Murray Goulburn securities jumped 5% yesterday after some good news from the embattled dairy processor. The shares ended at 63.5 cents, a bit of respite from the selling pressure of the past few weeks.
The company revealed in a statement to the ASX yesterday morning that it had lifted its opening farmgate milk price by about 10% and boosted the top end of its full-year target range following what it says was a review of its budget assumptions.
Global dairy prices for milk solids are up around 12% since March after dipping by 0.8% in the latest auction run by NZ giant Fonterra last Tuesday. Murray Goulburn said yesterday its new opening 2017-18 price will be $5.20 per kilogram of milk solids, 50 cents above the price revealed two weeks ago that upset suppliers and saw the shares plunge 23% over two days.
Rival Bega Cheese has since announced an opening price of $5.50 per kilo for its Victorian milk supply, while NZ dairy giant Fonterra raised its initial forecast for the 2017/18 season to $NZ6.50 ($A6.23).
“MG recognises that in the current competitive environment it needs to maintain milk supply and provide improved cash flow for suppliers,” Murray Goulburn said in the statement issued on Thursday.
"The decision to revise the opening price to $5.20/kg is intended to assist in maintaining competitiveness and support the supplier base."
Murray Goulburn has also widened its full-year target range to between $5.20 and $5.50, lifting the top end from the $5.40 announced on June 6.
"The previous opening price announcement … was earlier than in prior years in order to try to assist suppliers with budgeting and business planning," Murray Goulburn said in a statement to the ASX. “Since then, MG has had the opportunity to review the 2017-18 budget assumptions."
Those assumptions take account of dairy commodity prices, exchange rates and cost saving initiatives, Murray Goulburn said. the company has already revealed plans to sack 250 people and close two plants in Victoria and one in Tasmania in a cost cutting exercise.
Murray Goulburn shares have been trading at or around an all-time low of 60 cents since June 6, when the company spooked investors with the announcement of a strategic review, in addition to the already announced cuts.
The co-operative is set to give details of this review with its full-year results, in August.
