Westland acknowledges payout ‘not competitive’
WESTLAND Milk Products has held back profits to give farmers a final season net payout of $6.07 a kilo of milk solids, which it acknowledges is ‘‘not competitive’’.
The payout is $6.12 a kilo, less a 5c retention for operating costs.
The company has lowered its predicted payout for the current 201819 season from $6.90 to $6.50.
Chairman Peter Morrison said ‘‘a substantial number’’ of shareholders would receive an additional premium of 4.4c a kilo for providing winter milk for UHT
production and supplying colostrum above the 201718 net.
Mr Morrison said Westland had achieved a $3.3 million profit before tax by holding back 5c a kilo, to keep the cooperative solvent.
This was essential ‘‘to ensure a strong balance sheet’’ and leave options for capital expenditure to drive growth.
The board acknowledged the payout was not competitive and at the lower end.
External factors had partly driven lower sales than expected, with production and processing targets for the year also not met.
‘‘This year’s payout was at the lower end of our range and was affected by global commodity prices, the impact of Cyclone Fehi, and a strike at the Port of Lyttelton,’’ Mr Morrison said.
‘‘Top line sales were not as good as they could have been, but we are seeing improvements.’’
A new sales team was in place with the benefit of improved processes.
The board would update shareholders on December 5 about the cooperative capital structure review ordered in response to ‘‘high debt and limited financial flexibility issues’’.
Accelerating Westland’s strategic business plan to drive better longterm returns and value remained the priority.
Mr Morrison said the revised downward payout prediction for 201819 was in line with the international fall in butter pricing, and with other milk processors.
Chief executive Toni Brendish said the company had made performance improvements in the past year in ‘‘right first time’’ manufacturing, and process and efficiency improvements.
Further changes to internal systems and processes would continue to help improve performance and better outcomes in the coming year.
Ms Brendish said they were more confident of achieving a competitive payout for 201819.