Westland Milk Products settles on $3.87 for 2015-16
28 September 2016
Westland Milk Products settles on $3.87 for the 2015-16 season
Westland Milk Products, New Zealand’s second biggest dairy co-operative, confirmed today that its final net average cash payout to suppliers for the 2015-16 season will be $3.87 per kilo of milk solids (KGms).
Chairman Matt Regan said the payout will be below the breakeven point for most farmers, but the news will not be unexpected.
“We have been predicting for the whole season that 2015-16 was going to be a tough one for farmers, with our recent cash forecasts in the $3.80 to $3.90 range.
“We did what we could to maintain farmers’ cash flows by starting the season with a higher advance rate of $3.80 per kgMS and holding this throughout. This ensured our focus was on cash-flow management and delivered as much cash as possible into the hands of shareholders.”
O’Regan said the reasons for 2015-16 lower payout season have been well canvassed; global over supply exacerbated by European farmers lifting production after milk subsidies were cut, and the persistently high New Zealand dollar.
“All of this has resulted in most dairy farmers returning to a largely pasture-based production model, reducing if not eliminating bought-in feed. Many of our shareholders have confirmed they have cut their spending by some 20-30% yet maintained milk production at 97% versus the previous season, a testament to their farming skills.”
The 2015–16 season further reinforces the message that for dairy companies such as Westland to prosper a significant portion of their sales and margins will need to come from value added products, O’Regan said.
“The demand for quality nutritional dairy based products will continue to grow as the burgeoning middle class consumers across Asia look for sources of quality nutrition. It is within these consumer markets that Westland must find niches for our products and brands.”
O’Regan said this week’s board meeting also considered the forecast for the 2016-17 season and the advance rates payable. Westland is forecasting a cash payout range for 2016-17 of $4.55 – $4.95 per KGms with an advance payout rate of $3.80 per KGms from September through to June.
“The board recognises the market is moving but, given the analysis around potential pricing volatility, we remain cautious,” O’Regan said. “The advance rate pricing reflects our commitment to supporting our shareholders and good cash-flow management by the co-operative.”