Warrnambool Cheese profits down in disappointing results
Warrnambool Cheese and Butter Factory Company Holdings Limited (WCB) has today announced a net operating profit after tax of only $7.5 million for the year ended 30 June 2013, a $7.7 million (50.7%) reduction on FY2012.
Total revenue was $496.5 million, down 0.3% ($1.2 million) on FY2012. FY2013 milk intake was 890 million litres, a net 3.1% decrease (FY2012: 919 million litres). Balance sheet gearing (net debt to net debt plus equity) is 31.8%. Working capital debt increased temporarily as WCB took advantage of the improved powder prices and lower exchange rates late in the year.
Chairman Frank Davis commented “FY2013 has been a difficult and disappointing year, with results adversely impacted by flat international prices, a persistently high Australian dollar and high raw milk cost relative to market conditions. However WCB has undertaken a number of strategic steps to maintain its long term revenue base and mitigate against ongoing deterioration in international commodity revenues”.
“A late surge in international powder prices and the depreciation of the Australian dollar was insufficient to wholly compensate for the depressed trading conditions and outcomes that prevailed for the majority of FY2013”.
The Directors have declared a fully franked final dividend of 11 cents per ordinary share with a record date of 9 September 2013, and a payment date of 27 September 2013. The Dividend Reinvestment Plan is applicable to the payment with elections to participate to be lodged by 9 September 2013.
WCB says it has experienced “a strong resurgence in international pricing in the first half of FY2014 and is contracting sales at average prices which are significantly higher than the FY2013 average”.
In addition, the report notes that substantial weakening of the Australian dollar versus the US dollar in recent months “has provided a welcome margin lift across the export product group”. The Company also reports that its numerous business improvement projects and initiatives being implemented are contributing to an improving product mix, higher margins and less volatility relative to commodity products. The Company says “These factors provide a positive outlook for the international markets over the first half of this financial year and for WCB’s operations in general”.
Shutdown of a Plant
Earlier the Company had announced it would cut 72 staff across its processing facilities.
The Company said 38 positions at Cobram, 15 at Leongatha, eight at Kiewa, four at Edith Creek, four at Rochester, and three at Koroit were no longer required as a result of its ongoing commitment to improving efficiency, productivity and cost competitiveness.
The Company said affected staff had been informed of the changes which would take effect in late September to early October . The Company said it was seeking to minimise the impact by looking first to natural attrition, contract and casual positions and then voluntary redundancies.
Succession Changes on WCB Board
The Company has also announced that Mr Frank Davis is retiring as an independent director and Chairman of the company, effective today, 28 August 2013.
As part of its ongoing succession planning process, the current Deputy Chairman Mr Terry Richardson will assume the position of Chairman on Mr Davis’ retirement. Mr Richardson joined the Board in 2007 as a supplier director and was appointed Deputy Chairman in May 2009. Mr Richardson’s special responsibilities within WCB include Chairman of the Nominations & Remuneration Committee and member of the Audit & Risk Committee.
Retiring Chairman Mr Davis joined the board as an independent director in 2000 and took on the role of Chairman in May 2009 at a difficult time for the company. The Board wishes to pay tribute to Mr Davis for his exceptional leadership over the past four years as Chairman and over 13 years with the Board. He has made an outstanding contribution to the success and stability of the company and has worked with diligence and drive to improve the performance of the business to the benefit of staff, shareholders and suppliers. We thank Mr Davis for his strategic guidance and dedicated service and wish him and his family all the best for the future.
A dairy farmer for 35 years, Mr Richardson has extensive board experience within the dairy industry having also served on the board of Kiwi Co-operative Dairies for seven years. Mr Richardson was also an agribusiness consultant with Agriculture NewZealandfor eight years. Mr Richardson is a member of the Australian Institute of Company Directors and holds a Bachelor of Agricultural Economics, a Diploma in Business Studies and a Certificate in Company Directorship.
