Hokitika-based Westland Milk Products has put the heat on dairy giant Fonterra with a $120m profit turnaround in 2022, driven by record sales.
Westland paid its suppliers a 10c premium above the forecast Fonterra price per kilo, contributing $535m to the West Coast and Canterbury economies.
The dairy company, which is owned by the big Chinese dairy outfit Inner Mongolia Yili Industrial Group, said its revenue increased 27% year-on-year to a record $1.04bn, for a net profit of $39m, or 69c per kilo of milk solids.
The result was against the background of milk prices hitting $9.40kg/MS during the year.
CEO Richard Wyeth said the company’s strategy of focusing on high-value product sales, leveraging off the West Coast’s reputation as a source of premium dairy products and ingredients, was paying dividends.
“This is the first time in our company’s 85-year history that we have surpassed the $1 billion dollar revenue mark,” Wyeth said.
Yili bought the then financially-troubled Westland Milk for $588m in 2019.
Wyeth said the turnaround in performance was also a result of a well-planned, whole-of-business approach to improve quality, reduce waste, increase sales, improve opportunities for staff and reduce costs of production.
“The biggest contributor to increasing revenue has been our high-value product strategy and, to some extent, high global commodity prices – but right across the business we have focused on doing everything well,” Wyeth said.
Westland’s performance turns the spotlight back on where Fonterra’s payout this season will end up.
This week Westpac’s senior agri-economist Nathan Penny said an expected pick-up in Chinese dairy demand was taking longer than anticipated. Westpac has trimmed its forecast milk price to 8.40kg/MS, towards the bottom end of Fonterra’s $8.20-$8.80 range.
Penny had been expecting global dairy prices to be rebounding by now. China is NZ’s largest dairy market and therefore has an oversized impact on global dairy prices.
At the Fonterra GDT auction this week, wholemilk powder prices eased again, with the average price at $US3,228/tonne. SMP, the second most influential factor in the farmgate milk price, fell 3.5% to $US2648/tonne.
NZX dairy analysts said the auction result was unexpectedly soft, with cheddar, down 10.2% to %US4052/tonne leading the way. Butter eased again by 3% to $US4748/tonne.