Dairy processor Synlait Milk (ASX:SM1) has issued a financial update, forecasting a significant net loss for the first half of the 2026 financial year as it undergoes a massive structural "reset."
The company expects to report a net loss after tax of between NZ$77 million and NZ$82 million for the six months ended Jan. 31.
This is a sharp decline from the NZ$4.8 million profit recorded in the same period last year.
Underlying EBITDA is projected to sit between breakeven and $5 million, significantly trailing the NZ$68.5 million achieved in H1 FY25.
Synlait attributed the downturn to several factors, including ongoing "manufacturing challenges" at its Dunsandel plant.
Although these issues are now largely resolved, the company was forced to aggressively rebuild inventory and make additional raw milk sales at lower margins, which heavily impacted operating costs.
Furthermore, a conservative decision not to recognise additional deferred tax assets further weighed on the bottom line.
CEO Richard Wyeth described the result as "disappointing" but emphasised that 2026 is a pivotal year for the company.
A major component of the recovery is the NZ$307 million sale of North Island assets to Abbott, scheduled for completion on April 1.
The sale is expected to drastically reduce Synlait's debt and allow the processor to focus exclusively on its Canterbury operations.