Murray Goulburn's milk collection tumbles

Murray Goulburn's milk collection tumbles, has been approached by third parties

By Rebecca Howard

Aug. 22 (BusinessDesk) - Murray Goulburn Cooperative may lose the title of Australia's dominant milk processor as its milk collection continues to tumble and confirmed it has received approaches from third parties as it undertakes its strategic review.

The Melbourne-based cooperative said milk collection was down 22 percent to 2.7 billion litres in the year to June 30 and it is forecasting it to drop to 2 billion in the current financial year, on par with New Zealand rival Fonterra Cooperative Group's forecast for 2 billion litres, a Fonterra spokesperson confirmed.

Murray Goulburn "has experienced a difficult year as a result of the significant reduction in milk intake and adverse seasonal conditions," MG Unit Trust said in a statement to the Australian Stock. The Australian cooperative reported a net loss of A$370.8 million for the year as milk collection tumbled and revenues fell. A strategic review is now underway.

That loss compares to a profit of A$39.8 million in the prior 12 months and was due to previously signalled one-off costs, such as de-recognising the Milk Supply Support Package as well as a manufacturing footprint review that eliminated some product lines. Underlying profit was A$34.7 million versus A$40.6 million, it said. Revenue fell 10 percent to A$2.49 billion.

Revenue in its dairy foods segment fell 8 percent to A$1.22 billion, largely driven by a slide in adult milk powder sales, it said. The ingredients business benefited from improved commodity prices but total ingredient and nutritional sales fell 12 percent as a key international customer for the nutritional business became increasingly self-sufficient, it said.

However, despite the difficult traditional conditions, the cooperative did reduce net debt by A$35 million to A$445 million although the gearing level was 37.7 percent at year-end versus 29 percent in the prior financial year as a result of material impairments due to its business and footprint review.

Looking ahead, it reiterated an opening farm-gate milk price of A$5.20 per kilogram of milk solids. It said a final payment above A$5.20/kgMS would be subject to favourable exchange rate movements and dairy commodity prices. The price is below Fonterra's forecast.

Meanwhile, a comprehensive strategic review has commenced and Deutsche Bank has been hired as adviser, Murray Goulburn said. Since the review was announced in June it has received a number of confidential unsolicited proposals from third parties.

"These proposals have ranged from concepts around certain non-core assets to larger proposals including whole of company transactions," it said. It has asked Deutsche Bank to seek more detail in order to value the merits of the proposals. It said it would consider the proposals, taking into account things like the ability to pay a higher farm gate milk price on a sustainable basis, any value implications for shareholders and unit holders as well as its ability to access capital as required in the future.

The ASX-listed units in the MG Unit Trust rose 3.2 percent to 64.5 Australian cents.

(BusinessDesk)

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