Gerry’s dairy diversification hits a dead end

Gerry Harvey’s dreams of creating a thriving dairy empire have soured.

Gerry Harvey in Sydney.

Billionaire Gerry Harvey’s dreams of creating a thriving dairy empire within his international furniture, bedding and consumer electronics retailer Harvey Norman have soured, after a jointly-owned Victorian farm was placed into administration.

Harvey Norman has had a long spirit of adventurism when it comes to investing its shareholders’ funds and in the past has bought stakes in property developments, real estate and miners’ camp accommodations.

Three years ago Harvey Norman shareholders woke up to the news the retailer had paid $34 million for a 49.9 per cent stake in a dairy farm in the Coomboona district of Victoria’s Goulburn Valley.

At the time, Mr Harvey said he had grand plans for the investment, with the first module of dairy cows destined for Coomboona to number around 6000, with the plan to sell milk to processors. Coomboona, through wholly-owned subsidiaries, owns land and farm assets in the Goulburn Valley. The business ­includes dairy farm operations and a pedigree breeding and genetics division.

But now the dairy business has lurched into administration following the announcement, four weeks ago when Harvey Norman released its half-year results, that the retailer would be forced to write off more than $20.7m against the investment.

The Harvey Norman accounts revealed the dairy business had triggered equity accounting losses of $4.57m for the retailer, compared to trading losses of $3.26m for the same period last year.

There was also a growing dispute between the joint venture partners, with Harvey Norman demanding the repayment of $18.5m in loans.

Ryan Eagle and Stewart McCallum, of Ferrier Hodgson, have been appointed administrators of Coomboona holdings and Peter McKenzie Anderson, William James Harris and Matthew Wayne Caddy, of McGrath Nicol, have been appointed receivers by National Australia Bank.

“We are in the process of conducting a review of the financial position and operations of Coomboona with a view to stabilising the business while we run an orderly sale campaign,” Mr Anderson said.

“We will be in communication with all relevant stakeholders and will be providing updates as appropriate.”

The dairy business is sitting on cumulative losses of more than $13m.

In March, when Harvey Norman announced the large writedown of its stake in the dairy, Mr Harvey said it only represented a tiny loss for the large international retail chain, and in comparison to the billions Harvey Norman was worth.

“Look, the situation was we ­invested in a dairy and it hasn’t been a good result, but it doesn’t even represent 1 per cent of Harvey Norman.’’

But investors were less convinced and when the dairy losses were released as part of Harvey Norman’s interim results, which also included lower returns from its billion-dollar property portfolio, shares in the retailer posted their biggest one-day fall in 24 years.

Shares in the group closed down 0.3 per cent yesterday at $3.63.