Murray Goulburn meets lowered profit forecasts

The embattled dairy co-op has met downwardly revised guidance with a 61pc rise in net profit.

Murray Goulburn execs, chairman Philip Tracy, deputy chairman Kenneth Jones and interim CEO David Mallinson meet with Prime Minister Malcolm Turnbull and Deputy Prime Minister Barnaby Joyce. Pic: AAP

Embattled dairy co-operative Murray Goulburn has met downwardly revised guidance for the full year despite posting a result well below expectations shown in its prospectus last year.

Through an incredibly turbulent year, Murray Goulburn trimmed profit forecasts three times, saw its chief finance and executive officers stand down and shocked farmers by delivering a retrospective price cut in April and the lowest opening farmgate price in the sector for the 2017 financial year.

Despite this, the group (MGC) posted a 61.2 per cent jump in net profit to $40.6 million in the 12 months to June 30, in line with its most recent forecast of $39m-$42m.

The lift in earnings came despite a 3.3 per cent dip in revenues to $2.78 billion.

The group also announced a restructuring program would lower costs by $50m-$60m from FY2018 due to an undefined number of job cuts — largely at head office — and systems improvements.

The dairy co-op’s interim chief executive David Mallinson admitted the “challenging year” had been made tougher by its decision to slash the farmgate milk price.

“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,” he said.

“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.”

The pricing changes were seen pushing some suppliers out, with reports rival producers such as Warrnambool Cheese and Butter and Bega Cheese had drawn supply away from Murray Goulburn.

The co-op confirmed there had been a hit to its supply, with its milk supply down 2.5 per cent to 3.5 billion litres in FY2016 and the pain extending into the current season.

“To date MG has sustained net milk intake losses of approximately 240 million litres,” Mr Mallinson said.

“Milk intake for July was down in line with the broader Australian industry, further impacted by difficult on-farm conditions.”

The group will update the market on its intake at its AGM in October, while Mr Mallinson shied away from offering specific earnings guidance despite noting a recent turnaround in the global market environment.

“MG continues to face a challenging macro environment for the year ahead with global markets in oversupply and a higher than expected Australian dollar,” he said.

“Commodity prices have shown some upward momentum in August, with recent Global Dairy Trade results showing recovery across most commodities. This recovery comes at a time before peak production in Australia and New Zealand, and only a sustained recovery through those peaks will add meaningfully to milk price returns.”

The dairy co-op met its latest guidance for distributions to shareholders by delivering 7.41c for the year. Murray Goulburn had estimated a range of 7.1c-7.8c in April. The figure includes a final dividend of 3.91c.