Murray Goulburn increases profit despite turmoil

Dairy co-operative Murray Goulburn has increased net profit by 61.2 per cent, despite a turbulent year in which it retrospectively cut its farmgate milk price.

MG’s net profit of $40.6m for the year to June 30 was in line with its most recent forecast of $39m-$42m. However, this was well below the profit forecast originally stated in its prospectus last year.

The co-operative’s revenue of $2.8 billion was down 3.3 percent compared to the previous twelve months.

“FY16 has been a challenging year for our co-operative. We faced an environment comprised of very challenging macro settings, including sustained low commodity prices, a volatile Australian dollar, changes in Chinese regulations, and difficult seasonal conditions across many of our key regions,” said MG’s interim Chief Executive Officer in a statement.

“This has placed our suppliers and Australian dairy farmers generally in a very difficult environment. The Board, MG’s management team, and I personally have also acknowledged to all our key stakeholders that MG’s FMP downgrade so late in the year added to the challenge of FY16. Today we reported a final FMP for FY16 of $4.80 per kgms – in line with our April revised earnings guidance.

“At the time of our revised earnings guidance in April, MG made the decision to support our suppliers for the remainder of the financial year through a Milk Supply Support Package (MSSP). At the close of the year, this support totalled $183 million, net of $7 million of early repayments. This delivered an average cash price for milk to our suppliers of $5.53 per kgms, after two consecutive years of FMP above $6.00 per kgms. The MSSP is larger than originally anticipated predominantly on account of incentives payable as a result of stronger than forecast milk receipts in May and June.”

As the ABC notes, MG suppliers who were shocked by the farmgate price cut in April now owe the company an average of about $100,000 each.