Murray Goulburn to cut 200 jobs

TREVOR CHAPPELL
August 24, 2016
Australian Associated Press
Two hundred jobs are set to go as Australia’s biggest dairy producer, Murray Goulburn, works to regain the confidence of its suppliers and ease financial pressures on dairy farmers.
Murray Goulburn established a milk supply support package (MSSP) for farmers following a shock retrospective cut to milk prices in April, with the funds loaned to farmers to meet short-term demands to be deducted from their future milk payments for up to three years from 2017.
Interim chief executive David Mallinson says the cooperative has to regain the confidence of its farmers and suppliers.
“The clear way to get this back on track is to manage the impact of the MSSP,” he said.
“We know it’s an issue for our suppliers, and we’re very focused on both mitigating it now and in future as well.”
The first part of that process was to cut costs, and Murray Goulburn aims to save $50 million to $60 million a year by 2018 through staff cuts and operational improvements.
The cost initiatives are expected to make an extra $10 million to $15 million available for distribution to farmers in 2017.
Mr Mallinson said 200 jobs are to go, mainly at Murray Goulburn’s head office in Melbourne.
The company also said it had sustained a net milk intake loss of about 240 million litres since the start of the dairy season on July 1, due to farmers retiring, people moving to other processors, a wet July in Victoria and an increase in cow culling.
Mr Mallinson said two to three per cent of dairy farmers generally switch processors at the end of each season, but this year that had more than doubled to about seven per cent.
“I think it’s (because of) two parts: the absolute milk price and probably a lack of trust,” he said.
Murray Goulburn made a net profit of $40.6 million in the 12 months to June 30, in line with its most recent guidance, but down from original guidance of $63 million given in February.
Revenue from its dairy foods business rose in Australia and internationally, due to new products such as iced coffee and milkshakes, and higher sales of its Devondale branded products.
But the co-operative said it had been a challenging year, with sustained low commodity prices, a volatile Australian dollar, regulatory changes in China and difficult seasonal conditions in many dairy regions.
Murray Goulburn said it the year ahead will also be difficult, with global markets still oversupplied and the Australian dollar remaining higher than expected.
Units in Murray Goulburn’s listed entity, the MG Unit Trust, gained one cent to $1.30.
MURRAY GOULBURN OVERCOMES DAIRY CHALLENGES
* Full year profit up 61pct to $40.6m
* Revenue down 3.3pct to $2.78b
* Final dividend down 5.09 cents to 3.91 cents, fully franked