Value-add key to improved returns for shareholders
EMBARGOED AGAINST PUBLICATION until Wednesday 30 September 2015
Value-add key to improved returns for shareholders – Westland Milk Products
Continuing its move into more value-added production is the best strategy to ensure shareholders competitive and sustainable returns Westland Milk Products says, as the co-operative confirmed a company average operating surplus available to shareholders for the 2014-15 season of $4.95 per kilo of milk solids (kgMS), before retentions.
Chief Executive Rod Quin says Westland, like dairy companies globally, has been adversely impacted by the “significantly lower” market prices in the last season, with total group revenue for the financial year 2014-15 down 23 percent on the previous year, at NZ$639 million.
However he says there is room for cautious optimism for an improvement and, accordingly, Westland has increased its forecast payout for the 2015-16 season by 30 cents to $4.90 - $5.30 per kgMS.
“The current market has shown some signs of increasing demand and price recovery,” Quin says. “The key contributors to Westland’s pay-out are the prices for skim milk powder, casein and butter, with a growing contribution from infant and toddler nutrition.”
Quin says Westland, in line with its strategic objective of providing competitive and sustainable returns to shareholders, continues to focus on its nutritional and value-add growth strategy. He noted that the co-operative’s Dryer 7 and UHT projects will both come on line in the 2015-16 season. The retentions of ten cents per kgMS in the 2014-15 season will support this growth plan.
He also noted the contribution to payout from Westland’s colostrum production and from its wholly-owned subsidiary EasiYo.
“The colostrum programme remains an active part of Westland’s product plans. The total return for a colostrum supplier for the 2014-15 season was an average of six cents per kilogram milk solids. Over Westland’s total milk solids of 70 million kilograms this is an average return of three cents per kilogram milk solids. EasiYo’s top line revenue increased 41% to $52.1 million and net profit doubled from last year to deliver a pre-tax return of a five cent contribution to pay-out.”
“I am confident,” Quin concluded, “that the global oversupply is being consumed. However farmers in Europe and the USA are yet to find a new level of milk production and farm profitability. There are risks that need to be considered, but also cautious optimism to balance our views of the market going forward.”