¹ Total number of meetings attended varies depending on Director’s Board start date and Committee appointments.
² George Adams (Chair) joined the Board on 21 March 2024.
³ Simon Robertson retired from the Board on 20 October 2023.
⁴ Dr John Penno retired from the Board on 30 April 2024.
⁵ Ruibing Liu (Ryan) retired from the Board on 9 February 2024.
⁶ Ruth Richardson retired from the Board on 3 June 2024.
⁷ Tao Zhang joined the Board on 26 February 2024.
⁸ Leon Fung joined the Board on 3 June 2024.
Good corporate governance is critical to protect all stakeholder interests
Synlait is committed to maintaining high standards of corporate governance and have therefore taken the opportunity to voluntarily report against the new NZX Corporate Governance Code (NZX Code) dated 1 April 2023 for greater transparency.
The Board and management regularly reviews and assesses Synlait’s compliance with best practice recommendations set out in the NZX Code. This Corporate Governance Statement describes Synlait’s compliance with the NZX Code recommendations in the year to 31 July 2024.
Synlait’s operating subsidiaries operate largely independently from Synlait. Synlait does not require them to comply with the recommendations in the NZX Code.
Corporate Governance Code Principles
Principle 1: Ethical Standards
"Directors should set high standards of ethical behaviour, model this behaviour and hold management accountable for these standards being followed throughout the organisation."
Our reputation matters. Synlait is committed to maintaining high standards of honesty, integrity, fairness and ethical conduct, led by our Board and Executive Leadership Team. Our Synlait Standards Policy sets out our expectations for the highest standards of behaviour and accountability.
Employees receive regular information and training, consistent with the recommendations in the NZX Code, our Synlait Standards Policy and other relevant policies, including Synlait’s Continuous Disclosure Policy, Conflict of Interest Policy, Fraud and Corrupt Conduct Policy, Major and Related Parties Transaction Policy and our Securities Trading Policy. All Synlait policies are available to all employees at all times on the Synlait intranet. Synlait’s Securities Trading Policy summarises the law on insider trading and Synlait’s restrictions for Directors and employees dealing in Synlait shares. The policy introduces a trading prohibition for Directors and certain employees at defined times (“blackout periods”). Companywide reminders are sent out regarding the blackout periods.
Breaches of any policy are taken seriously. We have a Protected Disclosure Policy which enables employees to raise breaches of policy confidentially, if required.
Synlait conducts regular review of its policies, which is managed as part of our Compliance Programme with internal Policy review frequency reported through to the Audit and Risk Committee annually. This allows us to continue to ensure each policy remains fit for purpose.
Principle 2: Board composition and performance
"To ensure an effective board, there should be a balance of independence, skills, knowledge, experience and perspectives."
Board Composition and Information
Synlait’s Board as at 31 July 2024 is made up of seven Directors, with one vacancy to be filled. The Board is actively engaged in a recruitment process to fill the vacant Board appointed Director role. Information on the Director’s profiles can be found on the People page of this website. Synlait’s Board believes in the importance of ensuring that the Board consists of Director’s with a range of skills and experience.
Other information, including information about remuneration, ownership interests, independence, and gender composition of the Board is included in our annual report.
Attendance at Board and Committee meetings in the year to 31 July 2024 was as follows¹:
| Director | Board meetings (including out of normal board cycle meetings)¹ | Audit and Risk Committee¹ | People, Environment and Governance Commitee¹ |
|---|---|---|---|
| George Adams (Chair)² | 4/4 | 1/1 | 1/2 |
| Simon Robertson³ | 2/2 | 2/2 | 1/1 |
| Dr John Peno⁴ | 7/8 | ||
| Paul McGilvary | 10/10 | 6/6 | 5/5 |
| Paul Washer | 10/10 | 6/6 | 5/5 |
| Ruibing Liu (Ryan)⁵ | 2/5 | ||
| Hon. Ruth Richardson⁶ | 9/9 | 4/4 | |
| Sihang Yang (Edward) | 10/10 | 4/5 | |
| Yi Zhu (Julia) | 10/10 | 4/6 | |
| Tao Zhang⁷ | 5/5 | ||
| Leon Fung⁸ | 1/1 | 1/1 |
Board Charter
Our Board Charter sets out the roles and responsibilities of the Board. It requires that the Board meet formally at least six times annually and clearly distinguishes between the role of the Board and the role of management. The Board delegates responsibility to the CEO for implementing Synlait’s strategic direction and day-to-day operations, as recorded in our Delegated Authorities Policy. Management provides detailed reports to the Board to keep the Board up to date with key operational activities and other aspects of Synlait’s affairs, including financial performance.
