Revenue up as Murray Goulburn announces infant formula launch

By Jim Cornall contact

- Last updated on GMT

Murray Goulburn made several announcements during its 1H16 financial results presentation, including the launch of Devondale Natra Start
Murray Goulburn made several announcements during its 1H16 financial results presentation, including the launch of Devondale Natra Start

Related tags: Milk

Murray Goulburn (MG) will launch Devondale Natra Start infant formula in Australia in March 2016, with the brand available in China shortly afterwards.

The launch was revealed during the announcement of its financial results for the half year ended December 31, 2015 (1H16).

MG said it hopes to leverage the Devondale brand to drive infant formula sales in Australia and Asia. Sales of MG’s Devondale brand grew 46% from 1H15, achieving sales of more than $178.8m (A$250m) for the half year.

The company added that it is in advanced negotiations with global nutritional companies to secure major nutritional supply agreements – expected to underpin a planned $186-$215m (A$260-300m) nutritionals investment at Koroit, Victoria.

MG expects to announce these agreements in the coming weeks. The investment is expected to expand the nutritionals capacity by 63,000 tonnes per annum.

New investments

MG said that a series of investments have been completed to increase production capacity for Devondale consumer milk powders, cheese and dairy beverages.

The company said it will continue producing infant formula in Australia for third party brands.

Revenue growth of 24.1%

MG stated that revenue of $986m ($A1,379.3m), an increase of 3.7% over the first half of 2015, reflected MG’s efforts to shift to higher-value dairy foods and away from volatile dairy commodities assisted by a weaker Australian to US dollar rate, and optimizing product mix to support farmgate milk prices.

EBIT was $19.3m ($A27m), down 3.2%. Overall profit, however, rose 15% to $11.2m ($A15.6m).

With dairy foods and nutritionals products, MG said it delivered revenue growth of 24.1%, reaching total sales of $561m (A$784m).

Dairy foods

The dairy foods segment saw revenues of $495.9m (A$695m), up 27% on 1H15. MG noted that this is the second consecutive comparable period where segment revenue growth has exceeded 20%.

Dairy Foods Australia delivered revenue growth of 28.1% to $436.7m (A$612m), which MG says was driven by strong demand for Devondale branded products including fresh milk across the chilled and UHT categories, cheese and consumer milk powders.

Sales in the food service business also continued to grow strongly in the half, particularly shredded cheese, MG added.

New products doing well

During the half, MG launched new products, and added that the Devondale milkshakes and 8Bar iced coffee ranges, in particular, performed strongly.

In February 2016, MG announced it had agreed a five-year national private label contract to supply Coles brand Australian cheese​, which MG says will generate approximately $92.8m (A$130m) in additional sales per annum.

International revenues grow in Asia

All markets delivered revenue growth, particularly Vietnam, Singapore and China.

In China, MG’s largest dairy foods export market, sales of consumer milk powders and cheese were up compared to 1H15, which MG says was supported by expanded grocery and online listings, cross-border sales and a broadened distribution network.

“Internationally, Dairy Foods sales growth of 21.4% (to $59.2m/A$83m) was supported by a broadened distribution network and very strong demand for Devondale branded consumer milk powders,”​ MG managing director, Gary Helou said.

“In particular, we are pleased to have advanced our Asian distribution strategy in this period by securing valuable supply agreements with major retailers and entering into joint business plans with global eCommerce platforms including JD.com and Tmall.com.”

Ingredients and Nutritionals

Volatility in global dairy commodity markets has continued in the new financial year, MG said, and prices have not materially recovered. As a result, revenue for the Ingredients and Nutritionals segment was down 13% to $368.9m (A$517m) compared to 1H15.

Helou said, “The first half has seen the continuation of the decline in Chinese imports of commodity dairy ingredients and the ongoing Russian embargo on dairy imports.

“This has been compounded by increased European milk supply, resulting in a period of significant oversupply in global dairy commodity markets, driving commodity prices towards record lows.”

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