The earnings downgrade from Australia’s biggest exporter of processed foods underscores the risk companies take by leaving themselves exposed to the vagaries of Chinese consumer demand and to unfavourable moves in foreign exchange rates.
Just nine months after listing, the maker of Devondale milk and butter slashed its full-year net profit forecast to between A$39 million and A$42 million ($30.2 million and $32.5 million), less than half the $85.8 million it forecast in an Initial Pulic Offering prospectus.
The company also cut its forecast farm gate price to between A$4.75 and A$5.00 a kilogram for the year to June 30, from A$5.60 per kilogram previously, and said it will provide financial assistance to farmers resulting in charges of up to A$165 million.
In a statement to the Australian Securities Exchange, Murray Goulburn said managing director Gary Helou will step down and quit as a company director. It said Helou and the board agreed the company «will be best served under fresh leadership».
«We are very disappointed to be announcing this downgrade,» said David Mallinson, executive general managing of business operations, who is stepping in as acting chief executive officer, on an analyst webcast.
«I am very aware of the impact this will have on investors and suppliers.»
Murray Goulburn shares slumped 35 percent to a record low of A$1.39, compared with their A$2.10 issue price. The broader market meanwhile rose nearly 1 percent.
Other dairy exporters also rose, a sign that Murray Goulburn’s misjudgment of future Chinese demand was especially strong. New Zealand-based Fonterra Co-operative Group Ltd , another China supplier, gained 1 percent.
Murray Goulburn said that after sales of its milk powder sachets in China tripled in the six months to end-December, it increased production only to see orders drop over Chinese New Year in February.
Sales to China recovered in March, but slowed again in April. The company offered no explanation but said the slowdown «has significantly reduced expectations for the remainder of the financial year».
It also noted an unfavourable currency move, after the Australian dollar rose more than 10 percent since mid-January, hurting exporters.
«With the other milk stocks up, it would seem that some of the issues are to do with Murray Goulburn rather than the general milk market,» said Bill Keenan, general manager of equities at Lonsec Stockbroking.
Just nine months after listing, the maker of Devondale milk and butter slashed its full-year net profit forecast to between A$39 million and A$42 million ($30.2 million and $32.5 million), less than half the $85.8 million it forecast in an Initial Pulic Offering prospectus.
The company also cut its forecast farm gate price to between A$4.75 and A$5.00 a kilogram for the year to June 30, from A$5.60 per kilogram previously, and said it will provide financial assistance to farmers resulting in charges of up to A$165 million.
In a statement to the Australian Securities Exchange, Murray Goulburn said managing director Gary Helou will step down and quit as a company director. It said Helou and the board agreed the company «will be best served under fresh leadership».
«We are very disappointed to be announcing this downgrade,» said David Mallinson, executive general managing of business operations, who is stepping in as acting chief executive officer, on an analyst webcast.
«I am very aware of the impact this will have on investors and suppliers.»
Murray Goulburn shares slumped 35 percent to a record low of A$1.39, compared with their A$2.10 issue price. The broader market meanwhile rose nearly 1 percent.
Other dairy exporters also rose, a sign that Murray Goulburn’s misjudgment of future Chinese demand was especially strong. New Zealand-based Fonterra Co-operative Group Ltd , another China supplier, gained 1 percent.
Murray Goulburn said that after sales of its milk powder sachets in China tripled in the six months to end-December, it increased production only to see orders drop over Chinese New Year in February.
Sales to China recovered in March, but slowed again in April. The company offered no explanation but said the slowdown «has significantly reduced expectations for the remainder of the financial year».
It also noted an unfavourable currency move, after the Australian dollar rose more than 10 percent since mid-January, hurting exporters.
«With the other milk stocks up, it would seem that some of the issues are to do with Murray Goulburn rather than the general milk market,» said Bill Keenan, general manager of equities at Lonsec Stockbroking.