Nomination and appointment of Directors
Our Constitution includes specific governance arrangements permitted by waivers from various rules in the NZX Listing Rules granted by NZX Regulation Limited (“NZ RegCo”).
The minimum number of Directors on Synlait’s Board is three, the maximum is eight. At least two Directors must ordinarily reside in New Zealand and three must be independent. One of Synlait’s shareholders, Bright Dairy Holding Limited, is entitled to appoint four Directors, one of which must ordinarily reside in New Zealand and have local commercial and governance experience appropriate for an NZX listed company.
A Nominations Sub-Committee forms part of the People, Environment and Governance Committee. The Sub-Committee has a majority of independent directors and makes candidate recommendations to the Board. When recommending Directors, the Sub-Committee considers experience, qualifications, character, criminal record, bankruptcy history, judgment, ability to work with others, current Board composition and skill set. Synlait’s Diversity and Inclusion Policy is also considered.
Before any candidate is finally selected, appropriate fit and proper checks are undertaken. Important information about candidates is provided to shareholders in the notice of meeting at which they will vote on the appointment of a new Director.
The Nominations Sub-Committee is satisfied that the current composition of the Board reflects an appropriate range of skill, experience, knowledge, and diversity needed to discharge the Board’s functions and responsibilities to achieve Synlait’s strategic goals.
Agreements with Directors
All Directors enter into an agreement with Synlait outlining their appointment terms, role requirements, including time commitments and remuneration, as well as indemnity and insurance arrangements.
Director training
Our Board commits to a week-long session of organised visits and meetings focused on the business.
In May 2024, our Board spent time across our sites in New Zealand doing a deep dive into the various sites and our business recovery plans. In particular, the Board reviewed and sought to gain a clear understanding Synlait’s current business performance and how this will inform FY25 forward-looking business recovery plans.
FY25 recovery plans were presented for accelerating volume growth (the Advanced Nutrition and Foodservice business units); and optimising performance (the Manufacturing, Improve Quality and Supply Chain functions).
In addition, the Board spent considerable time connecting with Farmer Suppliers and staff as part of broader engagement plans these groups. Several sessions were held where both stakeholder groups had the opportunity to interact with the Board and ask questions.
Assessment of Director, Board and Committee performance
Our Chair conducts an annual review of the Board and each Director. The People, Environment and Governance Committee and Independent Assurance function assists with these performance reviews. An external performance review is conducted every three years. Each year the Audit and Risk Committee and the People, Environment and Governance Committee review their performance against the respective Charter and the recommendations in the Corporate Governance Code.
Independent Directors
Three of our seven Directors are independent. This does not satisfy Recommendation 2.8 of the Corporate Governance Code, which suggests that a majority of our Directors should be independent, but is permitted by a waiver granted by NZX RegCo from the relevant NZX Listing Rule and our Constitution.
Synlait has considered the independence of its three Independent Directors against the definition in the NZX Listing Rules, the table and commentary to Recommendation 2.4 in the Corporate Governance Code and its Board Charter and is satisfied that the relevant Directors are independent.
Independent Chair of Board
Synlait has an Independent Chair. George Adams was appointed as Synlait’s Independent Chair during May 2024.
Diversity and Inclusion Policy
Our Diversity and Inclusion Policy promotes a culture of diversity and inclusiveness, putting in place appropriate strategies and measurable objectives. We aim to achieve three main goals:
- Workforce diversity – employ, develop, and retain more women and Māori.
- Diversity through leadership – empower and equip our leaders to recruit, develop and retain a diverse and competent workforce.
- Workforce inclusion – foster a culture that encourages flexibility and fairness, to enable all employees to realise their potential, and thereby increase employee retention.
To help us meet these goals we have our Mātua (Parental Leave) and our Tāwariwari (Flexible Working) Policies in place.
