Murray Goulburn posts healthy pre-tax profit, despite lower milk supply

MURRAY Goulburn posted its best half-yearly pre-tax result in four years, as signs emerge the company has financially turned the corner.

Hopeful: Despite a 31 per cent lower milk volume for the first half of 2017-18, MG is clawing its way back financially.

MURRAY Goulburn posted its best half-yearly pre-tax result in four years, as signs emerge the company has financially turned the corner.

The dairy co-operative posted a pre-tax profit of $35.1 million for the six months to December 31 last year.

But after $62.7 million in tax adjustments relating to the planned sale of assets to Canadian dairy giant Saputo were brought forward, MG posted a net loss after tax of $27.5 million.

The pre-tax profit was from revenue of $1.116 billion, 5.1 per cent lower than the $1.176 billion recorded for the previous corresponding period.

That was despite milk volume for the first half of 2017-18 being 1.1 billion litres, more than 31 per cent lower than the 1.6 billion litres reported for the same period in 2016-17.

MG still anticipates milk intake for 2017-18 to be about 1.91 billion litres, down just slightly on its original forecast of 1.93 billion litres, but significantly lower than its 2015-16 intake of 3.5 billion litres.

An MG spokesman said the pre-tax profit “reflects the impact of the improved commodity prices, allocation of milk into higher yielding products and cost reduction”.

“While management initiatives continue to address the cost base and commercial performance, the business remains exposed to competitive pressures and future financing requirements,” he said.

“The step-up announced in October 2017 as a consequence of the agreement reached with Saputo has assisted in stabilising milk intake.

“MG’s underlying farmgate milk price remains uncompetitive.”

Last October, a deal was struck with Saputo to buy MG’s assets and liabilities for $1.31 billion but the deal remains subject to shareholder and government regulatory approval. The financials included a stark warning that “if the Saputo transaction does not proceed and in the absence of an alternative transaction, the group may not be able to pay a competitive milk price”.

Ari Mervis

MG chief executive Ari Mervis remained confident the sale to Saputo would proceed, but said, with or without the sale, board directors were confident the co-operative would have sufficient funds to pay the debt MG faced in the “ordinary course of business”.

The release of the half-yearly accounts was brought forward three weeks to progress the Saputo deal, the company said.

Saputo chief executive Lino Saputo arrived in Australia this week and will address the Australian Dairy Conference in Melbourne tomorrow.