The West Coast-based cooperative is currently working through the resource consent process for the Rolleston based plant but chief executive Rod Quin said the board and management are investigating a number of investment opportunities to determine which offers the fastest way forward in buffering returns against volatile commodity prices.
In the current climate, where the New Zealand dollar stubbornly remains at near record highs and world economies are still suffering from the hangover of the global financial crisis, it was prudent to evaluate a number of options and see how they stack up against the Rolleston expansion proposal, he said. There may be investments that can have a quick benefit which can be about tactical delivery and managing different product streams.
Further investment at Hokitika, where a nutritionals upgrade has already taken place, could not be ruled out instead of taking on the major Rolleston project in the current climate.
The Hokitika upgrade was commissioned earlier this season and has produced around 150 tonnes of pediatric milk powders. During the peak it produces high-quality milk powders, and will return to the nutritional powders in the new year.
Quin said the board would be taking options to shareholders and furthering the discussions by around March.
Last year’s tumble in dairy commodity prices reinforced the benefits of having an added-value strategy and there was no doubt the co-op would be pursuing that strategy, although just exactly how it would be executed was still to be determined.
A shareholders constitution review committee has also been established and as part of its review will look at the co-op’s nominal share standard and options for funding future expansion.
Westland has fiercely defended its $1.50 share value with a view that it presents little impediment to farmers expanding their own businesses. While there’s no suggestion or apparent appetite by shareholders for this to change it was seen as good practice to look longer term to ensure the company remained resilient and fit for purpose.
Westland chair Matt O’Regan said he was confident the security and growth opportunities provided to shareholders by the current constitution would continue to be recognised.
At the co-op’s annual meeting at Shantytown in late November this season’s forecast payout of $5.40-$5.80/kg milksolids (MS) was reiterated, with no respite from the tight cashflows faced by shareholders in the form of an earlier lift in the advance payment of $3.90/kg milksolids (MS).
As well as its continued plans for adding value Quin reported on last year’s performance.
The company processed 643 million litres, 14% up on the previous year and produced a record 100,520t of finished product sold. The increased throughput helped the company lower its fixed costs by 9%.
Revenue was $534m up, just 4% on the previous year despite 14% more product being sold. That was due to the dramatic impact of lower international commodity prices and the strengthening NZ dollar. The final payout was $6.14/kg MS, down 21% on the previous season.
Average currency conversion was at US78c, 1c higher than Fonterra compared with the previous year when Westland managed to convert its sales at 2c below Fonterra’s average conversion rate.
The crash in international colostrum prices had blighted the company’s performance with suppliers overpaid and an extremely unpopular price clawback necessary. Ultimately colostrum returned $4m to the co-op, providing those who supplied it with an extra 10c/kg MS in their payout and across all suppliers made up a 7c/kg MS addition to milk price.
The co-op’s EasiYo business grew $6m to reach a turnover of $39m and add 4.5c/kg MS to the payout.
