Warning as MG posts gloomy financial report
United Dairyfarmers of Victoria (UDV) president Adam Jenkins has warned any delay to the proposed sale of milk processor Murray Goulburn (MG) to Canadian giant Saputo ran the risk of causing significant damage to the industry.
His comments follow the industry cooperatives’ financial results made public yesterday, which includes a dramatic 30 per cent decline in milk intake for the first half of the financial year, compared with the same time last year. Milk supply had plummeted to 1.1 billion litres, attributed to an inability to pay a competitive milk price.
In a statement, MG said if the sale to Saputo did not proceed the co-operative would not be able to pay a competitive farmgate milk price.
“Further losses of milk flow may trigger an impairment to MG’s assets that could breach banking covenants and result in potential withdrawal of creditors’ support and an increased risk to MG’s ability to refinance its expiring debt facilities,” the statement said.
“The successful completion of the transaction remains a priority focus and MG will continue to work closely with Saputo to achieve completion as soon as possible.”
In October, MG announced the sale of its operating assets and operating liabilities to Canadian processor, Saputo, subject to approvals from the Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB).
The ACCC recently revised its date for announcement of the outcome of its review to March 1, with the FIRB decision expected to follow.
In reaction to the milk supply struggles, Mr Jenkins said the board and shareholders faced tough decisions in pursing the sale to Saputo.
“MG want clarity and an end to it as soon as possible,” Mr Jenkins said. “The risk of not doing something soon will have huge ramifications for the whole industry.”
He said if MG was to collapse under dwindling supply and revenue pressures, it would send “shockwaves” into global markets.
“When you have this uncertainty, they may want to look elsewhere, so we have to sort this out as quickly as possible,” Mr Jenkins said.
“Australia has great bio-security, a great product and great quality assurance system – people need our product.”
Several Victorian MG suppliers said they were not surprised by the half yearly results.
Former longtime MG supplier, Kate Lamb, Denison, in Gippsland, said her family moved to Fonterra 18 months ago.
“They weren’t paying us enough so we got out,” Ms Lamb said.
“They expect farmers to stick by them, but we all have businesses. If we ran our business the way they ran theirs, we’d all be broke.”