The hard times (all self-inflicted) continue for Australia’s largest dairy group, Murray Goulburn with the group reporting a net loss for the year to June of $371 million and revealing that the company has fielded some approaches from tyre kickers.
It could see corporate vultures try to snap up the group on the cheap – with the company revealing it has received unsolicited offers from third parties.
In an announcement to the ASX on Tuesday the company said revenue dropped 10.3% to $2.49 billion with sales from its flagship Devondale brand down massive 14%, or $502 million, to $1.02 billion.
The result was heavily impacted by one-off costs of $405 million associated with the axing of the company’s controversial milk supply support package.
The company announced an underlying net profit of $34.7 million but will pay no dividend.
"MG has experienced a difficult year as a result of the significant reduction in milk intake and adverse seasonal conditions," chief executive Ari Mervis said.
"The financial year has tested the strength and resolve of Murray Goulburn and its suppliers.
"A new management team is now in place and a comprehensive strategic review covering all aspects of MG’s strategy and corporate structure, including the profit sharing mechanism and capital structure is accelerating." The company announced a view of operations earlier this year and as part of that will sack 360 employees in Victoria and Tasmania, as well as closing three factories in the two states.
It said on Tuesday the continuing review of the rest of the business has already yielded a “number of confidential, unsolicited, indicative proposals from third parties”.
"These proposals have ranged from concepts around certain non-core assets to larger proposals including whole of company transactions," the company said.
Deutsche Bank is advising Murray Goulburn on the potential merits of the proposals. They were not specified.
In July, the company indicated it would have a total milk intake of 2.3 billion litres. While that was a reduction, the company said it would not impact on the expected opening average farmgate milk price of $5.20 a kilogram of milk solids.
At the time, it forecast a final milk price of between $5.20 and $5.50 a kilogram of milk solids, although it warned that if the dollar remained elevated that could jeopardise that price.
Now the company is signalling it will pay more than $5.20 but will need to access $100 million from its profit-sharing mechanism to do so. That could see shareholders faced with a difficult choice.
