Takeover target Westland Milk cuts dairy payout forecast

Westland Milk chair Pete Morrison. Photo/supplied.

Westland Milk Products, the West Coast dairy co-op that Chinese dairy giant Yili wants to buy, has cut its pay-out prediction.

Lower-than-expected sales have forced the board to lower its predicted payout range for the 2018-19 season to $5.80 - $6.00 /kg from a previous forecast of $6.00 to $6.20/kg.

Chairman Pete Morrison said factors driving the revision included the fact that the last quarter's sales targets for infant and toddler nutrition (ITN) will not be met.

"While we have seen increased production of ITN by 29 per cent, the budget was reliant on the business achieving 52 per cent sales growth, and now the forecast sales growth is 34 per cent," he said in a statement.

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

Westland's board believes that one of the benefits of the proposal is that Yili will provide a strong route to market.

The co-op's biggest shareholders — investment fund Southern Pastures and the state-owned Landcorp — are biding their time over Yili's takeover offer.

Hokitika-based Westland has signed a conditional agreement for the sale of the co-op, which will Yili pay farmer-suppliers $3.41 a share.

Westland will seek shareholder approval for the proposed transaction at a special shareholder meeting, expected to be held in early July.