Ques­tions raised

Shepparton News - Country News - - FRONT PAGE - By Rod­ney Woods

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 2.7 bil­lion litres of milk, down by 21. 8 per cent on the pre­vi­ous year’s fig­ures, and rev­enue dropped by 10.3 per cent to $2.5 bil­lion dur­ing the same pe­riod.

But it was the news that Mur­ray Goul­burn would con­sider debt fund­ing milk price pay­ments by up to $100 mil­lion 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 $100 mil­lion 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 now­in­fa­mous 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.’’ ■ Fund­ing will help Rochester Mur­ray Goul­burn staff, see page 12.

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