Announcing its full year financial results this morning, Murray Goulburn revealed its milk intake had dropped nearly 22 per cent from the previous financial year to 2.7 billion litres, and was expected to drop even further over the coming season to 2 billion litres.
«MG has experienced a difficult year as a result of the significant reduction in milk intake and adverse seasonal conditions,» MG said in a statement to the Australian Stock Exchange on Tuesday.
The dairy cooperative made a $370.8 million loss, its revenue is down 10 per cent to $2.5 billion dollars and it is carrying $445 million in debt (reduced 7.5 per cent from the previous year).
Murray Goulburn’s CEO Ari Mervis said the last year has «tested the resolve and strength» of suppliers, and said the «coming months would be pivotal for the future of the business».
Switching over
While many have made the painful decision to leave the historic cooperative, Gippsland, Victoria supplier Paul Kent refused to give up on Murray Goulburn.
«I wake up every morning wanting to produce that white stuff to send to MG, I just enjoy it,» the fourth-generation supplier said.
«We’ve been with Murray Goulburn ever since their inception, and we don’t hold any grudges, I understand people have decided to leave because of financial constraints.»
«We’re not in that situation, so we’ve ridden the highs and lows already — and we’ll ride it out again.»
Murray Goulburn confirmed it would pay $5.20 a kilogram of milk solids this season to farmers, a price that sits below rivals Fonterra, Lion, Warrnambool Cheese and Butter, and Bega Cheese.
Many farmers have been switching to Fonterra, which revealed recently it had picked up an additional 500 million litres over the same period.
«We finished last financial year with 1.5 billion litres of milk, we’ve now got 2 billion litres, it’s 33 per cent higher,» Fonterra Australia managing director Rene Dedoncker said.
The increase in supply has helped Fonterra’s new cheese factory at Stanhope in northern Victoria, where the processor has picked up around 75 new suppliers from that region alone, representing 120 million litres of new milk supply.
Board confirms approaches
While Fonterra ramps up production at its new cheese factory in northern Victoria, Murray Goulburn is in the processes of shutting down three facilities, laying off around 360 staff.
It has discontinued product lines, including infant formula, after a strategic review was completed in May 2017.
The board of directors has commissioned a further review, engaging Deutsche Bank as an advisor.
Today the company confirmed Deutsche Bank had «received a number of confidential unsolicited indicative proposals from third parties».
«The Board has requested Deutsche Bank to seek more detailed proposals from these and other relevant parties, so as to enable MG to assess the merits of any proposals,» the company said in a statement.
It said MG would only consider proposals that included paying a higher farmgate milk prices and increasing its access to capital.
Price turnaround
The downswing in prices was largely attributed to three important events: over production in European Union countries, Russia’s trade embargo, and lower Chinese demand for imports of bulk commodities.
Dairy Australia senior analyst John Droppert said while Russia was still blocking Western dairy imports, conditions in Europe and China had improved.
«Late last year the EU started to pay its farmers to produce less milk, that’s been followed by cold weather through their busy spring period, which has kept production down,» he said.
«Demand out of China has improved, and we have seen significant growth out of China in the last few months; it’s actually Chinese demand that has been driving higher overall demand.»
Source: ABC Rural
Link: http://www.abc.net.au/news/rural/2017-08-22/murray-goulburn-milk-supply-drops-and-company-announces-loss/8807696