Murray Goulburn chief speaks up on dairy issue

Murray Goulburn factory2Chief executive Ari Mervis discussed Murray Goulburn’s latest move to shutdown factories. He was also critical of the Milk Supply Support Package (MSSP).

“Not only had it created a financial burden on the farmers, perhaps more importantly it created an emotional burden or disconnect between the suppliers and their co-op. The board had recognised that this had caused a significant outflow of milk and had the potential to incite further milk outflows,” said Mervis.

Murray Goulburn will close processing facilities at Tasmania’s Edith Creek by December and Victoria’s Rochester and Kiewa by the end of next year. ETU Victorian trade union said it will cost hundreds of job losses because of poor management and recklessly low prices.

“First they managed to send the farmers to the wall with reckless milk price promises and now it’s processing workers who have to cop it,” trade union secretary Troy Gray said. “Murray Goulburn should be ashamed. These workers deserved better. This will be hard for the country towns affected.”

The dairy giant will cut up to 360 jobs when it closes three manufacturing facilities next year as it endeavours to improve its financial performance. The company announced this week it will forgive $148 million of debts under its controversial and will take a $410 million hit from writedowns and restructuring initiatives. Murray Goulburn will also introduced at the same time the co-op cut the price it paid farmers for their milk in April, 2016.

Under the MSSP, they made payments above the reduced farmgate milk price but required farmers to repay it from their future milk payments, causing some to switch to other processors. Murray Goulburn will also make a special payment to continuing and retired suppliers who made MSSP repayments between July and September 2016, and to any suppliers who start supplying it with milk again by July 31.

The Electrical Trades Union said electrical maintenance workers were among those who will lose jobs because of Murray Goulburn’s “incompetent management”. Gray said the union’s officials were working with the company to understand what will happen to the workers, including some who have worked at the Rochester plant for 40 years. National Union of Workers said about a quarter of Murray Goulburn’s milk powder and cheese workers are employed at the three plants to be closed.

“Job cuts today may improve Murray Goulburn’s share price but will leave workers and farmers facing great uncertainty,” NUW’s Victorian secretary Gary Maas said. “We would expect that workers from these sites will be provided opportunities to relocate into positions elsewhere in Murray Goulburn.”

The dairy giant has been struggling to maintain its milk supply after wet weather in August and September cut the amount of milk produced by its suppliers. The company recorded a first-half loss of $31.87 million in February, after a $10 million profit a year earlier. Mervis said Murray Goulburn this year would have a milk intake of about 2.7 billion litres, which was not sufficient to warrant the current 11 processing facilities.

Campaspe Shire councillor Leigh Wilson said the loss of about 100 jobs at the Rochester factory would affect other businesses in the town.

“A lot of people in the community expected bad news but this is the worst news we could hear,” Wilson said.

Murray Goulburn also said that, because of weaker trading conditions, the forecast farmgate milk price for 2017 had been downgraded from $4.70 per kilogram of milk solids to $4.60, but the co-operative remains committed to paying an average of $4.95 which it promised in October 2016. The difference may be funded by debt.

Independent expert Graeme Samuel said the initiatives undertaken by Murray Goulburn should help it in retaining milk supply and improving profitability, but would have a material impact on debt and result in a value transfer from equity holders to suppliers.

Units in Murray Goulburn’s listed entity, the MG Unit Trust, closed down 14.5 cents, or 14 per cent, at 89 cents.

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