Dairy giant fends off takeover bids

STRUGGLING dairy group Murray Goulburn Co-operative says it has fielded a string of takeover proposals as it tries to arrest a slide in revenue and milk supplies.

MG yesterday revealed it had tumbled into the red in the year to June, with a net loss of $370.8 million, compared with a $39.8 million profit the previous year.

Its bottom line was hit by $405 million in writedowns, including the effect of forgiving debts owed by farmers under its controversial loan package — an initiative Murray Goulburn admits has hurt its standing among suppliers.

Costs associated with the closure of three factories in Victoria and Tasmania also took a toll.

Full-year underlying profit was $34.7 million, compared with $40.6 million a year ago.

Revenue fell 10.3 per cent to $2.49 billion as it reported a 22 per cent drop in milk supplies to 2.7 billion litres. The group expects that tally to fall further this financial year to two billion litres, but is maintaining its opening farmgate milk price of $5.20 for each kilogram of milk solids.

That is less than the opening prices being offered by rivals Bega Cheese and Fonterra, and Murray said it might have to prop up its price by drawing $100 million in debt.

The group has tested the resolve of farmers since cutting the price it paid for their milk by 10 per cent in April last year — a move that battered suppliers already dealing with rising water and energy bills.

“Murray Goulburn has experienced a difficult year as a result of the significant reduction in milk intake and adverse seasonal conditions,” chief executive Ari Mervis said yesterday.

Since the co-op had launched a review of its operations in June it had received “a number” of indicative proposals from unnamed third parties for parts or all of the business.

“It’s not wholly surprising, given the terrific asset that Murray Goulburn is, that we have had a significant amount of inbound and unsolicited confidential approaches, or interest I should say, being made to the company,” he said.

Coming months would be pivotal as MG refined business improvement programs and gave third parties a chance to submit formal proposals.

It did not declare a final dividend. Units in Murray Goulburn’s listed entity, the MG Unit Trust, yesterday rose 3.2 per cent, or 2c, to 64.5c.