Yili’s gain on the West Coast brings a $500,000 windfall to farmers – but local leaders lament sale to foreigners

Westland  Milk  Products  farmer-shareholders  voted overwhelming in the past week to accept  the  $558m  takeover bid   by   Chinese  giant  Yili  for the   co-op’s  milk processing  operation.

For  individual  farmer shareholders, the  bid  means an injection of  around  $500,000 each  into their  bank accounts,  plus better  returns for their milk  over  the  next  10 years.

No wonder  94%  of the  96% eligible shareholders  cast their votes in   favour.  West Coast farmer and Federated Farmer president Katie Milne, who is also a WMP director, said it was an “absolutely stunning” result for West Coast farmers.

Yet the  sale  is lamented  by  many local leaders, as well  as  by  NZ  First  whose spokesman  Mark Patterson  wailed about an  “alarming trend”. Continue reading “Yili’s gain on the West Coast brings a $500,000 windfall to farmers – but local leaders lament sale to foreigners”

NZ First is not alone in worrying at the implications of a Westland Milk sale to Yili

Is   Westland  Milk   one of  NZ’s  “key  strategic assets”?

NZ  First  is adamant  it is and believes the government  should be a  applying a  “national interest test”   to the proposed  sale of the company  to the Chinese  dairy giant Yili.

Those  who  see  heavily indebted  companies  like Westland Milk struggling to  make a profit and  not  even  matching  Fonterra’s payout  to its suppliers might take a  cooler view  to  the proposed  sale.

Federated Farmers dairy chairman Chris Lewis said he had received “mixed” feedback from West Coast farmers on the deal, which will require 75% approval. Continue reading “NZ First is not alone in worrying at the implications of a Westland Milk sale to Yili”

Yili bid for Westland Milk raises questions about dairy co-operatives – and Fonterra’s ownership


On  the face  of  it, it’s  a  no-brainer.  Weighed  down  with  debt,  Westland  Milk,  based in   Hokitika  is financially  on  its  knees.  Riding  to  its  rescue,  Chinese  dairy  giant  Yili  has come in with a  $588m buyout deal   which  will yield  $3.41  a share   to the co-op’s  farmer shareholders,  and, as well,   absorb  Westland’s debt and liabilities.

According to  Westland, the  nominal value of its shares  has ranged  from  70c  to $1.50  per share. For the  average-sized  Westland farm, the  share offer translates to  about half a  million dollars cash.

The offer  looks even  more attractive since  Westland had to  cut its  milk payout  forecast, while other  companies’ forecasts  are rising.  Westland, which has  grown out of  the West  Coast’s  150-year  dairy heritage, hasn’t paid  a  competitive milk price   for  several years.

The conditional  deal comes with extra  sweeteners. Yili has committed to collect all  milk  supply. It  will  also pay  a  competitive  price of at  least  as  much as  the  Fonterra  farmgate milk price   for  10  years.

But why  would   Yili   go that distance? Continue reading “Yili bid for Westland Milk raises questions about dairy co-operatives – and Fonterra’s ownership”

Comforting news for dairy farmers as companies report results and the world price rises again

Encouraging signs emerged this week that key elements in the structure of NZ’s largest export industry are whipping themselves back into the shape they should be.

The giant  co-op  Fonterra  has  gone back  into the  black  with a net profit of $80 million in the  first half,  after previously recording  a  net  loss of  $186m.

Meanwhile Westland Milk Products, NZ’s second biggest dairy co-op, is in line to be  sold  to China’s biggest  dairy company,  Yili,  in  a $588m  transaction that would inject nearly half a million  dollars into the operations of  each  of its  suppliers.

Alongside these co-ops, the Canterbury-based Synlait has underlined its strength in the  industry with a  solid result in  its half-year after  achieving   higher sales  volumes.  It reported a half-year net profit of $37.3m,  9.6%  lower  than   the  $41.3m  in the previous first   half,  but  with the  focus  on investing for  growth,  with a  second processing  plant due  to come on stream for  the  2019-20 season. Continue reading “Comforting news for dairy farmers as companies report results and the world price rises again”

A tale of two milk companies – one of them is being suckled by taxpayers

The contrasting fortunes of Synlait Milk and Westland Milk Products were thrown into sharp relief last week. On the one hand Synlait won applause at its annual meeting from shareholders, impressed by its performance in virtually doubling profit ($74.6m against $39.4m) in its tenth year of operations. On the other hand Westland had the begging bowl out for a Provincial Growth Fund loan of $9.9m which will help the co-op in funding a $22m manufacturing plant aimed at converting milk to higher-value products.

The Westland dairy exporter, discussing a capital restructure in its 2018 annual report, said it had relatively high debt and limited financial flexibility.

Commenting on the PGF loan, chief financial officer Dorian Devers is reported as saying the co-op could have financed the project in other ways “but the terms we have been given from the PGF are more favourable. It’s a longer-term loan than we can get from a bank which is nice”.

The NZ Herald quoted economic consultant and former ANZ Bank chief economist Cameron Bagrie as saying the loan sets a “dangerous precedent”. He reckons it appears to be corporate welfare. Continue reading “A tale of two milk companies – one of them is being suckled by taxpayers”