In the co-operative’s annual report Morrison said Westland’s primary focus will be to deliver a competitive payout for the 2018-2019 season with high-value products key to future success.
But with high debt and limited financial flexibility achieving a better outcome for shareholders will be reliant on the co-op’s capital structure review.
“There is a full range of opportunities in front of the co-operative as well as new, emerging, possible opportunities.
“For the co-operative to realise all the opportunities in front of us we need access to new and increased capital,” Morrison said.
Westland’s new five-year business strategy has the potential to add significant value to its business.
The Project Horizons capital structure review is based on three options – maintaining the status quo, taking a cornerstone shareholder or a merger.
“We want the best outcome for all our shareholders and we are working through the processes of Project Horizon and our shareholders are waiting to hear that outcome.”
Morrison said the board is confident it is doing the right process to understand its values.
“The process is going well and we will be coming back to our farmers before anybody else.
“Our shareholders are our top table. They are what motivates us.”
Westland is scheduled to give a first progress report on the review to farmer shareholders on December 5.
“During the year we completed a strategic road map.
“The core of this strategy is to produce differentiated products that leverage our heritage and location, enabling the company to grow value for shareholders in terms of payout and their farm properties,” Morrison said.
“We worked hard during 2017-18 to build the foundations for Westland’s long term future.
“This included a focus on getting the basics right and improving our right-first-time performance.”
But there’s still more to do, he said.
“Our first aim is to deliver a competitive payout for the 2018-19 financial year while focusing on driving better, long-term returns and value to our shareholder farmers.
“The board is conscious that we have relatively high debt levels and limited financial flexibility.
“It is, therefore, timely to look ahead and consider all options that can provide a sustained higher payout and improve shareholders’ and the co-operative’s financial flexibility.
“Obtaining new capital would make a significant difference.”
Westland last month reported a final milk payout for 2017-18 of $6.12 a kilogram of milksolids, less a five cent retention, delivering a net average result for shareholders of $6.07/kg MS.
A substantial number of shareholders received a premium of 4.4c/kg MS for providing UHT winter milk and colostrum, giving them a net average payout of $6.11.
Westland last month predicted a payout for 2018-19 in the range $6.50 to $6.90 but in line with global activity has this month dropped that range to $6.10-$6.50.
Chief executive Toni Brendish focused her annual report on Westland’s strategy to bring life to the company purpose of nourishment made beautifully for generations.
During 2018-19 Westland will complete plant upgrades with the goal of producing high-value segregated products throughout the season, not just on the season’s shoulders.
Production capacity means the company is forced to process high-volume but low-value bulk powders to get the milk through during the peak.
Brendish said Westland upped its value-add income by $15 million in 2017-18, evidence that segregated, value-add products can produce success.
Other examples of Westland succeeding when it enters markets less vulnerable to global commodity price fluctuations include Westgold butter’s year-on-year growth of 50.4% in the New Zealand grocery market with three million blocks sold in three years.
UHT sales of 6.045m litres are up compared with 1.024m in the previous year, nutritionals including infant formula are up 4543mt to 15,263mt and China achieved 17.4% year-on-year volume growth.
Brendish highlighted health and safety achievements as a core achievement for 2017-18 with the company reporting significant reductions in work-related injuries and downtime and a corresponding lift in health and safety compliance.
“It is no coincidence that we are seeing quality improvements at the same time as we see staff health and safety improve.
“A safe workplace creates a culture that flows through to working well, efficiently and ensuring a high-quality, safe, product,” Brendish said.
