Dairy co-operative Murray Goulburn is cutting milk prices for suppliers after discovering it had been overpaying them for 10 months.
Australia’s largest dairy processor expects to pay around AUD $4.75, a drop of 10% from AUD $5.60, in a bid to claw back the costs. Managing director Gary Helou and chief financial officer Brad Hingle are stepping down. David Mallinson, currently executive manager business operations, has stepped in as interim chief executive.
Against a backdrop of falling global milk prices Murray Goulburn has been focusing on value-added dairy foods production, particularly in China. But a stronger Australian dollar and lower adult milk powder sales in China hit performance.
The global oversupply also led to lower prices, and Murray Goulburn’s profit fell by a third to AUD $10m. To support farmer members during this difficult period the co-op will introduce milk price support package. The cost of this help will be taken from prices in the future, smoothing the impact over the next three years.
Last year the dairy giant listed a unit trust on the Australian Securities Exchange to raise to raise AUD $500m via the public offering to fund capital investments in value-added products. The business kept its co-operative structure but the unit trust model enables external investors to buy non-voting shares.
The co-op expects to achieve net profit after tax attributable to shareholders of between AUD $39 million to AUD $42 million, resulting in a dividend/distribution to shares/units of between 7.1 cents to 7.8 cents per share/unit for the full year.
Following the announcement of the price fall Murray Goulburn’s listed entity, MG Unit Trust, plunged 90 cents, or 42%, to $1.24.
Regarding Mr Helou, chair Philip Tracy said: “Gary has made a significant contribution to MG and has been a powerful driving force behind our transition to become a globally recognised, ASX-listed food business. We thank Gary for his passion, drive and leadership during what has been an important transformation period for MG.”
Mr Helou added: “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. 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.”