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Press Releases Westland Milk Products predicts payout of $6.75 to $7.20 for 2018-19 season

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Westland Milk Products, New Zealand’s second biggest dairy co-operative, has announced a predicted payout range for its shareholder suppliers of $6.75 to $7.20 per kilo of milk solids (kgMS) for the 2018-19 season.

The co-operative’s current prediction for 2017-18 season is $6.10 to $6.30 per kgMS.

Chairman Pete Morrison said today that there were several key factors in the prediction for an improved performance in 2018-19.

“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.”

Morrison said Westland was starting to see some payback on the capital investments in ITN and UHT capacity of the last few years. While these had taken longer than expected to start delivering a return to the company, they were now adding value. “ITN volumes significantly up this year,” he said, “and UHT is close to capacity.”

Westland’s decision to enter the New Zealand retail consumer butter market with its Westgold brand had also paid off, Morrison said. While Westland has 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 out-selling all other gourmet butters in New Zealand combined, and is starting to reach sale levels comparative with more established brands.

Morrison recalled that Westland had previously reported it was costing it more to process its ‘bucket of milk’ than comparable companies. He said this was partly because of quality issues in the plant at Hokitika.

“Our percentage of ‘right first time’ processing was not good, however it has improved and that means less cost, and we are more able to deliver on time for the best price. We are still not satisfied with our performance on quality for the past year and believe this will show further improvement in the 18/19 year,” Morrison said.

Morrison said other factors influencing the increased payout prediction for 2018-19 included evidence that butter would also continue to be a good export earner for Westland. “We see robust demand for butter in all sectors growing further in the coming year, with grass fed growth showing even further potential. Westland is in a great position to take advantage of the growing demand-for grass-fed dairy products.” He added that to make butter Westland then had to find markets for its skim milk powder and this, too, was looking promising. “We believe New Zealand SMP will continue to trade at a premium due to the global ITN demand.”

“We are also benefitting, especially in just the last few months, from finally having a complete executive leadership team in place. Our CEO Toni Brendish has been in the role for 20 months and one of her first actions was to restructure leadership of the company to have the right people in the right roles for the direction we wanted to go. It’s taken a while to get all those people in place. We have had the full team since just before Christmas last year and they are delivering, with real expectations of continued improvement going into 2018-19.”

Morrison said the prediction for 2018-19 will be welcomed by shareholders, who are facing a payout range of $6.10 to $6.30 for 2017-18. “This is a disappointing result as it is not as competitive as we had originally told shareholders we would be,” Morrison said, “but there were a number of one-off factors contributing to this.”

The major contributors to a lower than expected payout for 2017-18 included the impact of former-tropical cyclone Fehi, estimated to have cost at least ten cents per kgMS. The Lyttelton Port strikes cost Westland also, and - added to disruption of cyclone Fehi - meant Westland was incurring higher freight costs to still get products to customers on time. The other major factor, as mentioned above, was quality issues that, while now improved, were more extensive than at first thought and took longer than expected to resolve.

ENDS

For further inquiries contact:
Steve Attwood – Communications Manager
DDI: 03 – 943 0580
C: 027 419 1080
E: communications@westland.co.nz

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