Our success will be measured against the following as at the end of FY25:
| Measure | Current position at 31 July 2023 - compared to FY22 |
|---|---|
| Reduction of the gender pay gap to ≤ 5% | 13% (17%)⁹ |
| 40-50% of leadership positions (people leaders, supervisors, specialist roles and senior leadership) held by women | 40% (37%) |
| No regretted losses of high potential female employees | 4 (8) |
Synlait’s FY23 Director and Officer composition is set out in the table below. The prior year’s comparison in in brackets.
| Group | Female | Male | Total |
|---|---|---|---|
| Board | 2(3) | 6(5) | 8(8) |
| Officer | 3(2) | 8(7) | 11(9) |
| Total | 5(5) | 14(12) | 19(17) |
Management report to the Board on progress against the Diversity and Inclusion Policy. The Board also conducts an annual compliance assessment of the Policy.
⁹ The 2022 Annual Report used a mean to report Synlait’s progress towards the reduction of the gender pay gap. This year, Synlait have adopted using a median to measure our progress. Accordingly, the FY22 figure has been updated to the median as at 31 July 2022 and a median has been used to assess the progress as at 31 July 2023.
Principle 3: Board Committees
"The Board should use committees where this will enhance its effectiveness in key areas, while still retaining Board responsibility."
Synlait has two Board Committees: the Audit and Risk Committee and the People, Environment and Governance Committee. Their roles and responsibilities are set out in the respective Charters. The Chair of each Committee reports back to the Board at each meeting and makes recommendations, as necessary. Each Committee reviews its performance against its Charter at least once a year.
Synlait considers it has an adequate range of committees for its size.
The membership of Synlait’s Board Committees and Sub-Committees is disclosed on the Investor Centre page of this website. Attendance at Committee meetings has been set out in the table under Principle 2 of this page.
Audit and Risk Committee
As required by the Charter, membership of the Audit and Risk Committee is majority independent and solely non-executive. The committee comprises of an independent Chair and includes members with significant financial experience.
The Committee makes recommendations to the Board on a number of matters including those that may significantly affect the financial condition or affairs of Synlait. It reviews the interim and annual financial statements before release. The Committee also oversees independent assurance, risk management, compliance (legislative and internal policy compliance), tax management, treasury management and sales management.
The CEO, CFO, Head of Legal & Governance, and Senior Independent Assurance, Risk and Compliance Manager have a standing invitation to attend meetings of the Audit and Risk Committee. Other members of Management may attend by invitation only.
People, Environment and Governance Committee and Nominations Sub-Committee
As required by the Charter, membership of the People, Environment and Governance Committee is majority independent. The Chair is an independent director.
This Committee undertakes an overview of human resource (including remuneration), governance and sustainability tasks on behalf of the Board. It has a Nominations Sub-Committee to assist with selection of Board candidates and the nomination and appointment process. The Nominations Sub-Committee is comprised of a majority of independent directors.
The CEO, Director of People & Culture, Head of Legal & Governance, Senior Independent Assurance Risk and Compliance Manager and Director of On-Farm Excellence & Business Sustainability have a standing invitation to attend meetings of the Committee. Other members of Management may attend by invitation only.
Takeover Committee
Synlait’s Takeovers Policy sets out the process to be followed if there is a takeover offer. The Policy records that the Board may establish an independent takeover committee to manage this process.
Principle 4: Reporting and Disclosure
"The Board should demand integrity in financial and non-financial reporting, and in the timeliness and balance of corporate disclosures."
Synlait’s NZX and ASX listings require it to comply with strict reporting and disclosure requirements. Synlait publishes its key Charters, Policies and Standards on the Investor Centre page of this website.
Continuous Disclosure Policy
Our Continuous Disclosure Policy helps employees comply with our reporting and disclosure requirements as a listed company. Everyone is required to be familiar with the Policy and associated procedures. Directors and Management are primarily responsible for compliance with our continuous disclosure obligations.
Financial Reporting
Synlait is committed to ensuring the integrity and timeliness of its financial reporting, and to providing information to shareholders in a timely manner. The Audit and Risk Committee oversees this process. Following review and approval by the Audit and Risk Committee, the complete set of financial statements and related audit report is submitted to the full Board for final approval. Management makes detailed representations to the Board to assist them in their consideration of the draft financial statements.
Synlait’s full and half year financial statements are prepared in accordance with relevant financial standards. Recent full and half year financial statements and investor presentations are available on the Investor Centre page of this website.
