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November 26, 2014

 

New Zealand's Westland Milk announces reduced pay-out for 2014-15 season

 
 

Shareholders of the New Zealand co-operative dairy company Westland Milk Products were advised on Wednesday it was likely their pay-out for the 2014-15 season would be reduced by 40 cents per kilo of milk solids (kgMS) because of the continuing global oversupply of dairy products and the impact of a relatively high New Zealand dollar.

 

Chairman Matt O'Regan said Westland's predicted pay-out was now at $5 to $5.40 per kgMS, adding advance payments to shareholders would 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 said. "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".

 

He added that bank and industry commentators had "widely predicted this continued downward pressure on pay-outs throughout the industry".

 

O'Regan said the pay-out would be a challenge for many farmers and that budgets would be tight. He gave the assurance the company had systems and processes in place to offer support to shareholders who might struggle financially.

 

He noted that the inventory position for many of New Zealand's dairy customers was 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", he said.

 

"The lesson from this", O'Regan added, "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"

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