The future ownership of Murray Goulburn and whether the company will be able to pay its suppliers without borrowing further money have overshadowed the fact it recorded a major loss of revenue and reduced milk intake in the past financial year.
Last week an Australian Stock Exchange update announced Murray Goulburn’s 2016-17 financial year results which showed the co-operative received 2.7billion litres of milk, down by 21. 8 per cent on the previous year’s figures, and revenue dropped by 10.3 per cent to $2.5billion during the same period.
But it was the news that Murray Goulburn would consider debt funding milk price payments by up to $100million if it suffers further reductions in milk supply that really stood out — especially because the company is expecting milk flow to fall to about two billion litres in the 2017-18 year.
‘‘Our focus is on maintaining a competitive milk price to shore up the two billion litre lower milk intake that we have and, given that lower capacity, allocate our milk intake to those product streams that are the most profitable,’’ chief executive officer Ari Mervis said.
‘‘We came out earlier than usual with our opening price in response to suppliers who wanted us to come out early. We are maintaining $5.20/kg MS and our underlying assumptions support this price.
‘‘We also have $100million of funding in place if required to support this price.’’
Going into the future, Mr Mervis assured suppliers there was nothing to worry about, despite a challenging time for the industry following the now-infamous clawbacks.
‘‘What suppliers can expect in the coming year is a committed management team that will do everything it can to restore farm gate milk price,’’ he said.
‘‘Unfortunately these things are not solved overnight; we need to work through the issues thoroughly and properly.
‘‘The FY17 year has tested the strength and resolve of MG and its suppliers.
‘‘The coming months will be pivotal for the future of the business as the board and management finalise substantial business improvement programs and third parties are given an opportunity to submit formal proposals to the company.
‘‘Ownership of Murray Goulburn remains with our farmer suppliers,’’ Mr Mervis said.
‘‘Our constitution restricts any one owner to 0.5 per cent of the issued capital. To change this, 90 per cent of our farmer shareholders would need to agree.’’
In terms of the company’s financial position, Mr Mervis said the difficult decisions that had been made were showing positive results.
‘‘Hard decisions taken are starting to pay off,’’ Mr Mervis said.
‘‘We have managed our debt level down, exceeded our target in working capital reduction and are focused on improving returns across the business.
‘‘Clearly there is still work to be done. The price that we have paid is not as competitive as some of our competitors out there, and some of our suppliers have been under some financial stress and have taken the decision to move to other processors.’’
One of those to move on is Invergordon farmer Mark Norman, who now supplies Australian Consolidated Milk.
‘‘There is no doubt in my mind that I wouldn’t have been able to milk cows for another 12 months on their (Murray Goulburn’s) prices,’’ Mr Norman said.
Despite this, Mr Norman said there would be a different feeling around the industry if a new owner took the reins.
‘‘It is such a great company and an icon of the industry, it would be a sad day for the dairy industry if it were to be sold.’’