Murray Goulburn slashes milk prices under revised trading outlook

By Jim Cornall

- Last updated on GMT

Murray Goulburn has amended its farmgate milk price to between A$4.75 and A$5.00, saying its.
Murray Goulburn has amended its farmgate milk price to between A$4.75 and A$5.00, saying its.

Related tags Milk United states dollar

Australia’s largest dairy cooperative Murray Goulburn (MG) has reviewed the expected performance of the business for the balance of FY16 and is dropping its farmgate milk price (FMP) by slightly more than 10%.

MG said that the figure of A$5.602 ($4.273) per kilogram milk solids (kgms) provided on February 29, 2016 is not achievable, and prices will now be between A$4.75 ($3.62) and AU$5.00 ($3.81) per kgms.

The cooperative said that this is partially a result of the Australian dollar to US dollar exchange rate, lower than expected demand for exports, and low commodity prices.

MG said it now expects its FY16 Distributable Milk Pool (DMP) to be approximately A$170m ($130m) to A$220m ($168m) lower than previously forecast.

Prices paid will be higher

MG, however, announced that it is creating a milk supply support package, to provide a milk support payment above the actual FY16 FMP, so that suppliers will receive the cash equivalent of A$5.47 ($4.17)per kgms in FY16.

This will result in additional borrowing at the end of FY16 of approximately A$95m ($72.5m) to A$165m ($126m).

MG said that it “has headroom within its existing funding arrangements, and this initiative is not expected to impact MG’s planned capital investments”.

Trading halt

On April 22, MG asked for a trading halt for its MG Unit Trust on the ASX.

When trading resumed Wednesday morning, the value of shares dropped from A$2.14 ($1.63) to A$1.40 ($1.07), before closing at A$1.27 ($0.97). Thursday it reached a low of A$1.22 ($0.93) before making a slight recovery to close on A$1.30 ($0.99).

MG changes in management

This comes as Gary Helou stepped down as managing director of MG. Helou will also cease to be a director of MG Responsible Entity Limited, the responsible entity of the MG Unit Trust.

Following the MG trading update, the board and Helou agreed that the company going forward will be best served under fresh leadership. As a result, David Mallinson, executive general manager business operations, was appointed interim CEO of MG and MG Responsible Entity Limited.

MG’s chief financial officer, Brad Hingle, also resigned from his position following Helou’s decision to step down, but will remain to assist with the finalization of the FY16 annual results.

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