1 Dec 2016

Westland Milk suppliers consider options

3:09 pm on 1 December 2016

A dairy farmer who supplies Westland Milk Products says Canterbury suppliers might jump ship because the co-operative is not paying enough.

The dairy co-operative has lifted its forecast milk price to a range of $5.50 to $5.90 per kilogram of milk solids.

It ended the previous season on a payout of $3.88 - one of the lowest in New Zealand.

Westland lost $51 million in revenue last season and chief executive Rod Quin resigned, followed by chairman Matt O'Regan, who will leave in March.

Fonterra and Synlait are both forecasting a milk price of $6 kg/ms for the current season.

Kurt Harmer, who milks 1000 cows in mid Canterbury for Westland, said he was fed up with the co-operative.

"We've been supplying Westland since they first came into Canterbury and there's been a lot of talk about them matching Fonterra, but they've just never really stumped up to be fair.

"They seem to be more reactive rather than proactive. They put the UHT plant in Rolleston, but it seemed to just be following everyone else."

Westland Milk supplier Kurt Harmer

Westland Milk supplier Kurt Harmer says he is fed up with the co-operative. Photo: Supplied

Westland appeared to be hamstrung by its share price, said Mr Harmer.

"They've always been worried about that, it's only $1.50 but they've never been able to get the capital to do the value-added things that they want to do."

Mr Harmer said other co-operatives were looking appealing.

"In Canterbury we've got a lot of choice, we've got Synlait and obviously we can go to Fonterra and quite easily to MyMilk.

"Canterbury suppliers aren't going to hang on for much longer, it's just costing them too much money. On this payout after it's been so low, it's not just taking the cream off the top - it really hurts if we do come in considerably under Fonterra."

Mr Harmer said he had been loyal to Westland, but it was wearing him down.

"We could have jumped ship earlier. It just seems to be the same thing over and over, the promises just don't seem to be happening, they can't seem to get it right."

Mr Harmer said he would see what came out of the AGM today and after Christmas, when it would be clearer where the payout would sit. He would then decide whether to stay with Westland or leave for greener pastures, he said.

Westland chief executive Toni Brendish said she hoped the annual meeting today would reassure farmers that the business was doing well.

"Shareholders are looking for Westland to improve. What we have and what we're going to share with our shareholders today is programmes that are going to drive greater efficiency in the business. Programmes that focus on premium products that deliver higher margins and therefore higher payouts.

"I expect that we will become increasingly more competitive as those efficiencies and the premuim products really start to take hold."

Ms Brendish said the recent forecast of $5.50 to $5.90kg/ms was overly cautious, but reflected the volatile market.

Westland supplier Chris Staples - a 50/50 sharemilker milking nearly 400 cows near the Franz Jospeh Glacier - said he did not have any option except Westland for his milk.

Chris Staples' dairy farm near the Franz Joseph Glacier.

Chris Staples' dairy farm near the Franz Joseph Glacier. Photo: Supplied

"Where we are we can't really supply anyone else, so our hands are tied in that regard. As long as the payout is moving up and they hold around that $6kg/ms people should be pretty happy with that."

Mr Staples said it would be interesting to hear what the board had to say at the AGM today about Westland's poor performance last season.

"The board will have a few questions to answer today. I looked over the annual report (from the 2015/16 season) and it seems like a lot of costs have gone up at the same time milk production has gone up - so you'd think those costs would have been diluted more.

"Salaries within the company seem to have gone up quite a bit."

Mr O'Regan, the retiring chair of Westland Milk Products, has admitted that the co-operative failed to deliver a competitive payout last season.

Mr O'Regan told 150 shareholders that while the company's business strategy was sound, it's delivery had been poor.

He acknowledged that changes were needed and during the meeting a shareholder resolution for a complete review of the board and its governance and performance was passed almost unanimously, with the full support of the board.

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