Units in the listed Murray Goulburn unit trust plunged 42% (from last Thursday’s close of $2.14) after the company yesterday downgraded profit and revealed CEO Gary Helou would be leaving the company.
The shares had hit a 52-week high in late December of $2.70, and yesterday’s close of $1.24 represents a 54% drop in value in five months.
Mr Helou will leave the top job less than a year after Murray Goulburn’s partial float on the ASX, which raised $500 million from investors.
The company released a trading update yesterday which said it now expected a net profit after tax of between $39 million and $42 million, down from February’s forecast for a net profit of around $63 million and the prospectus forecast for earnings of $89 million.
In February the company predicted a farmgate price of $5.60 per kilogram of milk solids. It now expects that number to be between $4.75 and $5 per kilogram of milk solids.
Yesterday’s statement said the board was “very disappointed” Murray Goulburn could not hit the milk price targets in its float documents from May last year or as revised in February.
The co-operative cited a spike in the Australian dollar and a weaker global dairy market that continues after China slashed its spending on bulk dairy imports and amid Russia’s ongoing trade sanctions on many western products.
According to the Global Dairy trade platform run by Fonterra, NZ’s dairy giant, world milk products prices have fallen by a net 18% since last November (despite rises in the two auctions this month).
In the statement to the ASX, Murray Goulburn’s board and Mr Helou said given the challenges facing the industry, it would be best for him to resign.
"The stewardship of the company going forward will be best served by fresh leadership," the co-operative said.
At the same time, its chairman Philip Tracy praised Mr Helou, saying history would judge him as a "visionary leader".
“Gary has made a significant contribution to MG and has been a powerful driving force behind out transition to become a globally recognised, ASX-listed food business," Mr Tracy said.
Mr Helou said the company had transformed and delivered "premium" prices for farmers.
“While maintaining this price has proven difficult in current market conditions, I firmly believe MG has the foundations in place to support a strong and successful business in the years ahead," he said.
The chief financial officer Brad Hingle will also leave the co-op after finalisation of the 2015-16 annual results. Yesterday’s statement said Mr Hingle resigned following Mr Helou’s decision to stand down.
The company’s executive general manager business operations David Mallinson will serve as interim chief executive while a replacement is found.