Non-Financial Reporting
In FY24 we refreshed our sustainability strategy which aligns to Synlait’s purpose and strategy. We publish a separate sustainability report at the end of each calendar year which meets the disclosure requirements in the NZX Code. As a Climate Reporting Entity (CRE) as defined under the Climate Standards issued by the New Zealand External Reporting Board (XRB), Synlait will be making a climate related disclosure (CRD) in November 2024. The Climate Standards require reporting entities to make annual disclosures covering governance arrangements, risk management, strategies, metrics, and targets for mitigating and adapting to climate change impacts. Sustainability, and the transparent reporting of sustainability measures, are important to Synlait. Preparations were started for this work in previous financial years and the business is in the final stages of preparation, having already worked on qualitative climate risk and opportunity assessments entailing stakeholder mapping, a scope and boundaries workshop, physical and transition risk and opportunity identification, risk assessment workshops, and a materiality analysis of the final risk assessment outputs. Management intends to initially make the disclosure in conjunction with Synlait’s sustainability report and greenhouse gas inventory. In line with the exemption granted by the Financial Markets Authority (FMA) Synlait will not be releasing our climate related disclosure (CRD) as part of our annual report in FY24. As such, an online copy of our CRD will be available at: synlait.com/investors/ no later than 30th November 2024. This is also the location of previous sustainability reports.
Principle 5: Remuneration
"The remuneration of directors and executives should be transparent, fair and reasonable."
Director remuneration
As set out in Synlait’s Strategic Remuneration Policy, the People, Environment and Governance Committee is responsible for reviewing Directors’ remuneration. It obtains an independent review of remuneration and, if a change is proposed, makes that review available to the Board and shareholders, on our Investor Centre page of this website. Shareholders then vote on the proposed Directors’ remuneration at the applicable annual meeting.
Current Directors’ remuneration is set out in the statutory information section of the annual report (document required) and was approved by the shareholders at the 2019 annual meeting.
Remuneration Policy
Our Strategic Remuneration Policy is designed to ensure Synlait meets the strategic policy objective of attracting, rewarding, and retaining staff with the requisite skills and capabilities to ensure successful business outcomes.
Director remuneration is paid by way of Director fees. Employee fixed remuneration comprises a base salary, employer KiwiSaver contributions (for participating employees), and medical insurance.
Synlait does not offer a regular bonus or any other short-term incentive programme. It operates a shadow Long-Term Incentive Scheme (LTI Scheme) which a small group of selected senior employees are invited to join each year. Any benefits from the LTI Scheme are based on company performance rather than individual performance and paid in addition to the market salary and other benefits agreed with participating employees.
In the past financial year, Synlait has made a strategic decision to transition from issuing actual shares to issuing shadow shares as part of our executive remuneration and incentive schemes. This shift is driven by several key factors aimed at aligning our long-term goals with shareholder interests while managing financial stability.
Rationale for the transition:
Issuing shadow shares allows Synlait to offer competitive incentives without diluting existing share holders’ equity. This approach helps maintain the company’s share value and provides greater financial flexibility, especially crucial during periods of financial restructuring and market volatility.
Shadow shares are designed to mirror the value of actual shares, ensuring that executives remain motivated to drive the company’s long-term performance. This alignment is critical as we navigate through challenging market conditions and focus on sustainable growth.
There are two performance hurdles required to be met, relating to total shareholder return (TSR) and earning per share (EPS). Payment of half of the total award is dependent on the TSR target being met, and the remaining half is payable on the EPS target being met. The amount that is paid out in each case is determined by a progressive measurement scale. If our TSR is greater than or equal to the 75th percentile of a peer group over the assessment period, a minimum of 50% of the PSRs will be paid out. The per group comprises the S&P/NZX 50 index companies on the first day of the assessment period. If our EPS over the assessment period equals the Board approved EPS target plus 10%, then a minimum of 50% of the PSR will be paid out. For either performance hurdle to be met, our TSR must be positive over the assessment period.
Chief Executive Officer Remuneration
Remuneration for Synlait’s CEO is recommended by the People , Environment and Governance Committee and approved by the Board. Current CEO remuneration is set out in the statutory information section of our annual report.
Principle 6: Risk Management
"Directors should have a sound understanding of the material risks faced by the issuer and how to manage them. The Board should regularly verify that the issuer has appropriate processes that identify and manage potential and material risks."
