Dairy co-op Murray Goulburn to axe jobs and plants as milk industry crisis continues

The Australian giant is to shed up to 360 workers, close three processing facilities and suspend divident payments

Problems at Australian dairy co-op Murray Goulburn have taken another turn as it announced plans axe up to 360 jobs.

It is also preparing to lose AU$410m in writedowns and restructuring, close three processing facilities and suspend dividend payments in a bid to shore up its milk supply.

But it will also forgive debts owed by farmers under its controversial Milk Supply Support Package (MSSP), which Murray Goulburn introduced after it cut the price it pays to milk producers last April.

The move saw the co-op make milk payments above the farmgate price but required farmers to pay it back from future milk payments. It prompted some dairy farmers to switch to other dairy processors.

Murray Goulburn said the forecast farmgate milk price for 2017 had been downgraded from $4.70 per kilogram of milk solids to $4.60, but it is committed to paying an average of $4.95 which it promised in October 2016. It may fund the difference through debt.

The co-op giant has also axed plans for major capital investments in its Dairy Beverages and Nutrionals businesses.

About 360 jobs at its Edith Creek facility in Tasmania, and its Rochester and Kiewa facilities in Victoria, will be affected by the closures over the next two years, saving the co-operative $40-50m a year.

Ari Mervis, chief executive since mid-February, said: “These have been difficult decisions to make, however they are necessary steps on the journey to ensure the future strength and competitiveness of Murray Goulburn.

“A strong MG is of fundamental importance to the Australian dairy industry, and these decisions are necessary to lay the foundation for the future.”

Murray Goulburn said it will make a special payment to continuing and retired suppliers who made MSSP repayments between July and September 2016, and to any suppliers who start supplying it with milk again by July 31.

Related: Lessons to learn from the Murray Goulburn saga

The latest announcements from the co-op drew flak from Victoria state premier Daniel Andrews, who pledged to work with the company to save jobs but said workers had been treated poorly.

He said: “I want to be careful what I say here because I do genuinely want to work with this company and support these workers and continue to support this industry.

Victoria state premier Daniel Andrews had strong words for the co-op (Photo: Swinburne University of Technology)

“But I tell you what, we had the clawback a year ago, they have now walked away from that having done enormous damage to dairy farmers and dairy farming families and communities across the state having taken back money that had been properly paid to those farmers for work they had done and product that had already been provided.

“It’s an awful way to treat proud people that produce the best milk products anywhere in the world. Now to think these job losses are coming just a year later.

“I’ll work with the company, absolutely, but I will call it as I see it. I just don’t think our dairy farmers have been treated particularly well by this company for quite some time.”

He added: “MG have to have a fresh look at this. If that means the Government needs to get involved to facilitate that or support it I stand ready to do that. I think our dairy farmers were very, very badly treated and indeed these staff have every reason to be upset and angry, of course. Let’s try and come together and work together for a more positive outcome for them.”

The co-op also faces court action in the Federal Court from the Australian Competition and Consumer Commission (ACCC). The watchdog alleges the information Murray Goulburn provided to farmers in the months before dropping the milk price was “false and misleading”.

ACCC chair Rod Sims said farmers who were not expecting the price cut were not able to re-adjust their budgets.

“We’ll be alleging that Murray Goulburn knew that farmers relied on this information and that they made decisions based on what Murray Goulburn was telling them,” he added. “That caused the farmers considerable problems, because many had invested money based on that price.”

Murray Goulburn recorded a first-half loss of $31.87m in February, compared to a profit of $10m a year earlier.

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