Sharechat Logo

Murray Goulburn to rethink capital structure in latest business review

Tuesday 6th June 2017

Text too small?

Murray Goulburn Cooperative will rethink its capital structure and how it shares profits with investors in the ASX-listed MG Unit Trust as Australia's biggest milk processor seeks to revive the business after last year's slump in global milk prices wrong-footed the dairy cooperative.

Chief executive Ari Mervis today announced a strategic review of the business to “look at all aspects of MG's strategy and corporate structure, including the profit sharing mechanism and capital structure”, he said in a statement to the ASX. The Melbourne-based company will update its farmer-shareholders and unit trust investors on the review at its annual earnings announcement in August.

"I see this review as a fundamental next step to strengthen MG for the future," Mervis said. "While the previous decisions resulting from the manufacturing footprint review, including the announcement of three site closures were necessary, I do not consider them alone to be sufficient to move the business forward."

Murray Goulburn announced plans to close factories in Edith Creek, Rochester and Kiewa in an overhaul of its processing footprint, forgive loans to farmers to protect milk supply, and deviate from its profit-sharing mechanism by up to A$410 million to prop up farmgate milk payments after losing farmers to rivals after last year's slump.

The cooperative today forecast a farmgate milk price of between A$5.20 per kilogram of milk solids and $5.40/kgMS for the southern milk region in the 2018 season, with an opening farmgate milk price of A$4.70/kgMS. That range depends on commodity prices, exchange rates and Murray Goulburn's cost-cutting measures, with an intake of 2.5 billion litres of milk.

"Although global commodity prices have shown some recovery since this time last year, whole milk powder and particularly skim milk powder prices remain under 10-year averages," Mervis said. "We have also had regard to GlobalDairyTrade auction results over the past two months and current futures pricing, both of which suggest some ongoing price volatility in global markets."

The ASX-listed MG units last traded at 86 Australian cents, having dropped 7 percent so far this year.

(BusinessDesk)



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: Blue-chip stocks Meridian, A2 lead market lower
NZ dollar rises on Brexit hopes, rate cut reassessment
Three not failing, just needs a new owner - MediaWorks CEO
Major investors back new CBL class action targeting directors
Rip Curl purchase a done deal on Kathmandu proxies alone
Comvita chair Neil Craig eyes the exit once he finds a new CEO
Mercury raises guidance on increased storage, high spot prices
Eroad reports strong 3Q sales growth, eyes ASX listing
MediaWorks puts TV business on the block
NZ dollar benefits as preliminary Brexit deal improves risk appetite

IRG See IRG research reports