Synlait’s risk management framework and risks
Synlait’s risk management framework is aligned to ISO31000:2018 guidelines and is applied across all sites and operations. Synlait operates under a Board approved Risk Management Policy, with supporting procedures and tools to achieve a consistent approach.
At Synlait, risk is everyone’s responsibility. This principle is supported by an integration of proactive risk management processes within key business functions and activities, and reactive incident management processes where remedial actions are based on root cause analysis and robust improvement processes.
The Audit and Risk Committee (a subcommittee of the Board) review and approve Synlait’s risk management framework and key control framework. The Committee is responsible for monitoring Synlait’s risk management profile, and the effectiveness of key risk control activities.
Annually as part of Strategy development Synlait’s Board and Executive consider the risks that may have a direct impact strategy, emerging risks and interconnectivity of risks. Through these Strategic Risk workshops Synlait’s Strategic Risks and Appetite settings for each risk are agreed.
Strategic risks are assigned an Executive Owner responsible for ensuring mitigation strategies are in place and robust maintaining risks at an acceptable level.
Governance is provided through monthly individual ELT reviews on the progress of risk mitigation action plans, monthly ELT collective reporting and deep dive sessions on risk mitigation strategies, quarterly Audit and Risk Committee reporting and annual Board refresh where major changes and emerging risks are discussed.
The following Synlait Strategic Risks and Appetite Statements were approved by the Board on 30 July 2024:
| Risk | Mitigation | Risk Appetite |
|---|---|---|
| Strategic Risk 1: Financial and Liquidity | The risk of failing to effectively maintain Synlait’s financial sustainability, ability to meet its financial obligations and ensure ongoing long term profitability.
Liquidity is a critical risk to be managed to ensure our on-going operations as a company. Accordingly, we have an "averse" risk appetite. Successfully executing our FY24-FY28 Strategy will require us to focus on applying appropriate cost-out measures, careful allocation of working capital and capital expenditure, and increasing demand for Advanced Nutrition and production line utilisation. | Averse |
| Strategic Risk 2: Health, Safety and Wellbeing | A significant people safety incident may result in legal liability, significant costs and damage to reputation and an inability to deliver on our 'people safety' commitments.
Effective health, safety and wellbeing is critical to our people and our reputation. Accordingly, we have an averse appetite towards health, safety and wellbeing, and will not accept inadequate safety, security and health management systems, ineffective supervision, resource allocation, inadequate capability or unsafe environments and practices. We will be particularly focussed on critical health, safety and wellbeing risks that could permanently alter someone’s life or result in a fatality. | Averse |
| Strategic Risk 3: Stakeholder Confidence | Failing to meet stakeholder performance expectations may result in stakeholder dissatisfaction, investor loss, inability to raise capital, loss of farmer confidence, and related support to the Company's strategy.
Maintaining the confidence of our major stakeholders, farmers and customers is critical and accordingly we have an averse appetite towards this risk. This reflects the importance of stakeholder support to our strategy, as well as our continued ambition to align their expectations into our way forward. This appetite setting reflects how critical our stakeholders are to our strategy, as well as our continued ambition to align their expectations into our way forward. | Averse |
| Strategic Risk 4: Trading Risk | Failing to manage our commodity ingredients sales in line with NPM may result in the revenue generated by the commodity ingredients sales being insufficient to cover milk price. This would in turn require Synlait to cover the COGS through other means.
Trading risk is a critical risk as it impacts our ability to match NZ milk price without the support of other funding options. We are risk averse across all these factors and seek to avoid speculation on the up / downsides. | Averse |
| Strategic Risk 5: Customer Delivery and Contract Compliance | Inability to meet contractual obligations and customer delivery expectations may result in the inability to service current customers and meet delivery expectations, attract new customers, meet contractual obligations, and maintain compliance across the entire value chain, from procurement through testing to product delivery.
Effective management of customer delivery and contract compliance risks are key for maintaining existing customer relationships, attracting new customers, and ensuring adherence to contractual obligations throughout our value chain. We therefore have a cautious risk appetite for a failure in our ability to meet contractual requirements and customer delivery expectations, particularly in areas of food safety and quality. | Cautious |
| Strategic Risk 6: Food Safety, Quality and Traceability | A significant food safety and quality or regulatory compliance issue may result in a product recall, financial penalties and costs, impact business performance, imposition of additional food safety, quality and traceability measures, requirements and regulatory obligations, increased time to market and costs, inability to meet consistent, required nutritional product profiles, and reputational impacts.