Mr Davis said, “It has been both challenging and rewarding working on the Board for this great Australian dairy company, and I am proud of what our Board, management team, staff and suppliers have achieved over recent times through hard work and determination. I am extremely pleased to hand over to Terry Richardson. Terry and I have worked closely together as Chair and Deputy Chair since 2009 and he is a hard-working, knowledgeable and passionate Board colleague. His experience and understanding of the dairy industry inAustraliaand internationally is invaluable and will be of benefit to WCB as the company grows and evolves to meet the changing market and retail conditions.”
Mr Richardson added, “Frank has left a great legacy at WCB, that is a robust, strategic business model and a passionate and performance driven culture. I look forward to working with the Board and management in my new role to support them in continuing to strengthen WCB’s position in the market to produce improved earnings for shareholders and milk suppliers.”
The Board also announced the appointment of Mr Neville Fielke to the Board to fill the vacancy created by Mr Davis’ retirement. Mr Fielke has held a number of senior executive positions in sales, marketing and strategy over 20 years to 2007 at H J Heinz group companies, Fosters Group Limited and Mars group companies, including seven years as CEO and Managing Director of H J Heinz Australia Ltd which extended to Watties in New Zealand and Heinz Japan during this period. Mr Fielke was also CEO and Managing Director of Racing Victoria Ltd from 2001-2003. Since 2007 Mr Fielke has been involved in corporate advisory as a director of Falcon Corporate Advisory Pty Ltd which specialises in merger and acquisition transactions and growth consulting through Growth Solutions Group Pty Ltd.
Mr Richardson said, “Mr Fielke has significant experience at director and executive level and brings wide ranging skills and expertise in FMCG sales and marketing, business development and strategic alliances. We welcome Mr Fielke to the company and look forward to supporting him in his efforts and contribution to WCB.”
Background of WCB
At 125 years of age, WCB isAustralia’s oldest dairy processor, continuously producing high-quality dairy products since 28 May 1888. The Company is headquartered at Allansford (southwest Victoria, near Warrnambool) and employs around 480 people across its three sites at Allansford, Port Melbourne (Victoria) andMountGambier(southeastSouth Australia). WCB was listed on the ASX in 2004.
WCB collects approximately 900 million litres of milk annually from around 600 suppliers located acrossVictoriaandSouth Australia, making the Allansford plant one of the largest milk receival and processing sites inAustralia.
The Allansford site covers approximately 17 hectares and comprises manufacturing facilities for cheese, milk powders, whey protein concentrate, butter, cream and packaged milk. The site also contains a manufacturing facility for production of Vivinal GOS (galacto-oligosaccharides) through a joint venture with Royal FrieslandCampina. WCB have recently announced the construction of a lactoferrin plant at Allansford with Tatua Co-operative Dairy Company (“Tatua”) providing intellectual property, design and construction services (Founded in 1914, the Tatua Co-operative Dairy Company is the oldest independent dairy company in New Zealand. Today, Tatua exports 94% of its products to more than 60 countries worldwide each year.). WCB also operates a specialty cheese plant in Mil Lel, just north of Mt Gambier inSouth Australia.
WCB produces a range of dairy products for domestic and export markets. Its products include cheese, butter and butter blends, cream, skim milk powder, buttermilk powder, whey protein concentrate, nutritional supplements, dairy ingredients tailored to customer-specific applications and packaged milk. Its joint ventures produce Vivinal GOS and lactoferrin.
The Company’s local brands include Sungold Milk and the Warrnambool Cheddars, and it producesGreat Ocean Roadmilk and cheese for Coles who have an exclusive license to this WCB-owned brand. WCB also manufactures cheese for Lion who produce well known Australian brands such as Coon and Cracker Barrel.
WCB has a joint venture with Mori International Corporation in a Japanese sales and distribution company – WCB Japan – that directly distributes WCB products in Japan.
WCB has a range of relationships (such as alliances, supply arrangements and joint ventures) with global dairy companies including but not limited to Mondelez (formerly Kraft), Lion, Royal FrieslandCampina, Tatua, Mori International Corporation and Mitsubishi Corporation.