Westland Milk shareholders approve plans to shrink board

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Westland Milk Products shareholders have voted in favour of a proposal to shrink the dairy cooperative's board and overhaul the selection process for new directors.

Shareholders voted 93.5 per cent in favour of the changes at a special meeting in Hokitika today. As a result, the board will shrink to eight from 11 and those elected by shareholders will reduce to five from eight. Tne remaining three will be independent directors chosen for their competence and suitability via a transparent process, chairman Pete Morrison said in a statement.

The governance overhaul comes after a review of the company that was sought by shareholders at last year's annual meeting following criticism of the then board for its performance. Westland reported a net loss of $14.5 million in the 12 months ended July 31, 2016, as its gross margin fell by about 17 per cent and expenses rose. Its payout for the 2015-16 season of $3.88 per kilogram of milk solids was the lowest of any New Zealand dairy company payout.

Since then Morrison has replaced Matt O'Regan as chair, Toni Brendish has taken over from Rod Quinn as chief executive, a new chief operations officer, Craig Betty, has been appointed and in August Westland named Dorian Devers as chief financial officer.

"The vote today sets Westland up to be a highly performing company that can offer a competitive and sustainable payout to its shareholders," Morrison said.

The changes include a programme to "identify and upskill" potential candidates for the board from among shareholders "so that we can ensure there is a continuing pool of high quality, effective directors available for shareholders to vote onto the board in coming years," he said.

The proposals have some of the elements of Fonterra Cooperative Group's governance review that resulted in a plan to reduce its board to nine from 13. While a majority of Fonterra's farmer-shareholders supported a proposal to shrink the board at the 2015 annual meeting the vote fell short of the 75 per cent required to pass.

Westland is forecasting a payout for the current season of between $6.40 and $6.80 per kilogram of milk solids. Its average cash payout was $5.18/kgMS in 2016/17, which was up from $3.88/kgMS in 2015/16. Fonterra has forecast a 2017/18 payout of of $6.75/kgMS plus earnings per share of 45-to-55 cents, for a total payout of $7.20 to $7.30, before retentions.

Fonterra is New Zealand's biggest business, with revenue of $17.2 billion in 2016. Westland's 2016 sales were $588m, making it the second-largest dairy cooperative.