We have an overall cautious appetite for this risk however in each area we have an averse risk appetite for any food safety or food traceability risk across our entire product line, as consumer safety is paramount to our reputation and viability as a company.
We have a cautious risk appetite for quality issues across our infant formula and adult nutritional product lines. We have a neutral risk appetite for quality issues across our other product lines (Ingredients, Powders and Creams). | Cautious |
| Strategic Risk 7: Climate Change and ESG | Failing to meet Climate Change / ESG regulations (including reducing greenhouse gas emissions) may result in an inability to deliver on the Climate Change / ESG promises and commitments made to shareholders and stakeholders, additional compliance and organisational costs and negative reputational impacts.
We have a cautious risk appetite to adaptation and mitigation, as we recognise that these activities are necessary to protect our operations from a changing climate. However, we are conscious of the operational and financial impacts of our efforts in this space, and we are working to refresh our sustainability strategy to align it to our revised targets and metrics. | Cautious |
| Strategic Risk 8: Cyber and Digital Resilience | Digital interruption / cyber security event, internal breach or other system failure across our interconnected production lines may result in theft, misappropriation of critical assets and/or personal data and disruption to core business operations including manufacturing and supply chain. This could also result in significant customer, financial, reputational and/or regulatory impact for Synlait.
This risk is heightened because of the ever-evolving nature of cyber security threats. In order to effectively deliver on our strategic objectives and maintain pace with the current market environment in the near-term, we have a cautious risk appetite towards adopting further digital resiliency projects or enhanced cyber security resilience measures. | Cautious |
| Strategic Risk 9: Milk Supply and Farmer Relationships | Non-optimal farmer relationships and farm gate pricing arrangements may result in inability to retain farmer supply contracts and milk supply quantities, inability to maximise plant production schedules, reduced ability to meet contractual arrangements and customer expectations, negatively impacting financial and reputational goals.
Milk supply is critical to our strategy and the ongoing longer term success of our Company. Given the current pressures on the organisation, particularly liquidity, risk appetite in this area is cautious in the short term, as we work to navigate our near-term challenges. We will prioritise developing a robust relationship plan to engage with our top farmer suppliers. | Cautious |
| Strategic Risk 10: Operational Stability and Resiliency | Failing to maintain operational stability and resilience may result in reduced optimisation of manufacturing plants, delays to production and customer delivery, increased costs, trade-offs to meet customer demands, and potential financial losses.
Operational stability is a foundational element to our strategy and key to optimising the strong investments we have historically made. Our neutral risk appetite reflects our commitment and long-term investments to strategies to improve operational stability whilst managing liquidity risks. We recognise that additional immediate investment may not adequately reduce this risk in the short-term. | Neutral |
| Strategic Risk 11: People Capability, Capacity and Engagement | Failure to attract, develop and retain leadership and talent may result in an inability to achieve growth ambitions and execute effectively and to maintain a positive culture of excellence, additional losses due to our committed workforce, cost out pressures, operational inefficiencies and increased financial costs.
We recognise the significance of having a skilled and engaged workforce to deliver on our long-term FY24-FY28 Strategic Plan initiatives. Whilst our aim is to get the right talent, capacity, capability and culture at our Company, our receptive appetite reflects our ‘sinking lid’ approach to talent retention, and the significant liquidity concerns impacting our ability to implement our long-term strategic initiatives. | Receptive |
| Strategic Risk 12: Innovation, New Sectors and Customer Preferences | Changing consumer preferences for dairy-free alternatives and a rapidly aging population in target markets forcing a transition away from core products may result in reduced capacity and capability to establish a sustainable new product development pipeline, inability to enter new markets and introduce new products that align with changing customer preferences, inability to compete, and subsequent negative impacts on financial and reputational goals.
While acknowledging the strategic opportunities from innovation, new sectors, and evolving consumer preferences, we currently have a receptive risk appetite in this area due to liquidity constraints. This reflects a need to judiciously balance investments in targeted innovation against financial limitations. We will prioritise opportunities closely aligned with our core strengths that present a clear return while deferring or scaling back higher-risk, capital-intensive initiatives until our liquidity position improves. | Receptive |
| Strategic Risk 13: Market, Consumer and Category Concentration | Over reliance on a limited number of product lines, customers, markets, and geographies (i.e. no one product, customer or geography being greater than 30%) may result in increased vulnerability to market dynamics, inability to respond to changes in customer requirements, regulatory landscapes, and competitive pressures, and negatively impacting financial stability and future growth ambitions.
