Big profit turnaround of $120m for China’s Westland Milk

Westland Milk Products' dairy factory in Hokitika.

Westland Milk Products said it had staged a $120 million profit turnaround in 2022, driven by record sales.

The dairy company, which is owned by Chinese dairy giant Inner Mongolia Yili Industrial Group, said its revenue increased 27 per cent year-on-year to a record $1.04 billion, enabling profit of $39 million, or 69 cents per kilo of milk solids.

The result was against the background of milk prices hitting $9.40 per kilogram of milk solids during the year.

Westland continued to pay farmers a 10c premium above the forecast Fonterra price per kilo, contributing $535m to the West Coast and Canterbury economies through milk payments to farmers over 2022.

Chief executive officer Richard Wyeth said the company’s strategy of focusing on high-value product sales, leveraging off the West Coast’s reputation as a source of premium dairy products and ingredients, was paying dividends.

“This is the first time in our company’s 85-year history that we have surpassed the $1 billion dollar revenue mark,” Wyeth said.

“Having the support of Yili has enabled us to invest in our people and the infrastructure needed to increase production and sales of value-added products,” he said.

Yili bought the then financially-troubled Westland Milk for $588m in 2019.

Wyeth said the turnaround in performance was also a result of a well-planned, whole-of-business approach to improve quality, reduce waste, increase sales, improve opportunities for staff and reduce costs of production.

“The biggest contributor to increasing revenue has been our high-value product strategy and, to some extent, high global commodity prices - but right across the business we have focused on doing everything well,” Wyeth said.

The financial performance was well ahead of company projections and Wyeth said he remained optimistic about maintaining momentum and growth for Westland, despite ongoing international inflationary pressures and overall reductions in milk supply across New Zealand.

In 2022, Westland processed an 11 per cent increase in milk solids, year-on-year.

While Westland was able to pay farmers a record price of $9.40/kg in 2022, the recent milk price downgrade and the ongoing impacts of inflation meant Westland would continue to take a cautious approach in managing costs to ensure it could continue to pay a premium for milk.

Following Westland’s acquisition of North Island butter processor Canary in 2022, Canary posted a 28 per cent revenue increase over budget forecasts and increased profit by 129 per cent ahead of budget for the year.

“While ingredient prices are more subdued in 2023, which will impact our revenue, the team in China sees the market being reasonably stable over the coming 12 months with balanced supply and demand, but we are also positioned well in other international markets for future growth,” Wyeth said.