The loss of 270 million litres of milk a year, about 7 per cent of Murray Goulburn’s former 3.7 billion annual pool, is continuing, with the troubled co-operative yesterday admitting it had drafted plans to close processing plants once its milk supply losses haemorrhage past the 10 per cent or 400 million litre mark.
To contain spiralling costs, Murray Goulburn will sack 200 employees, mainly in its Melbourne corporate head office, close its old cheese factory at Cobram and shelve plans to build a $160 million UHT plant at Laverton on Melbourne’s rim.
It is also determined to get rid of 30,000 tonnes of powdered milk — valued at $100m on its inventory and costing $20m in extra warehouse storage costs — before December 30; a consequence of a serious misjudgment last year by MG executives of the appetite of the China market for one-litre sachets of powdered milk.
Announcing the embattled company’s annual financial results yesterday, interim chief executive David Mallinson admitted Murray Goulburn’s reputation had been deeply damaged by the fiasco and that the co-operative’s 2600 farmer-suppliers had lost faith and trust in the business.
But Mr Mallinson, who continued to blame the global slump in dairy commodity prices for MG’s woes, insisted the company’s finances and balance sheet were strong, debt levels down and its fundamental direction right.
MG announced a $40.6m net profit yesterday to its farmer shareholders and investors in its hybrid listed unit trust, consistent with its May profit downgrade but well below the $89m profit for the 2015-16 year to June 30 forecast in its listing prospectus last year.
Mr Mallinson said the co-operative had increased net profit by 61.2 per cent and that its sales revenue was down by only 3.3 per cent on the previous year to $2.78 billion, despite the turbulent year and low global commodity prices.
“We are well placed to go into the future; Murray Goulburn remains a great Australian company,” Mr Mallinson said.
“But we have damaged our reputation; (while) the milk losses to date are in line with what we expected, we are working hard to retain the rest of our milk; we’ve got to get the confidence of our farmers back.”
Murray Goulburn slashed the milk price it pays its farmers for the 2015-16 year in April from $5.60/kg milk solids (43c a litre) to a shock $4.75/kg (36c/L), leaving farmers owing an average $120,000 “overpayment” debt to Murray Goulburn.
In July, the milk price was further dropped to $4.31/kg (33c/L), way below the cost of production for most southern Australian dairy farmers.
Former chief executive Gary Helou, who encouraged his dairy farmers to expand milk production on the back of a promised and “achievable” $6/kg milk price, left Murray Goulburn in May with a $10m payout.
The annual report showed he was paid $2.7m in salary and allowances in 2015-16, as the company’s financial and sales figures imploded.
Mr Mallinson said yesterday the board had considered not declaring a $40m profit, and instead reduce the $183m “clawback” of milk prices. But he said the company decided to issue a profit dividend instead.
Murray Goulburn also said yesterday it would reduce debt to $430m on the back of its partial ASX listing. It still plans to build a $250m-$300m Nutritionals and infant formula factory at Koroit by 2019.
Source: TheAustralian
Link: http://www.theaustralian.com.au/business/companies/farmers-bale-out-of-dairy-giant-murray-goulburn/news-story/e149d1e01348b8082db880fd18f8609c