In the medium-term, we have a receptive risk appetite towards our current market, consumer and category concentration. We acknowledge that a significant diversification (as highlighted in our FY24 – FY28 Strategy) may not be a short-term reality, and may potentially take 7-8 years to fully materialise as we work to focus on customer needs and diversification of existing categories. | Receptive |
Health, Safety and Wellbeing Risks
We are into our second year of our journey to Synlait Safe, our programme designed to engage and inspire safer and healthier work practices and thereby achieve justifiably higher standards of performance to ensure we can all work safe, to arrive home safely.
This year we pivoted from our original plan for delivery of our cognitive behavioural safety programme, bringing it completely in-house and building internal capability. We developed and implemented a refreshed employee engagement programme called Synlait Safe Mindsets. The content includes key concepts to challenge inherent beliefs our team members may have around safety and wellbeing. It then introduces them to factors which impact on our decision making, provides everyone with an understanding of our critical risks (life-altering or fatality events) and empowers employees with tools to assist them with more conscious thinking to ensure they achieve our goal: Work Safe | Home Safely. Leaders are also introduced to key competencies which assist in the development of a more mature safety culture. These include role modelling expected behaviours, challenging levels of performance, to improving communication.
This was one of three priorities achieved for the year. Over 500 leaders and frontline team members from across Synlait attended the training. Our objective is to ensure all employees have participated in the training by December 2024, with 65% of all employees having completed the training as at 31 July 2024.
The second objective was to implement and embed our Synlait Safe critical risk management framework, which includes engaging leaders to conduct critical control checks in the field. The third was to fully resource our Health, Safety & Wellbeing team, thereby ensuring we had the capacity and capability to deploy our strategy across the business.
Our Total Recordable Injury Frequency Rate (TRIFR) for FY24 was 15.0 versus a target of 9.0, which was a stark return to injury rates seen prior to the introduction of our Synlait Safe strategy. While this was not the result we strived for, importantly we saw a marked improvement in the level of event reporting and our perception and understanding of risk potential. This demonstrates a desired shift to a more open, learning culture and error management organisation.
Milk Token Programme
At the start of FY24, we launched the Milk Token reward and recognition programme as part of Synlait Safe. The programme is targeted at all employees, empowering them to reward fellow team members that are seen to be demonstrating helpful attitudes and values reflective of a Synlait Safe culture. The recipient is presented with a certificate (virtual or printed) and a Milk Token that they then deposit into one of three (giant) Milk Cartons, each with a chosen charity. The charity with the most tokens at the end of each quarter receives a donation from Synlait. This process is implemented across all our operating sites.
At the end of each month, an overall winner for each location is selected and a voucher and certificate (Cream of the Crop) is presented to them.
In February 2024, on the back of its successful uptake, the Milk Token programme was extended to encompass and recognise employees for having a Business Owner Mindset and demonstrating Quality behaviours – all contributing to our overall business objectives.
More information on Synlait’s health and safety initiatives is available in the Sustainability Report.
Principle 7: Auditors
"The Board should ensure the quality and independence of the external audit process."
External auditors
As prescribed in the Committee Charter, Synlait’s Audit and Risk Committee plays a key role in Synlait’s relationship with its auditor, and the audit process generally. It is responsible for recommending the appointment of the external auditors to the Board, overseeing the independence and the work of the external auditors; as well as reviewing policies for the provision of non-audit services by the external auditor (including the framework for pre-approval of any such services).
PricewaterhouseCoopers (PwC), the current external auditor for Synlait, were appointed at the 2021 Annual Meeting. The Audit and Risk Committee continues to regularly review and rotate the key audit partner in accordance with the NZX Listing Rules, including maintaining best practice standards by reviewing and rotating not only the partner responsible, but also audit firms.
The Audit and Risk Committee meets regularly with PwC, our external auditor, including meeting without management. Annually, the committee reviews and assesses PwC’s performance through an internal questionnaire. The results, key themes and recommendations are reported to the Board. A representative from PwC will attend Synlait’s annual meeting and is available to answer shareholders’ questions.
