Gary Helou had a grand vision – to create a global dairy giant that would grow and prosper on the back of the seemingly insatiable demand from Chinese consumers for better food.
Unfortunately, that vision blinded him to the reality of what was unfolding in front of him and has cost him his job as chief executive of Murray Goulburn and plunged the dairy co-operative he led into crisis.
Murray Goulburn slashed its full-year earnings forecasts by 40 per cent last week and said it would cut the price it would pay to farmers for their milk from the promised A$5.60 per kilo of milk solids to just A$4.75 to A$5. It blamed lower commodity prices and adverse foreign exchange rate movements.
What’s striking about these downgrades is how quickly they appear to have snuck up on Helou.
Just two months ago he was telling farmers they would still get A$5.60 a kilo.
In fact, the week before the downgrade, Helou was reportedly touting a A$6 price.
By contrast, back in February Fonterra cut its farmgate milk price from $4.15 a kg to $3.90.
Fonterra might have known that things weren’t all that rosy for the dairy industry but that same month Helou was predicting a net profit of A$63 million. Less that three months later Murray Goulburn is expecting a profit of as little as A$39 million.
As Helou stood by his forecasts and reiterated the farmer milk payout, things were turning sour in the milk business. Global dairy prices had collapsed and the Chinese economy was slowing down. China also recently changed regulations governing the online sales that are so important to this market. Finally, the Australian dollar has risen strongly against its US counterpart this year, reducing the amount exporters earn.
Source: NZ Herald
