v2 Report - Additional Information Supplement
OCC Open Country Cheese Company Ltd
Press releases
24th May 2007
A Newsletter to Shareholders from the Independent Directors of
Open Country
As shareholders will know, Open Country is now subject to a
takeover offer. While not a listed company the Open Country board has
always adopted a robust “good governance” policy (for listed companies
good governance requires continuous disclosure of relevant information).
Given this board policy, in this circumstance the board has decided to
provide shareholders with information on our forecast performance for the
upcoming year.
Shareholders are then in a position to form their own view on the
value of their investment in Open Country (where they consider it
appropriate, shareholders should seek independent professional advice).
Please note, the independent directors will be making a recommendation to
all shareholders as to the merits of the take-over offer following the
completion and release of the Independent Advisors Report.
It is expected that this report will be completed next week and
that the independent directors will make their recommendation the
following week (week commencing 5 June 2007).
Actual
Year Ending
31-5-06
Current
Year
Forecast
31-5-07
Forecast
Year Ending
31-5-08
(millions) (millions) (millions)
Milk Processed (Litres) 81.6 176.8 244.0
kgMS 7.1 15.2 20.8
(tonnes) (tonnes) (tonnes)
Product Production (tonnes) 9,900 27,000 35,000
(millions $) (millions $) (millions $)
Revenue ($) 42 86 145
Assumptions
The assumptions on revenue numbers are based on current commodity
prices (Cheese US$3,200; SMP US$4,200; WMP US$4,200 AMF US$2,800) and an
average exchange rate of 0.71 cents against the US dollar. The assumed
Milk Payout is up to date (it takes into account the most recent Fonterra
forecast of $5.53 / kgMS).
For the 2008/09 season it is assumed the Whole Milk Powder Plant
will be operational. For all years it is assumed there are no significant
adverse events affecting the company. We note that commodity prices and
exchange rates changes can have a material impact on milk payout and
company profitability.
Commentary 2006/07 Year
The year has been very disappointing from a financial aspect.
Although we have achieved our targets in regard milk volumes and income we
are short on our profit projections. We now expect profit to be similar to
last year.
As alluded to in our last Shareholders’ Newsletter, profit has
been significantly impacted by:
(a) The underperformance of the whey plant. This resulted in
substantially less whey being produced than budgeted along with
significantly increased waste water disposal costs.
(b) The relative appreciation of the milk powder versus cheese
price that occurred this season.
(c) A much higher exchange rate resulting in more expensive
hedging cover.
This is the first season that the cheese plant has run at
capacity. Running the plant under the intense pressure of peak milk flows
from September through to November highlighted the limits of the plant
along with some system deficiencies. These have been addressed for the new
season.
2007/ 08 Year
For the 2007/08 we are forecasting a significant turnaround in
profitability, with a projected Earnings before Interest & Tax (EBIT)
in the range of $12m to $20m.
This comes for a range of reasons - our whey plant issues are
being resolved along with further enhancements to our overall plant
processing capability. We have upgraded our waste disposal capabilities
including the purchase of a farm to enhance the certainty of land
availability for waste water irrigation. Our current hedging programme is
being enhanced to better address currency volatility.
These enhancements will allow us to increase the volume of milk
we can process (without significantly increasing fixed costs) and allow us
to produce a wider range of products (including butteroil).
2008/09
For the 2008/09 year, we have assumed that the Anhydro Whole Milk
Powder (WMP) Plant will be constructed and commissioned by 1 June 2008,
allowing it to run throughout the entire season. It is estimated that a
further $30m of capital expenditure will be required to install the plant.
This expenditure will occur during the 2007/08 season. The plant will
allow Open Country to process a further 100 million litres of milk
producing an additional 15,000 tonne of product (dependent on product
mix). The WMP Plant and additional consolidation of existing operations
are expected to further enhance our profitability.
From the Independent Directors
PRESS RELEASE
28 August 2007
Open Country and Dairy Trust team up in Southland.
Open Country Cheese Company Limited and Dairy Trust Limited today
announced a joint venture to operate Dairy Trust’s new dairy factory at
Awarua in Southland.
Waikato dairy processor Open Country is a subsidiary of the newly
formed Dairy Trust Limited. Open Country commenced production in 2004 and
has grown rapidly to produce over 35,000 M/T of cheese, butter oil, whey
and milk powder from its Waikato factory.
Under the arrangement for the new Southland plant announced
today, Open Country secure exclusive marketing rights for all of the
plant’s production, allowing them to capitalise on their existing brand
and marketing networks.
Open Country will also provide technical and administrative
services to the new venture.
Alan Walters, the CEO of Open Country, noted that the alliance
provided “a strong platform for growth and in particular by working
together we can lower cost structures and avoid costly duplication of
capital and services”. He said there were “several synergies” from
the two companies working closely together in Southland which are positive
for suppliers and shareholders.
The “greater scale, market penetration and cost efficiencies”
from a combined group approach were all very positive, Mr. Walters said.
He was very pleased that the arrangement would provide a “strong
footprint” for Open Country in the Southland region, New Zealand’s
fastest growing milk region. Construction of the new plant will commence
in October 2007, with production beginning in August 2008.
Alan Walters Mark Fankhauser
Chief Executive Officer Chief Executive Officer
Open Country Dairy Trust
Chairman's report
Director's Report
