WMP shareholder payout expected to rise next season

Westland Milk chief executive officer, Toni Brendish

Westland Milk Products today lifted its predicted payout from $6.75 to $7.20 per kilogram of milk solids for next season.

Chairman Pete Morrison said it would be welcomed by shareholders, who were facing a lower payout range of $6.10 to $6.30 for 2017-18.

"We are now seeing improved sales and a better sales outlook; there is a much improved performance from our infant and toddler nutrition (ITN) and UHT plants; and consumer butter has been, and we believe will continue to be, a star performer," Mr Morrison said.

A fortnight ago Fonterra announced an opening forecast price to its farmers of $7 a kilo for the 2018-19 season, and increased its 2017-18 forecast farm gate price by 20c to $6.75 a kilo.

Westland said the major contributors to its 2017-18 payout, which is lower than expected, included the impact of Cyclone Fehi, which was estimated to have cost at least 10c a kilo.

The Lyttelton Port strikes cost also Westland and meant higher freight costs were incurred to get products to customers on time.

While now improved, the quality issues were more extensive than at first thought and took longer than expected to resolve.

However, Mr Morrison said an improved performance was predicted for the 2018-19 season due to several factors, including improved sales.

Westland Milk was starting to see some payback on the capital investments in ITN and UHT capacity. While these had taken longer than expected to start delivering a return to the company, they were now adding value.

"ITN volumes (are) significantly up this year and UHT is close to capacity."

The company's decision to enter the New Zealand retail consumer butter market with its Westgold brand had also paid off, he said.

While Westland had produced butter for export and in large packs for commercial sale in New Zealand, it was only in August 2016 that the co-operative released the butter in consumer-sized packs to New Zealand supermarkets. Since then more than two million packs have been sold.

Westgold is now outselling all other gourmet butters in New Zealand combined, and is starting to reach sale levels comparative with more established brands.

Westland previously reported it was costing it more to process its 'bucket of milk' than comparable companies.

Mr Morrison said that was partly due to quality issues in the plant at Hokitika.

This had improved and that meant less cost.

"We are also benefiting, especially in just the last few months, from finally having a complete executive leadership team in place."

Chief executive Toni Brendish has been in the role for 20 months.

- Janna Sherman of the Hokitika Guardian

Greymouth Star