Westland Milk Products chairman Matt O'Regan has owned up to a poor performance from the Hokitika-based co-operative over the last year.
O'Regan told about 150 shareholders at the co-operative's annual meeting that Westland's low payout of $3.62 per kg of milk solids, topped up from equity to a final payout of $3.88 was "beyond disappointing", below break-even point for farmers and represented a failure of Westland's goal to be industry-competitive.
"However, our strategy for growing Westland's capacity to produce value-added products was, and remains, a sound one," he said in speech notes prepared for the annual meeting.
"While the strategy was not at fault, I have to acknowledge that some aspects of its delivery were not up to standard at both managerial and board level," he said.
O'Regan, who will step down as chairman in March next year, acknowledged that changes had to be made.
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.
"Both our CEO (Rod Quin) and CFO (Kim Wallace) have left and (new CEO) Toni Brendish has moved quickly to restructure the senior management team," O'Regan said.
"Toni's vision for the company gives me confidence that we can, and will, put this poor performing period behind us," O'Regan said.
"Westland has the people, the structure and the means to be a top-end supplier of value-added products, which will reduce the effect on our business of the commodity cycle," he said.
O'Regan said that while the company's new value-added assets, its nutritionals dryer and new UHT milk plant, had not delivered the returns they were predicted to in their first period of operation.
However they were still a highly valuable asset for the company that can be utilised to produce greater volumes of value-added product such as infant formula and UHT milk.
Brendish told shareholders company's value-add strategy was correct and that problems with its delivery could be rectified.
"The fact that there are more than 43,000 babies born in China each day is a compelling reason to continue to back Westland's move into producing infant milk powder for the Chinese market," Brendish said.
For the season ahead, Westland has lifted its total operating surplus to a range of $5.50 to $5.90 per kg of milk solids.
This is estimated to produce a net return to shareholders (after retained earnings) of $5.30 to $5.70 per kgMS. The co-operative's previous estimate for the season was a net range of $4.55 to $4.95 per kgMS.
O'Regan said he would stay on until March to give Westland continuity of governance while new Brendish established herself in the role, and allow the board time to identify and plan its future governance needs.
Westland is New Zealand's second biggest co-operative after Fonterra.