MG buyers insist co-op will recover

THE chief of the Canadian dairy giant set to take over Murray Goulburn has pledged to return the business to profit by winning back milk from farmers and producing higher value products.

Saputo chief executive Lino Saputo also says he wants to build a “strong and sustainable” local dairy industry and vowed to continue to pay “leading and competitive” milk prices to local farmers.

The comments follow the $23 billion Saputo, which already owns Warrnambool Cheese & Butter, moving to buy the nation’s biggest milk processor for $1.31 billion.

“With the right focus, with the right people in the right place, with the right decision at the right time, we believe that MG can come back to its historical levels of profitability — we’re very confident about that,” Mr Saputo said.

Saputo will account for one out of every three litres of milk, and the two biggest players in the local dairy industry will be foreign owned, if regulators clear the deal.

Mr Saputo said Murray Goulburn was in “a distressed situation” with some plants running at 40 to 50 per cent capacity as farmers sent supplies to rivals. Existing supply contracts meant the bulk of milk was tied up in low-value commodity lines.

Mr Saputo said generating $175 million to $185 million in annual earnings before interest, taxes, depreciation and amortisation from the business was “very achievable” — a target not far from the record $200 million the Melbournebased co-op posted in 2014.

The key was to attract more milk to ensure plants were running near capacity and able to produce higher value products.

“If we are able to get more milk, we will be able to get back into the high margin products,” he said.

Murray Goulburn plunged into crisis last year after it slashed its milk price and tried to claw back past payments to farmers after a failed foray into China. Its milk intake has dropped from 3.5 billion litres to less than 2 billion litres.

Mr Saputo said it was “highly unlikely” Murray Goulburn would return to processing 3.5 billion litres, given the industry was becoming increasingly competitive.