Westland Milk Products is looking at changing its ownership structure in a bid to get more capital and up its milk pay-outs.
Its board has appointed Macquarie Capital and DG Advisory to do a strategic review of the dairy co-operative with its pay-outs having lagged its competitors for several years.
The following options are on the table:
- continuing the current co-operative model, recognising capital constraints;
- introducing a cornerstone investor to provide new capital to fund growth; and
- a merger or divestment of the co-operative.
Westland chairman, Pete Morrison, says: “If the co-operative is to realise all the opportunities in front of us we need access to new and increased capital.
“We have relatively high debt levels and limited financial flexibility and therefore it is now timely to look ahead and consider the options that can provide a sustained, higher payout and improve the company’s financial flexibility.
“Obtaining new capital would make a significant difference to the co-operative.”
Morrison expects the review to run for several months.
“The Board will keep shareholders updated on the process with the first update expected before Christmas this year.”
Westland says shareholders will vote on any proposal the board decides to bring back to shareholders. Creating a competitive and sustainable pay-out and driving the value of the co-operative’s shares will underpin the board’s recommendations.
Morrison goes on to say the co-operative had begun implementing a new strategy “focussed on more segregated higher value added products”.
“We’ve had strong interest from new suppliers and we take great heart from that as well as the loyalty shown by existing shareholders.
“We are excited about the full range of opportunities in front of the co-operative, as well as new emerging possible opportunities.
“Shareholders have clearly indicated support for a plan that would create higher returns and shareholder value, which would likely require significant new capital.”
Here is a run down of dairy industry pay-out rates:
| Fonterra | Tatua | Westland | Synlait | Open Country |
Miraka | Oceania Dairy* |
||||||
| $/kgMS | Milk | Dividend | Total | Retention | Milk | Retention | Milk | Retention | Milk | Milk | Base | Milk |
| $ | $ | $ | $ | $ | $ | $ | % | $ | $ | $ | $ | |
| 1998-99 | 3.58 | |||||||||||
| 1999-00 | 3.78 | |||||||||||
| 2000-01 | 5.01 | 5.52 | ||||||||||
| 2001-02 | 5.35 | |||||||||||
| 2002-03 | 3.34 | 0.29 | 3.63 | |||||||||
| 2003-04 | 3.97 | 0.28 | 4.25 | 4.39 | ||||||||
| 2004-05 | 4.37 | 0.22 | 4.59 | 4.32 | ||||||||
| 2005-06 | 3.85 | 0.25 | 4.10 | 4.59 | 3.90 | |||||||
| 2006-07 | 3.87 | 0.59 | 4.46 | -0.00 | 4.10 | 4.72 | 4.22 | |||||
| 2007-08 | 7.59 | 0.07 | 7.66 | -0.24 | 8.00 | 7.99 | 7.38 | |||||
| 2008-09 | 4.75 | 0.45 | 5.20 | -0.01 | 5.38 | 4.58 | 5.03 | 4.93 | ||||
| 2009-10 | 6.10 | 0.27 | 6.37 | -0.33 | 6.32 | 6.15 | 6.31 | 6.07 | ||||
| 2010-11 | 7.60 | 0.30 | 7.90 | -0.25 | 8.10 | -0.58 | 7.70 | -0.30 | 7.76 | 7.56 | ||
| 2011-12 | 6.08 | 0.32 | 6.40 | -0.10 | 7.50 | -0.54 | 6.04 | -0.10 | 6.22 | 6.18 | 6.18 | |
| 2012-13 | 5.84 | 0.32 | 6.16 | -0.14 | 7.40 | -1.17 | 6.34 | -0.10 | 5.89 | 5.75 | 5.94 | |
| 2013-14 | 8.40 | 0.10 | 8.50 | -0.00 | 9.00 | -1.32 | 7.57 | -0.30 | 8.31 | 8.41 | 8.50 | |
| 2014-15 | 4.40 | 0.25 | 4.65 | -0.04 | 7.10 | -0.63 | 4.95 | -0.10 | 4.54 | 4.61 | 4.50 | 4.50 |
| 2015-16 | 3.90 | 0.40 | 4.30 | -0.11 | 6.41 | -0.11 | 3.62 | +0.26 | 4.02 | 3.94 | 4.00 | 4.50 |
| 2016-17 | 6.12 | 0.40 | 6.52 | 7.60 | -0.50 | 5.18 | -0.20 | 6.30 | 6.06 | 6.23 | 6.22 | |
| 2017-18 | 6.75 | 0.15-0.20 | 6.90-6.95 | 6.10-6.30 | 6.65 | 6.90* | ||||||
| 2018-19 | 7.00 | 6.75-7.20 | 7.00 | 7.15* | ||||||||
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