Westland Milk products revises payout prediction downward
A continuing global oversupply of dairy products and the impact of a relatively high New Zealand dollar have seen
Westland Milk Products reduce its predicted pay-out for the 2014/15 season by 40 cents per kilo of milk solids (kgMS).
Chairman Matt O’Regan advised shareholders yesterday that Westland’s predicted pay-out was now at $5 to $5.40 per kgMS.
Advance payments to shareholders will also be adjusted to reflect the lower dairy prices and, therefore, the lower cash
flows into the business.
“This will be unwelcome news for shareholders, but not unexpected,” O’Regan says. “At our October shareholder meetings
we warned suppliers that the high level of in-market stocks held by dairy customers was producing downward pressure on
prices, especially in the area of bulk milk powders where the majority of our business is still conducted. Farmers will
have also noted that bank and industry commentators have widely predicted this continued downward pressure on pay-outs
throughout the industry.”
O’Regan said that the inventory position for many of New Zealand’s dairy customers is a reflection of some overstocking
earlier in the year following supply concerns due to drought, food safety and regulatory changes.
“These concerns are not significant at present and in-market inventory is slowly being consumed. But customers are
generally comfortable with their inventory positions into the first quarter 2015, so we do not expect a sudden uplift in
demand.
“The lesson from this,” O’Regan noted, “is that Westland’s drive to produce more value added products – such as our move
into base infant formula powders and our recent announcement of an investment in a UHT milk plant – is the right
direction to take so we are less reliant on the highly volatile commodity markets in future.”
O’Regan said the pay-out will undoubtedly be a challenge for many farmers and budgets will be tight. The company had
systems and processes in place to offer every support it can to shareholders who might struggle financially, he said.
ENDS