PwC confirms their independence from the company to the committee in March and September each year. Non-audit services performed by PwC are closely examined by Management and the Chair of the Audit and Risk Committee prior to engaging PwC for these additional services, to ensure that they do not compromise PwC’s independence.
Independent Assurance
Synlait has a Senior Independent Assurance, Risk and Compliance Manager who facilitates the completion of independent assurance reviews as per the risk based Strategic Independent Assurance Plan (which incorporates the Annual Independent Assurance Plan.
The independent assurance function is independent from management and responsibilities are established and monitored by the Audit and Risk Committee and who approve the Strategic Independent Assurance Plan.
The primary objective of the independent assurance function is to evaluate the adequacy and effectiveness of key processes within Synlait to improve controls, enable continuous improvement and deliver positive business outcomes in pursuit of objectives.
The Strategic Independent Assurance Plan remains relevant and consistent with Synlait’s needs through a flexible approach where significant events, emerging internal and external risks and changes in priorities are considered and addressed in a timely manner.
Principle 8: Shareholder Rights and Relations
"The Board should respect the rights of shareholders and foster relationships with shareholders that encourage them to engage with the issuer."
The Investor Centre on this website is the primary information channel for shareholders. It includes:
- A live share price feed (from the NZX and ASX), historical pricing and trading data.
- Announcements, annual and interim reports, investor presentations, and other news.
- Recordings and transcripts from results or outlook update conference calls.
- Corporate governance documents such as Charters and Policies, and this Corporate Governance Statement.
- Annual meeting materials and recordings.
- An investor calendar.
- Share registry information.
In addition to the above, updates on our activities are posted on our social media channels (LinkedIn, Facebook and Instagram).
Communicating with Synlait
Contact information is on the contacts page of this website. We aim to respond to all enquiries in a timely manner. Shareholders can elect to receive Synlait communications either electronically or via mail. Our share registry, Computershare, manages this process.
Right to vote
Our Constitution, the Companies Act 1993 and the NZX Listing Rules afford shareholders the right to vote on certain matters affecting Synlait. Our shareholders can vote at any meeting of shareholders in person or by using a proxy or representative. On a show of hands, each shareholder attending in person, by proxy or by their representatives has one vote. If a poll is taken, each shareholder attending in person, by proxy or by their representative has one vote per fully paid up share they hold. Postal votes are not permitted unless the Board notifies shareholders otherwise.
Shares Issue
In November 2020 Synlait completed a capital raise by way of private placement and share purchase plan. This was the preferred structure for Synlait to raise capital at the time due to temporary regulatory changes that provided more flexibility in structure allowing Synlait to meet all of its key objectives including allowing almost all existing shareholders the opportunity to achieve at least their pro rata proportion of the capital raise.
Annual meeting
2023
Synlait’s last annual meeting was held on Friday 1 December 2023 at Synlait’s Dunsandel facility. It was a hybrid annual meeting with shareholder participation (voting and questions) in person and online. The Notice of Meeting was released on 1 November 2023. A recording of the meeting is available here. here.
2024
Our 2024 meeting will be held on Wednesday 4 December 2024 in Canterbury. The Notice of Meeting will be released in November 2024. The annual meeting will once again be in a hybrid format to allow shareholders the opportunity to participate in person or online. A recording of the meeting will be made available afterwards on the Investor Centre.
In addition to the above, Synlait held a special shareholder meeting on Thursday 11 July 2024 at its Dunsandel facility. The meeting was to vote on the resolution to approve the proposed entry into a $130 million shareholder loan to be made available to Synlait by Bright Dairy International Investment Limited, a related company of Bright Dairy Holding Limited, Synlait’s largest shareholder. The resolution was approved and Synlait drew down the loan in full to meet the $130 million payment due to its banks on 15 July 2024.
The Notice of Meeting was released on Tuesday 25 June 2024. Synlait notes it is best practice for issuers to have the Notice of Meeting available to shareholders for 20 working days. Despite Synlait’s best efforts, negotiating the cross-border shareholder loan and meeting timeframes to repay Synlait’s bank syndicate, a full 20 working days’ notice was not possible. Given the critical importance of this resolution to Synlait’s future, Synlait elected to shorten the notice period to ensure the vote could take place and the loan be drawn down prior to the 15 July 2024 repayment date.