New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<ul><li>Following on from Synlait Milk's (SML) material FY23 NPAT downgrade on 17 March 2023, the 1H23 result showed (1) its opex base is much higher than expected (and unlikely to reverse near-term), and (2) gearing remains very elevated.</li><li>The result reinforced external transparency on key drivers is low, and the high degree of operating leverage within the business which is placing pressure on Nutritionals margins.</li><li>Valuation is undemanding, however, we require evidence of strategy execution to gain confidence in SML's earnings and returns trajectory (including growth beyond the recovery phase).</li></ul>

Following on from Synlait Milk's (SML) material FY23 NPAT downgrade on 17 March 2023, the 1H23 result showed (1) its opex base is much higher than expected (and unlikely to reverse near-term), and (2) gearing remains very elevated.The result reinforced external transparency on key drivers is low, and the high degree of operating leverage within the business which is placing pressure on Nutritionals margins.Valuation is undemanding, however, we require evidence of strategy execution to gain confidence in SML's earnings and returns trajectory (including growth beyond the recovery phase).

Synlait Milk: 1H23 Result — Curdling Continues