Open Country's revenue tops $1 billion but profit slips

Profit at Open Country was $23 million in the year ended September 30 from about $62m a year earlier. Picture / Paul Estcourt

Open Country Dairy, New Zealand's second-largest milk processor, generated more than $1 billion of revenue last year but payments for milk rose faster than receipts from customers and profit fell.

Profit was $23 million in the year ended September 30 from about $62m a year earlier, its accounts show. Sales rose 34 per cent to $1.1b while cost of sales gained about 44 per cent.

Open Country did not disclose volume figures in its public annual accounts but chair Laurie Margrain said it was up on a year ago.

"We have more market share, more farmers supplying us," he said. "We've got more of the market than a year ago and hugely more than 10 years ago."

You've got to be competitive on the price you pay for milk.

Laurie Margrain, chair Open Country

Open Country is 76.6 per cent owned by diversified agribusiness Talley's Group, slightly up on a year earlier and reflecting a share sale to Talley's by a small shareholder. The dairy company is forecasting a milk price payout for the current season of $6.25-$6.55 per kg of milksolids. That compares with Fonterra Cooperative Group's $6.40/kg. Synlait Milk's forecast is $6.50/kg.

"You've got to be competitive on the price you pay for milk," Margrain said. He added that Open Country "has a significant list of farmers who would supply us if we had the capacity."

He says global supply and demand are broadly in balance currently.

The accounts show the importance of Olam International, the second-largest shareholder with a 15 per cent stake, as a customer. It accounts for almost all of the $231m of related party sales in the latest year.

Open Country didn't pay a dividend.

"We continue to retain all earnings and re-invest in the business," Margrain said. "We're the most lowly geared dairy company in New Zealand and we continue to invest in stainless steel."

That includes its seventh dryer, under construction at Horotiu.

Founded in 2001 as a rival to dairy giant Fonterra, Open Country's first Waharoa cheese factory started production in 2004 and the company has since expanded throughout the country, building factories in Southland and Whanganui to enable it to source milk from the country's largest dairying regions.

In its early stages, the company's focus was on producing commodity products such as whole milk powder, however in recent times it has ramped up production of higher value products.