The dairy co-op says it is no longer feasible to pay $5.60 per kilogram of milk solids, and now expects to pay between $4.75-5 per kilogram, a drop of around 10 per cent.
MG says it will introduce milk support payment programs to give suppliers an equivalent milk price of $5.47 per kilogram.
The board of Murray Goulburn says the company will be best served by new leadership under the changes.
The chief financial officer Brad Hingle, along with Mr Helou, will also leave the co-op after finalisation of the 2015-16 annual results.
The MG statement said Mr Hingle resigned following Mr Helou’s decision to stand down.
Mr Helou has been the driver of significant change of the company, particularly its drive to move to value added products.
The board has appointed David Mallinson, currently the executive general manager of business operations, as the interim CEO.
«During my time at MG we have transformed the company’s capabilities and capacity and in the process delivered two consecutive years of premium milk prices for Australian farmers,» he said in a statement.
«While maintaining this price has proven to be difficult in current market conditions, I firmly believe MG has the foundations in place to support a strong and successful business in the years ahead.»
Global dairy oversupply weighs heavily on prices
MG says it now expects to achieve net profit after tax of between $39 and $42 million.
The company in February had forecasted an after tax profit of around $63 million. Early forecasts had tipped an $89 million after tax profit.
Global dairy prices have continued to slide this year but the company has kept the price it pays farmers unchanged.
In New Zealand, dairy giant Fonterra has cut the price it pays farmers throughout the season to deal with global conditions.
Mr Helou was the driving force behind MG’s partial float on the ASX last year.
MG entered a trading halt on Friday, April 22, when it announced it was reviewing its operations.
Shares in the co-op closed at $2.14 at the end of trade the day before.
Trading of MG shares resumed when the ASX opened, immediately falling 35 per cent to around $1.40.
Farmer fears price cuts will force suppliers out of the dairy industry
Dairy farmer Andrew Leahy, from Murrabit in northern Victoria, said the price drop came as a shock.
He said he was disappointed the prospect of a price drop wasn’t raised at supplier meetings earlier in the year.
Mr Leahy said the high price of water, combined with price cuts, would force farmers out of the industry.
«It’s just unprecedented…the main impact will be people just won’t be able to afford to do it and probably start selling cows and there will be some more dairy farm businesses shaken out of the system that we will lose,» he said.
«I think we’ll lose a lot of the northern Victorian dairy farmers.»
Source: ABC
