In a frank address to an audience of around 150 shareholders, retiring chairman Matt O’Regan acknowledged that Westland’s low payout of NZ$3.62 (US$2.58) per kilo of milk solids, topped up from equity to a final payout of NZ$3.88 (US$2.77) was “beyond disappointing,” below break-even point for farmers and represented a failure of Westland’s goal to be industry competitive.
O’Regan added, however, that the strategy for growing Westland’s capacity to produce value-added products was, and remains, a sound one.
He stated that the survival of the company depended upon the success of value-added products.
“While the strategy was not at fault, I have to acknowledge that some aspects of its delivery were not up to standard at both managerial and board level,” O’Regan said.
“This, coupled with external market factors over which we had little to no control, produced the poor result detailed in our annual report.”
O’Regan acknowledged change was needed, and during the meeting a shareholder resolution for a complete review of the board and its governance and performance was passed almost unanimously, with the full support of the board.
O’Regan said that incoming CEO Toni Brendish had moved quickly to restructure the senior management team.
O’Regan said the company’s new value-added assets – its nutritionals dryer and new UHT milk plant – had not delivered the returns they were predicted to in their first period of operation.
However, he said that the cooperative was in a better position to move forward in the value-add direction to remain viable and successful.
Importance of Chinese market
Brendish, addressing Westland’s annual meeting for the first time, also said that the value-add strategy was correct and that problems with its delivery could be rectified.
“The fact that there are more than 43,000 babies born in China each day is a compelling reason to continue to back Westland’s move into producing infant milk powder for the Chinese market,” Brendish said.
She also talked about other opportunities in China and elsewhere in the value-added space, including expansion into specialist adult nutritional products.
Westland is also expanding into regions such as Indonesia and Australia to prevent over-reliance on the Chinese market.
Brendish also said that the company was in negotiation with two “significant customers” who want to use the UHT milk plant.