The termination means the planned $280 million nutritionals plant at Koroit in Victoria is in doubt unless new suppliers can be found.
Helou unveiled the nutritionals deal in March, one month before being shown the door from Australia’s largest dairy co-op.
It was all part of a grand plan to export high-value-added milk powder to China with the help of a global leader.
The company was planning to install a huge 45,000 tonne dryer at Koroit but now the plans are on ice perhaps indefinitely.
When Murray Goulburn raised $500 million in a public float two years ago the new investment was a key selling point, but it seems instead the money will go to paying back debt.
In its statement today Murray Goulburn said around 90 per cent of its existing nutritional sales were destined for markets outside China, with its Indonesian supply agreement with Kalbe Nutritionals still in place.
The co-op has clearly decided it didn’t have the resources to continue with the new plant investment, which has seen the Mead deal fall over.
Some in the industry blame changes in Chinese regulation for the failure of the Murray Goulburn venture with Mead Johnson.
It is suggested Beijing has made clear it wants to rationalise the number of brands sold on the market and, based on this, MG was unprepared to commit to further investment.
Murray Goulburn’s move comes amid signs of blue sky on the global market with skim milk powder prices on the rise.
Murray Goulburn’s stock price rose one per cent to 96 cents a share on the news.
Separately the slide in Bellamy’s share price continued today with the stock down 3.9 per cent at $6.58 a share.
Morgan’s analyst Belinda Moore has cut her profit estimate for the company by 45 per cent to $33.6 million, below last year’s return of $38.3 million.
She said a possible takeover bid for the company was the key upside risk for the stock.
Source: TheAustralian
Link: http://www.theaustralian.com.au/business/opinion/john-durie/murray-goulburn-formula-plant-now-in-doubt-after-mead-johnson-deal-fails/news-story/1449629b2db0c1270062abab42c77205
