New Zealand's Synlait Milk, which is majority-owned by a Chinese group, says it has learned its lesson and is banking its near-term future on a new Middle East customer after selling the North Island processing facility.
The mid-2020 acquisition hurt its financial performance so much that its earnings fell from a peak net profit of $NZ82.2 million ($A66.2 million) in fiscal 2019 to a nadir loss of $NZ182.1 million ($A146.8 million) in fiscal 2024.
"The North Island assets created a drag on Synlait's performance and now they're sold," acting chief executive Leon Fung told an earnings call on Monday.
However, the sale around April wasn't early enough to reduce the pull on Synlait's annual results for fiscal 2026.
Its bottom-line net loss for the year ended July 31 was $NZ75.4 million ($A60.8 million), which was worse than the prior year's $NZ39.8 million ($A32.1 million).
It was a difficult year, Mr Fung said, even though the group's second half performance was better than the first half.
"Synlait is still in a recovery phase," he said.
"The capacity issue is resolved following the sale ... (and) ... our new revenue strategy will ensure Synlait is no longer exposed to a single customer, market, or product again, which will help protect us from future shocks."
Synlait's second-largest shareholder, with 19.8 per cent, is fellow NZ corporate a2 Milk, which was using its specialised milk powders to make its flagship milk for people with sensitive stomachs and other products.
The deal changed in early 2025 when a2 cut volumes previously fulfilled by Synlait, including its English-labelled baby formula sold in China.
However, because Synlait holds a special Chinese licence for supply from its processing facility in Dunsandel in the South Island, a2 still needs it for its Chinese-labelled formula.
Synlait went shopping for another supply partner and on Monday laid out its hopes that the unnamed Middle Eastern client would backfill about 18 per cent of its capacity.
"This customer has their own brand, they want to use NZ high-quality products, grass fed products, for their brands," Mr Fung said.
"So yes, this is a very promising business for us, for the near future."
Synlait's major shareholder, Bright Dairy, with 65.3 per cent, is one of China's biggest dairy producers.
The dual listed Synlait shares rose 15 per cent to 34.5 cents in early trading in low volume on the Australian stock exchange.
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