a margin story, not a volume story, since the 15.2% revenue decline alone cannot explain a $97.8m EBITDA reversal.
• Cash conversion has broken down. Operating cash outflow ballooned more than 14-fold to $183.4m. Capex was unchanged at $11.6m, so the $171.3m year-on-year deterioration is almost entirely working-capital-driven: receivable days stretched from 20.1 to 46.5 and inventories rose 22.1% to $423.7m. Management cites "customer inventory rebuild" as a deliberate choice.
• Leverage is weakening despite a lower absolute net debt number. Reported net debt of $472.1m is below HY25's $511.9m, but net debt/EBITDA on a trailing-half basis moved from 8.1x to 13.6x because EBITDA is now negative. Equity fell $79.1m.

Expectations

No quantified FY26 target, guidance, or forward-work figure is disclosed in the supplied release. The only shape context is that FY25 was not second-half weighted (HY25 was 56% of FY25 revenue), which means HY26's revenue shortfall cannot be dismissed as seasonal. Annualised HY26 revenue of $1.6b sits about 5% below the FY25 anchor of $1.6b. Management has positioned the half as "conservative" with customer inventory rebuild, implying an expected H2 recovery, but nothing in the release quantifies it. The release states reported EBITDA was -$34.7m against underlying EBITDA of $4.1m, but no bridge is supplied.

Quality of result

Low durability, for two reasons. First, the gap between reported EBITDA (-$34.7m) and underlying EBITDA (+$4.1m) is $38.8m without a disclosed reconciliation bridge, so the quality of the underlying number cannot be independently verified from the supplied excerpts. Second, the cash result is dominated by working capital: a $183.4m operating outflow against capex of only $11.6m produced pre-lease free cash flow of roughly -$195.0m, compared with -$23.4m in HY25. If receivables (now 46.5 days) and inventory ($423.7m) unwind in H2 as implied by the "rebuild" commentary, a portion of H1 cash burn should reverse — but that is a timing argument, not evidence of operating strength. PBT is the cleaner read on earnings this half given the tax line swung from a benefit to a $5.8m expense on a loss and discontinued operations added a further $8.8m drag.

Unresolved

• What is the composition of the $38.8m reported-to-underlying EBITDA bridge, and how much of it is genuinely non-recurring versus recurring operating cost?
• How much of the $198.7m receivables balance and the $76.6m year-on-year inventory build is expected to convert to cash in H2, and on what timeline?
• What drove the Synlait segment's roughly -14.5% margin swing — price, volume, input costs, or customer destocking — and is the trajectory stabilising?
• What is the discontinued operation, and are further losses expected?
• Is the group within covenants at 13.6x net debt/EBITDA, and what headroom exists on the bank facility referenced in the FY25 excerpts?

This briefing cannot assess covenant status, the detailed EBITDA reconciliation, or management's H2 recovery plan, because none of these are quantified in the supplied extraction.

Key metrics

Segment breakdown

Analytical metrics

This analysis was generated using Annolyse, an AI-powered tool that analyses NZX company announcements. The analysis is based on available company filings and standard Annolyse calculations. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.