On September 28, 2025, Bright Dairy & Food Co.,Ltd. announced a decisive asset divestment as its subsidiary New Zealand Synlait Milk Ltd. agreed to sell core North Island assets to Abbott New Zealand for $170 million USD (approximately 1.21 billion yuan). The transaction requires approval from Synlait's shareholders and New Zealand's Overseas Investment Office (OIO), with completion expected by April 2026, subject to foreign exchange fluctuations and regulatory uncertainties.
**Premium Assets on the Block**
The assets being sold represent Synlait's crown jewels, including the Pokeno nutritional powder facility completed in 2020 with an annual capacity of 40,000 tons (within a 150-kilometer fresh milk transport radius), RPD blending and canning production lines, and JerryGreen storage facilities. As of end-2024, these assets carried a net book value of NZ$282 million and were appraised at NZ$285 million.
Synlait once embodied Bright Dairy's global supply chain ambitions. Acquired in 2010 for 421 million yuan with a 51% stake, the company was subsequently listed in New Zealand and Australia. Bright Dairy's shareholding has since increased to 65.25%, marking the end of a 15-year overseas investment journey with the disposal of core assets.
**Triple Pressures Force Strategic Retreat**
This asset disposal reflects inevitable cost-cutting under mounting pressures rather than an opportunistic decision. Synlait's deteriorating financial performance has been alarming, with net losses of 40 million yuan in 2021, followed by a brief 28 million yuan profit in 2022, then steep losses of 296 million yuan in 2023 and 450 million yuan in 2024 - totaling 758 million yuan in cumulative losses over four years.
To sustain the subsidiary, Bright Dairy injected over 1.5 billion yuan in 2024 alone: providing a NZ$130 million loan in June (approximately 561 million yuan), followed by a NZ$185 million capital injection through rights offering in October, alongside Synlait's own NZ$500 million syndicated credit facility.
Asset impairments have directly eroded profits, with Bright Dairy recognizing 541 million yuan in Synlait-related write-downs from 2022-2024. As of June 2025, Synlait occupied nearly 7 billion yuan of Bright Dairy's overseas assets, representing 30% of total assets and becoming an unsustainable burden.
The North Island assets being sold are the core loss-makers. Despite the Pokeno facility being touted as the "most advanced nutritional powder base," it still recorded a NZ$20 million EBIT loss in fiscal 2025, primarily due to underutilized capacity. This was exacerbated by a 12.3% year-on-year decline in fresh milk prices in the main production province in March 2025, with industry loss rates exceeding 90% and daily raw milk oversupply of 11,000 tons, creating a fatal mismatch between high fixed costs and low output.
Adding to the challenges, Synlait's crucial contract manufacturing relationship with a2 Milk Company significantly contracted following their August 2024 settlement agreement, which terminated exclusive infant formula operating rights from January 2025, further aggravating capacity utilization issues.
Meanwhile, Bright Dairy's core business has struggled to support overseas operations, with revenues declining for three consecutive years since 2021. In the first half of 2025, revenue fell 1.9% to 12.47 billion yuan, while net profit attributable to shareholders dropped 22.53% to 217 million yuan.
More concerning is the deteriorating cash generation from core operations. Non-GAAP net profit in 2024 was only 170 million yuan, down 67.48% year-on-year. Of the 552 million yuan in non-recurring gains, 411 million yuan came from land acquisition compensation, accounting for 56.9% of the annual net profit of 722 million yuan.
The gap with industry leaders Yili and Mengniu continues to widen, with Mengniu's first-half 2025 revenue of 41.57 billion yuan representing 3.3 times that of Bright Dairy.
**Strategic Implications and Market Impact**
For Bright Dairy, this transaction provides immediate financial relief, with the 1.21 billion yuan proceeds primarily designated for Synlait debt repayment, expected to improve Synlait's net profit by NZ$10-15 million in fiscal 2026 while reducing interest expenses. This creates conditions for focusing on its "fresh strategy" - Huatai Securities notes that Bright Dairy is accelerating nationwide expansion of chilled dairy products, with gross margin improvements expected once the raw milk cycle stabilizes.
However, risks remain as the transaction premium is limited and covers only 27% of Synlait's debt burden. Should regulatory approval face obstacles, liquidity pressures will persist.
For Synlait, the asset sale represents a critical step toward "eliminating losses and achieving profitability." The board characterized this as a core measure to "emerge from difficulties." While divesting loss-making assets allows focus on core South Island operations, losing the Pokeno facility weakens competitiveness in premium nutritional powder segments, and combined with reduced a2 contract manufacturing, revenue growth may further decelerate.
Abbott's acquisition strategy carries deeper implications. As a global nutrition giant established in 1888 with operations across four business segments in over 160 countries and 114,000 employees worldwide, Abbott gains access to premium New Zealand milk sources and advanced production capacity through this acquisition, potentially strengthening its infant formula supply to China - a market where it directly competes with Bright Dairy. Industry analysts suggest Abbott may leverage local production to reduce costs, intensifying competition in China's premium infant formula market.
For China's dairy industry, this transaction reflects broader reconsiderations of overseas acquisitions. Bright Dairy's 2010 "overseas expansion flagship" ultimately concluding with asset disposal contrasts with Yili and Mengniu's "organic growth plus strategic acquisition" approaches, highlighting that international expansion requires matching operational capabilities.
**Conclusion: Recovery Test After Damage Control**
The $170 million asset sale represents Bright Dairy's "damage control reform" under internal and external pressures. While providing short-term financial relief, reversing the company's lagging position depends on core business recovery. Bright Dairy set targets of 26.2 billion yuan in revenue and 339 million yuan in net profit for 2025, currently achieving only 47.6% and 64% respectively.
If chilled dairy expansion falls short of expectations and dependence on non-recurring gains persists, this "amputation" may only mark the beginning of a prolonged self-rescue effort.
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