The dairy co-operative at the centre of Australia’s big farmgate milk price collapse in April has reported a 62 per cent rise in after-tax net profit to $40.6 million.
The earnings lift was despite a 3.3 per cent dip in revenues to $2.78 billion.
The investment market responded positively with the company’s unit trust share price up modestly (two cents) to $1.32 on Wednesday after the profit announcement, but still well under April’s $2.14 price.
Murray Goulburn (MG), which has farmer suppliers in Victoria, Tasmania and NSW has confirmed its 2017 farmgate milk price of $4.80 a kilogram having sent shock waves through the industry on April 21 as it announced low global prices, high costs and a stronger than expected exchange rate had forced it to rewind 2016 milk payment promises to farmers.
Key management and directors subsequently left the company in April and May.
The horror 2015-16 year, which included hard seasonal conditions for farmers and a 2.5pc reduction in milk intake, saw MG prune profit forecasts three times despite upbeat forecasts made during a strongly-subscribed partial listing of the co-op on the Australian Securities Exchange in 2015.
However, despite dairy’s continuing global market doldrums, strong growth in MG’s dairy foods sector, including exports and the Devondale brand’s domestic range, delivered a 17.2pc revenue jump for the category to $1.3 billion.
Dairy food earnings were the principal contributor to MG’s group profits, while its trading store network and milk broking business reported a 7.3pc revenue rise to $265m.
Now in the throes of a cost cutting drive, the big co-op intends to add as much as $15m to distributable milk payment pool in 2017 by slashing jobs (mostly at head office in Melbourne), reducing its inventory levels and reining in capital spending.
A planned new dairy beverages plant to produce long life milk and other lines has been put on ice because export earnings from the project are currently considered “below acceptable levels”.
Interim chief executive David Mallinson said the year’s “very challenging” macro market conditions had been compounded by changes to Chinese import regulations, a volatile dollar and the difficult season in many key southern farming areas.
“The board, MG’s management team, and I personally have also acknowledged to all our key stakeholders that MG’s farmgate milk price downgrade so late in the year added to the challenge of FY16,” he conceded.
Mr Mallinson said the co-op’s milk intake had slumped by about 240m litres last financial year, partly because angry southern suppliers have cut their MG allegiances and switched to other processors and because of the poor season.
The co-op will pay a final dividend of 3.91 cents a share, taking the full year payment to 7.41c.