Corporate

Westland Milk delivers non-competitive payout

Westland Milk has delivered its farmer suppliers a milk payout it admits is not competitive, but says its new owners will do better.

The West Coast-based dairy company confirmed to RNZ its final milk price for the 2018-19 season, under its former co-operative structure, was $5.86 per kilogram of milk solids.

China's Yili Group took over the company at the start of August, after Westland Milk's shareholders voted to sell-up following years of poor payouts and mounting debt.

As part of the $588 million deal, Yili guaranteed suppliers from the 2019-20 dairy season onwards it would meet or better Fonterra's milk price for the next 10 years.

Westland Milk's chief executive, Toni Brendish, said it was now forecasting a much-improved payout of $6.75 for next season. This was based on the midpoint of the current publicly published forecast payout range for Fonterra of $6.25 to $7.25

Brendish said the $5.86 milk price payout was not competitive, but had been well signalled by the Westland Milk Board.

"I don't think that came as a surprise, but clearly [it was] a disappointment and [there] is no way that that was competitive with what else was being paid around the country," Brendish said.

Prior to the sale, the company had been challenged by high levels of debt and capital constraints, Brendish said.

"Now having the backing of what is the world's second largest dairy organisation and one of the fastest growing, means that we can look at opportunities that really deliver growth," she said.

Yili's leadership would also give Westland Milk a clear route to market in China, which would help to drive sales and good prices in that market, she said.

This article was originally published on RNZ and re-published with permission.

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