Friday, 23 October 2015 10:14

Co-op’s outlook positive despite poor season

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Despite a poor 2014-15 season, Westland Milk Products is in a sound financial position and well positioned to return higher payouts to shareholders in the medium to long term, says chief executive Rod Quin.

The country's second biggest dairy cooperative, paid out $4.85/kgMS to its shareholders last season; retaining 10c/kgMS.

Quin says that in spite of the state of the global dairy market and the consequent reduction in revenue, the company has assets of more than $538 million and is in a sound position. He says Westland's investment in added-value plant and technology in the last few years is already reducing Westland's reliance on the highly volatile bulk commodities market.

Income from nutritional products is already adding significantly to shareholder returns, with nearly 20 cents of the 2014-15 payout from this source.

"We expect an increasing, and more profitable, component of Westland's revenue to come from added-value products as our capital investment in new plant comes on line," says Quin.

He says that the 2014–15 season was a blunt reminder that dairy commodity cycles are becoming shorter, with even more extreme price volatility.

"The global effects felt by the removal of milk production quotas throughout the EU, ongoing milk growth in the USA, continued sanctions against Russia, and softer demand from China, have been major factors defining the season. These have resulted in significant declines in dairy commodity prices, and reinforced the need for Westland Milk Products to continue its strategy to deliver higher returns through its focus on growing nutritional products, foodservice and retail brands.

"With revenue of NZ$639 million and volume of 123,084 tonnes, Westland continues to be a major regional economic success, delivering an industry-competitive payout of $4.95/kgMS before retentions.

"We have built on the strong historical platforms of quality commodity production with increased value-added capacity, culminating this year in the construction of the new infant nutrition plant (Dryer 7) in Hokitika, and the UHT facility under construction in Rolleston. The company's capital investment has been complemented with continued investment in its skills base to ensure it has capable and well-trained staff to deliver these new products and the highest return to shareholders."

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