Westland Milk Products has announced a record-breaking after-tax profit of $55.9 million for 2023, breaking its previous 2022 record of $38.9m.
The result is more than double its targeted $20m annual return and is a $120m rebound on 2021.
Westland chief executive Richard Wyeth said the performance was a result in executing the company’s strategy put in place in 2021.
That strategy, called Zero to 100, aimed at improving Westland’s profitability by $100m.
He said the company will maintain its push towards long-term profitability by continuing to divert more milk solids into higher value products in 2024.
Westland recently committed to pay farmers a 10c premium above Fonterra’s milk price for the 2024-2025 and 2025-2026 seasons, extending and improving on payment terms made under the original Scheme of Arrangement when the company was purchased.
“We’re proud of this result but we know we still have plenty of room for improvement,” Wyeth said.
“We’re tracking well to deliver on our five-year commitment to build sustainable growth year on year. A sustainable financial base means we can continue to offer farmers very competitive terms for their milk.”
Wyeth said the purchase of Canary Foods in 2022 had also proven to be a good addition to Westland’s profitability.
“It certainly exceeded our expectations.”
Wyeth said revenue of $1.065 billion was slightly above last year’s result and very pleasing given the fall in global dairy prices.
“The advantage we have of course is the backing of one of the world’s largest dairy companies in Yili.
“Yili’s support has enabled us to invest heavily in infrastructure that will maximise revenue from high-margin products. But our ability to remain competitive on milk prices must rely on our ability to stand alone on financial performance.”
Westland’s diversification across multiple markets across the globe has also helped, he said.
“It’s a strength for us and we need to maintain that going forward because markets do come and go.”
A $70m investment in a new lactoferrin plant at the company’s Hokitika plant supported by Yili is expected to continue to reduce reliance on traditional high-margin revenue sources such as infant formula for China, as import demand in that sector continues to soften.
The plant is due for completion in the final quarter of 2024, and first production will take place in Quarter 3. Commercial production is expected by the final quarter this year.
Wyeth said a $40m investment in a new butter plant at Hokitika in 2022 had allowed Westland to expand strongly in the United States market.
Westgold butter is now stocked in more than 3000 grocery retail outlets in the US, including Walmart stores. Westland also produces Kirkland Signature New Zealand Grass-Fed Butter for Costco.
Costco reported in its 2022/23 financial results that Kirkland butter sales increased more than 160% year on year and continue to show strong growth.
The Westland-produced butter is now stocked in almost every Costco store in the US, as well as Costco global stores, including in Korea, Taiwan and New Zealand, with more international regions in the pipeline.
Looking ahead, Wyeth said the rest of the year could be challenging with casein and specialist protein prices softening but 2025 is looking brighter, with another lift in profitability expected.
“Our target now is to get to $100m in profit by 2030. There are obviously going to be ups and downs along the way – I think 2024 will be challenging with some headwinds with China and some of our higher value protein products – but I expect we should see an uplift again in 2025.”
