Westland continues to perform strongly with an an after-tax profit of $55.9 million in 2023, a further improvement on its outstanding result in the previous year.

Our performance is all the more impressive given current market challenges including disruption to global shipping due to ongoing conflict in the Middle East and a significant drop in underlying commodity prices of up to 20% for some of our products.

Despite these challenges our revenue of $1.065 billion was our highest ever, up from the previous year’s $1.021 billion.

Our strong focus on quality is paying dividends with our last time grade achievement of 99.8%. Other factors contributing to our strong performance include cost savings across our operation with significant reductions in chemical use at all our sites. We’ve also increased the throughput of a major dryer at our Hokitika plant by up to 30% and we are benefiting from additional cream processing capacity at our new butter facility.

Conditions have also been favourable this season on our suppliers’ farms. Milk supply is up by about 2.5% on the same period last year. The increase reflects stock being in very good condition following a season of ample grass growth in most parts of the West Coast.  Generally, rain has arrived before pastures dried out too much and the grass quality is good. We’re predicting that milk production should stay on track unless a major weather event hits between now and the end of the season.

Other reasons for optimism include the recent announcement guaranteeing indefinite milk collection beyond the 10 years specified at the time of the Yili purchase, the extension of the 10c a kg milk solids premium over Fonterra’s price, for two more seasons beyond the current season, and several increases in the farm gate milk price this season.

Unfortunately, shipping continues to be an ongoing and serious concern. Attacks by rebel groups from Yemen on commercial shipping in the Red Sea have caused delays and disruptions to all New Zealand exports/imports. Carriers are avoiding the area, and instead taking a longer route to Europe around the Cape of Good Hope and along the West Coast of Africa, or entering the Mediterranean through the Strait of Gibraltar. The distance is about 40% longer causing delays of between two and five weeks.

Given the effect on some of the most important trade lanes in global shipping, the flow on impact is worldwide as carriers adjust to major changes. 

There is no resolution in sight to the conflict and disruption and resulting congestion is expected to continue.  Shipping costs have increased with carriers recovering their additional costs through surcharges which we anticipate will remain at least until the third quarter of this year.

Our import/export team is working closely with our carriers to remain up-to-date on the situation.