Lower sales cut into Westland Milk payout

Westland Milk Products, Hokitika. Photo / Supplied

Westland Milk Products has lowered its forecast payout range from $6-$6.20 to $5.80-$6 for the current season, citing lower-than-expected sales.

Last week, the West Coast-based co-operative announced it had signed a conditional agreement to sell to Chinese-owned Mongolia Yili Industrial Group (Yili) in a deal worth $588 million.

The transaction was subject to shareholder approval, which would be sought at a special shareholder meeting expected to be held in early July.

In a statement yesterday, chairman Pete Morrison said factors driving the revision included last quarter's sales targets for infant and toddler nutrition (ITN) would not be met.

While production of ITN had increased by 29 per cent, the budget was reliant on the business achieving 52 per cent sales growth, and now the forecast sales growth was 34 per cent.

"This situation reinforces Westland's need to have better and more direct sales channels and to reduce our reliance on third party distributors," Morrison said.

The board believed one of the benefits of the proposed sale to Yili was that the company would provide a strong route to market as one of the world's leading dairy producers, he said.

Yili, which is state-owned, is China's largest dairy producer. It owns the Oceania dairy plant just north of Glenavy.

West Coast Federated Farmers president Peter Langford recently said "stunned" West Coast dairy farmers might have no option but to vote yes to the proposed sale.

Langford, a Westland shareholder, said farmers at a meeting in Karamea greeted the board presentation with "deadly silence" initially.

The price per share was not good enough given the "tight" situation many farmers found themselves in, he said.

"The banks have been wary for three years. It's hard to sell farms. It's put the farmers at the coal face in a very difficult position.

"No-one wants to sell [Westland] but the reality in business is sometimes you've got to let someone else run it. I welcome anybody to chuck another higher offer in because we're not happy."

- Additional reporting Greymouth Star.