The Synlait Milk Ltd (ASX: SM1) share price is in focus after announcing it plans to restructure. What can A2 Milk Company Ltd (ASX: A2M) shareholders learn?
Synlait plans for a restructuring
Synlait announced that it has told staff it has started a consultation to update its organisational structure.
The proposed changes are designed to align leadership and resourcing around key business units, being nutritionals, ingredients and liquids. It will also remove “unhelpful” hierarchy from the organisation to ensure staff have the information, resources and freedom to act as they need to, so that they can work their best.
This restructuring would see Synlait’s overall headcount reducing by around 15% and lead to potential annual savings of between $10 million to $12 million.
Synlait CEO John Penno said:
“Synlait has been through a lot of change over the last 12 months. This means some areas are now over resourced, and some areas are under resourced. We need to review and reset the structure of our business to match our current goals to be successful.
“As part of this, we are also on a journey to transform our culture. We need to build teams that are working together with clear roles and responsibilities, and the systems needed to chase the growth we are looking to achieve. This is not just a cost out exercise, it is a complete reset of how we operate as a business.”
Synlait is discussing these proposed changes with impacted staff and union representatives. This will take place over the next two weeks.
What can A2 Milk shareholders take from this?
It has been a very difficult time for Synlait over the last year. Profit and expectations have been falling. That’s why the Synlait share price is down 46% in the last 12 months.
Until demand for Synlait’s services changes, it can’t really do much on the revenue side of the business. But reducing costs is probably the best way to go. For most businesses, wages are one of the main expenses. Reducing its staffing costs is difficult for those involved, but seemingly necessary.
The Synlait share price and A2 Milk share price may be opportunities if they can turn things around. But there hasn’t been much evidence of that possibility yet- Chinese and daigou demand seem to have shifted.
I’ve got my eyes on other ASX growth shares for now.
