Westland Milk Products, New Zealand's second-largest dairy cooperative, turned to an annual profit as it reduced costs, processed less milk and lifted payments to its farmer suppliers.
Hokitika-based Westland turned to a profit of $1.5 million in the 12 months ended July 31, from a loss of $10.3m a year earlier, it said in a statement. Revenue rose 7.1 per cent to $629.7m even as the amount of milk received from suppliers reduced by 6 per cent to 699 million litres. Selling, distribution and administration expenses fell 9.6 per cent to $107.8m while other costs of sales dropped 18 per cent to $153.8m.
Under the leadership of new chief executive Toni Brendish, who started in September 2016, the company has been running the ruler over its cost base as part of efforts to return to profitability and lift payments to farmer suppliers. In the latest year, Westland lifted its payout to its 342 shareholders by 28 per cent to $338.7m, a net average payout of $5.18 per kilogram of milk solids, up from $3.88/kgMS a year earlier. Chair Pete Morrison said the payout is still not industry competitive, and he reiterated the company expected to lift the payout this season to between $6.40 and $6.80/kgMS.
"Both board and management warned shareholders after our annual general meeting last year that we would not be able to return the company to an industry competitive payout in one season. We committed to doing so for 2017-18," Morrison said.
"This recovery bodes well for the future of our co-operative," he said. "When our new chief executive Toni Brendish commenced in September 2016, and quickly established a new finance team to work with her, she identified that it was costing Westland more to process its 'bucket of milk' compared with other dairy companies in New Zealand. Since then, management has embarked on a campaign to reduce costs and improve efficiencies. The result has been the removal of many millions of dollars in costs from the business."
