29 Sep 2017

'Disappointing' Westland payout despite financial turnaround

11:14 am on 29 September 2017

Westland Milk Products, the country's second largest dairy company, says it's "bitterly disappointed" that it will only pay farmers $5.18 per kilogram of milk solids.

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Photo: 123rf

The company has reported an after-tax profit of $1.5 million on the back of better prices, higher revenue and cost-cutting, after last year's $10m loss.

Revenue was up about 7 percent, while the company's gross margin improved slightly as it slashed its overheads.

It has announced a 2016/17 payout for farmers of $5.18 per kilogram of milk solids compared with $3.80 the year before.

Westland chair Pete Morrison said farmers were told last year that the payout would be less than other dairy companies.

"We're all bitterly disappointed with the result, it affects our farmers, it affects our supply base, and we have to do better.

"We're still not competitive and that's the real issue. We have to have a competitive payout relative to other companies."

There were several changes at Westland in the past year, including the appointment of Toni Brendish as chief executive. In March, long-standing chair Matt O'Regan stepped down from his role.

Mr Morrison said since last year's big financial loss the company had been keeping a closer eye on spending.

"Everything we are doing now is different. Our shareholders are behaving different, our board is behaving different, the management and accountability," he said.

Westland is forecasting a payout of between $6.40 to $6.80 for the coming season, and Mr Morrison said the new team was focused on closing the gap between its payout and the competition's.

"It's the first time that I've felt very positively that we've got a good chance going forward."

Tatua to pay farmers $7.10

The small Waikato dairy company Tatua has confirmed a payout to shareholders of $7.10 per kilogram of milk solids, after 50 cents per kilogram was removed as a pre-tax retention for reinvestment.

That was up 80 cents from the 2015/16 season when it paid $6.30 per kilogram. In that same season Fonterra paid farmers $4.35 to $4.45, including the dividend.

Tatua had a stronger 2016/17 financial year compared to the year before, with an operating revenue of $335m and earnings of $114m.

In the 2015/16 financial year Tatua made an annual operating profit of $99.7m.

The company has about 120 suppliers and said milk solid production for the season dropped by 600,000 kilograms to 15 million kilograms, reflecting last year's wet spring.

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