Westland Milk expects job losses after review

Westland Milk Products, New Zealand's second biggest dairy co-operative after Fonterra, said staff redundancies were likely after the completion of a review.

The review, which covers the group - Westland Milk Products, Westland Shanghai and yoghurt subsidiary EasiYo - follows last year's net loss of $14.5 million, which prompted a board room and management shakeup. All up, the group employs 674 people.

Hokitika-based Westland said the review was part of a programme to gain efficiencies and reduce costs "to help restore the company to an industry competitive position and provide shareholders with sustainable returns".

"Current payout predictions, while higher than for the last two seasons, are still not where our shareholders need them to be and, for some, will still not be sustainable," Westland chief executive Toni Brendish said in a statement. "We need to get our group back to returning top value to shareholders," she said.

As it stands, Westland Milk's current farmgate milk price sits at $5.50-to-$5.90/kg of milksolids.

The review was likely to result in some staff redundancies, but Brendish said she would not speculate on how many, or what positions might be affected, until it was completed at the end of this month.

"Westland Group has the capital investment, technical expertise, quality products and resources to recover from last year's loss and get back to paying shareholders a competitive payout," Brendish said. "But our current structure, including staff roles, is not set up in the best way to deliver the results we want to achieve," she said.

Westland Milk chairman Matt O'Regan said last year the co-op had performed poorly.

O'Regan told about 150 shareholders at the co-operative's annual meeting in December that Westland's low payout for 2015/6 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.

In stepping down as chairman, O'Regan 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 support of the board.

Chief executive Rod Quin and chief financial officer Kim Wallace left the co-op last year. Brendish, who had served as a senior executive with the French multinational food group, Danone, replaced Quin in September.

Shareholders were told at last year's annual meeting that 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.

O'Regan said the poor result was due to a higher cost structure in the business - "necessary to support our value-added strategies" - combined with lower than forecast sales of these products due to a mix of commissioning issues and rapidly changing markets.

Revenue fell by $51m to $588m in the year to July 31, mainly due to international dairy market prices remaining weak as a result of continued global over supply.

In a separate statement, Westland Milk said a director, Sven Koops, had resigned from the board for personal reasons.