KMD said it had “funding headroom” of $235m.
Following the announcement of 21 future store closures across the group, the company expects to close 14 of these stores in 2026.
Difficult trading conditions have resulted in the company’s share price dropping from a peak of 90c in 2023 to around 25c this week, although the stock did rally a touch on the back of its result.
Fund manager Allan Gray, which has the biggest holding in KMD with 17.7%, is calling for the company to sell assets to reduce debt.
“We are not happy with the performance of the company. It’s been terrible,” Simon Mawhinney, chief investment officer at Allan Gray, told The Australian Financial Review (AFR).
“Part of that is cyclical and part of that is self-inflicted. We really want to see them repair their balance sheet the old-fashioned way.”
But Harbour Asset Management senior research analyst Oyvinn Rimer says now is not the time to sell, particularly since the company has already “organically” made meaningful progress with its debt.
He said KMD’s Rip Curl wetsuit plant in Thailand – cited by AFR as a candidate for sale – was a good one, producing a decent return on capital for KMD.
“So why would you sell a tangible asset that’s delivering good financial results if you don’t have to? I think that would be a bad executive decision,” he said.
“Ultimately, if the banks come pushing and bullying them into selling assets, then they do have some options, but clearly the business has seen some rough times from external forces as opposed to them scoring own goals.
“If anything, they’ve shown an ability to respond to quickly changing consumer landscapes and have sharply reduced their product development cycle from close to a year and a half to six months to respond to a different type of consumer that’s emerging,” Rimer said.
He said the wholesale channels had become difficult because of the uncertainties around global tariffs and consumer demand.
KMD had managed to reduce debt against the background of depressed consumer conditions in Australia and New Zealand, and a warm winter.
“Against a better economic backdrop, this business could print a lot more cash than it has in the last two years,” he said.
“But there’s no question that from here on in they just need to put runs on the board and start delivering sales and earnings growth, repair the balance sheet and eventually start paying dividends again.”
KMD chief executive and managing director Brent Scrimshaw is clearly in no mood to sell.
“Since joining KMD Brands what I’ve seen is clear, the potential of our brands is far greater than what we are delivering today.”
Four questions for Synlait
A number of questions hover over Synlait Milk, which reports its annual result on Monday.
The company, in a July 30 update, said its overall performance had improved year-on-year and the final 2025 result would be a marked improvement.
The company is expecting “underlying” earnings before interest, tax, depreciation and amortisation (ebitda) of $100 million to $110m (compared with $45.2m in 2024) with breakeven underlying net profit (compared with a loss of $60.4m in 2024).
However, as well as the headwinds signalled at half-year, Synlait had manufacturing challenges at its Dunsandel facility across a range of product segments, resulting in one-off costs in 2025.
Those challenges had been resolved.
Synlait is now forecasting a “reported” net loss after tax of $27m to $40m (compared with a loss of $182.1m in full-year 2024); reported ebitda of $50m to $68m (loss of $4.1m in 2024).
The company is targeting a closing net debt balance of $300m.
Forsyth Barr senior analyst Matt Montgomerie says there are a few questions surrounding Synlait, among them being the roughly $50m gulf between the company’s “underlying“ ebitda forecast (of $100m to $110m) and its “reported” ebitda forecast (of $50m to $68m).
In other words, what did Synlait choose to leave in, or out, in reaching that underlying number?
Movement in the balance sheet will be another key one, given gearing is going to be slightly higher than Synlait had previously expected, Montgomerie said.
“Thirdly, there will be interest around Synlait’s plans for its North Island plant [Pōkeno] and what the plans are ultimately because it’s currently meaningfully loss-making for them and the plant itself is materially underutilised, given there’s only one customer, with Abbott’s volumes going through there.
“A solution there would be positive because it would remove the losses and then free up some capital.
“Fourthly, the most important question is Synlait’s plans for the financial year 2027 and beyond, as a2 Milk somewhat rapidly moves production of its English label and infant formula volumes away to its newly acquired plant at Pōkeno.
“The key focus is more on the quite critical, forward-looking drivers of what happens with the North Island assets and what happens with the spare capacity after a2 Milk moves on.”
There is also some intrigue in the market as to exactly what the “manufacturing challenges” mentioned in the July update were.
Lessening role of a2
Then there is the issue of a2 Milk’s lessening role as a key customer for Synlait.
Early this month, a2 Milk completed the acquisition of an integrated nutritional manufacturing facility with two China label infant milk formula product registrations, also situated at Pōkeno.
A2 Milk said the acquisition was a significant step forward in the execution of its supply chain transformation strategy.
Synlait will continue making China-label formula production a2 Milk for some time to come, but a2’s increased manufacturing independence will be an issue.
“With a2 Milk being very clear about their plans, there will be a significant hole that Synlait will have to fill,” Montgomerie said.
Synlait’s share price has been showing signs of life after speculation surfaced in August that it would soon sell its loss-making facility at Pōkeno.
The company said then that it was in discussions with a party with respect to its North Island assets but that talks were incomplete.
Newspaper The Australian reported that Illinois-based multinational healthcare company Abbott Laboratories was believed to be in talks with Synlait about buying one of its manufacturing facilities in New Zealand.
In response, Synlait said it was in discussions with a party, but those discussions were incomplete.
The factory at Pōkeno already produces plant-based products for Abbott.
The plant – commissioned in 2019/20 – has been a millstone for the company as it has never functioned at full capacity and has always turned in a loss.
Synlait went through a major recapitalisation last year – which resulted in China’s Bright Dairy’s ownership going from 39% to 65.25% – after suffering a string of losses.
“This year will be a better year than what we would have been expecting 12 months ago, but there are key questions around Dunsandel’s utilisation without a2 Milk,” Montgomerie said.
Synlait has a new chief executive at the helm. Richard Wyeth, who came from Westland Milk, joined in May.
Fonterra’s Hurrell starts to cash in
Fonterra chief executive Miles Hurrell was paid a total of $6.11m for the 2025 financial year. That included a base salary of $2.49m, short-term incentive of $1.95m and a long-term incentive of $1.50m.
His total remuneration was up on the previous year’s $5.92m.
Hurrell’s long-term incentive is subject to performance hurdles being met, and his 2025 payment represented a deferred component of the now disestablished 2021 executive incentive plan.
Fonterra introduced a new incentive plan in the 2023 financial year aimed at “aligning the financial interests of Fonterra’s enterprise leaders with those of the co-operative’s farmer shareholders”.
The first grant of “alignment rights”, consisting of co-op units and farm units, was issued in October 2022, with a second tranche issued in October 2023. There was a transition from the previous EIP plan, which resulted in shorter performance periods for the first two years.
That means the first payment date under the new plan will take place next September.
Hurrell was awarded a third grant in October 2024. The structure means he can continue to receive incentive payments through to September 2030.
Mercury Capital’s 25% stake in Forbar
Private Equity firm Mercury Capital has completed the acquisition of a 25% shareholding in Forsyth Barr Group following approval for the deal by the company’s shareholders.
The transaction, announced in July, was subject to approval by shareholders and to other conditions as well as acceptance of a partial offer to existing shareholders.
Mercury Capital has more than $1 billion in funds under management.
Founded in 2010, it specialises in providing growth capital to well-established businesses across Australia and New Zealand.
The Sydney-based firm has strong New Zealand connections, with its founder and chief executive Clark Perkins and around half of its staff being New Zealanders.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.