In a statement of claim lodged by the ACCC in the Federal Court of Australia last week, the commission alleges former Murray Goulburn chief executive officer Gary Helou and former chief financial officer Brad Hingle were aware the opening price or the circumstances supporting the 2016 season opening price were “false, misleading or deceptive, and/or likely to mislead or deceive”.
The opening price generally accounted for about 90-96 per cent of final farm gate milk price.
MG had announced as early as May, 2015, a final farmgate milk price of $6.05/kg milk solids.
MG did not amend its opening price right through until April last year, and continued to make monthly payments to farmers in accordance with the $6.05/kg of milk solids final price.
That was despite global dairy prices declining for much of that period and analysts lowering their forecasts for the 2016 financial year.
“At all relevant times, each of MG, Helou and Hingle was aware of, and monitored, commodity prices,” the ACCC alleged.
The ACCC claims dairy farmers supplying MG relied on the misleading 2016 opening and final milk prices to make business decisions and were exposed to “risk of financial harm”.
The ACCC has taken court action against Murray Goulburn, alleging the dairy co-operative engaged in unconscionable conduct and made false or misleading representations in contravention of Australian consumer law.
It also claims Mr Helou and Mr Hingle were knowingly involved in MG’s conduct.
The statement of claim provides further detail to a concise statement lodged by the commission in April this year.
The ACCC’s statement of claim alleges that in August 2015, MG developed a plan to sell more dairy products to offset the fall in commodity prices so that it could reach its target milk price of $6.05/kg of milk solids.
This included 49 per cent more 1kg milk powder sachets than it had originally planned for 2015-16, 55 per cent more adult milk powder and 27 per cent more UHT milk.
These were known as “stretch targets” when the plan was formed by August 7, 2015.
But global dairy commodity prices were in the doldrums and Rabobank forecast on August 18 that prices were unlikely to materially improve for at least six months.
The ACCC said in the statement of claim the stretch targets were “speculative sales targets, not forecasts of what MG expected to achieve”.
According to the statement, MG maintained its $6.05/kg of milk solids was achievable in December 2015, when it responded to a query from The Weekly Times’ dairy writer Simone Smith.
But within the company, there were doubts.
Former business operations executive general manager and now chief financial officer David Mallinson said in an email to Mr Hingle on October 20, 2015, that “obviously we are coming up short on our forecast milk price”.
In an email to Mr Helou on November 16, 2015, Mr Hingle said the farmgate milk price forecast had been revised to a high of $5.80/kg of milk solids.
But the following month, MG set a revised income forecast which maintained a final farmgate milk price of $5.68/kg MS, with a “downside of $5.60/kg of milk solids and an upside of $6.04/kg of milk solids”, according to the statement of claim.
The ACCC claimed MG boosted its target for 1kg sachet milk powder sales from 40,000 tonnes to 58,000 tonnes for 2015-16, generating $150.3 million in gross profit and helping to maintain its final farmgate milk price forecasts.
The ACCC alleges MG did not have reasonable grounds of meeting its new sachet sales target as it had only sold 11,872 tonnes from July to November 2015, and never sold more than 15,000 tonnes in any previous year.
MG had forecast it would sell about 42,000 tonnes of 1kg sachets of milk powder from January to June last year — an average of 7000 tonnes a month.
In January and February, MG did not meet its monthly sachet sales targets.
In an email on February 23 last year, Mr Helou wrote to MG dairy foods executive general manager Albert Moncau saying sales staff had to “get more aggressive” in their approach.
He allegedly said in the email one staff member in China “shouldn’t come back until he has put in place BIG and IMMEDIATE DEALS!!!”
On February 29 last year, MG told farmers the final farmgate milk price for 2015-16 would be $5.60/kg of milk solids, a figure it publicly stuck to until April 27 when Mr Helou and Mr Hingle stood down from their leadership roles and left the company.
That same day, MG revised its final farmgate milk price to $4.75-$5/kg of milk solids.
MG declined to comment this week and said it would respond to the ACCC’s allegations on August 30.
It noted the ACCC was not seeking a financial penalty against the company.
The Weekly Times was unable to contact Mr Helou or Mr Hingle.
No trial date has been set yet, although a pre-trial case management conference is scheduled for September 15.
Source: The Weekly Times
Link: http://www.weeklytimesnow.com.au/agribusiness/dairy/murray-goulburn-accc-accuses-exchiefs-gary-helou-and-brad-hingle/news-story/213fa0d8f43b95506575b1929ab7a73f
