Difficult times for MG

As suppliers mull over whether they should stay or go, Murray Goulburn says it has been receiving “unsolicited offers” from other milk companies.

As suppliers mull over whether they should stay or go, Murray Goulburn says it has been receiving “unsolicited offers” from other milk companies.

WITH rumours of potential bidders on the co-operative circling, Murray Goulburn suppliers attended a meeting in Maffra recently to discuss the current situation.

Many suppliers emerged from the meeting positive, though some raised concerns about the future of the co-operative locally.

MG supplier Tim Dwyer said it was about sticking together.

“We’ve lost a lot of milk, but a lot of us are staying put and not going anywhere — I’m not going anywhere,” he said.

“In the end, it’s the farmers that are left (that have) all the power, a quiet majority are still behind (the co-operative).”

He admitted the situation was a challenge, after the co-operative posted a $380 million loss.

“If there has to be a partnership or funds brought in, it’s got to be someone who maintains our principles and co-operative ideals,” he said.

“We’ve got to face the fact that we’re down two billion litres.”

Graeme Anderson, a supplier from Denison, said the co-operative was honest and practical at the meeting.

“It’s acceptable, though everyone would want a bit more,” he said.

“The co-operative has to be able to function; they’ve got a lot more work to do.

“It’s a difficult time for us, but the majority would have gone away satisfied, maybe not happy.”

Mr Anderson said he had a great belief in the co-operative.

“We need it, and people in Maffra understand that.

“We want it to get on its feet again, and we still believe and want to stay with it.”

The ongoing strategic review has led to other milk companies, including multi-nationals, to begin making “unsolicited offers”, according to a recent MG media release.

MG’s chief executive, Ari Mervis, said there would be more details for suppliers and shareholders at the co-operative’s general meeting in October.

“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,” he said.

“A more detailed update on the strategic review is expected to be given at the company’s annual meeting in October.

“We haven’t made any decisions, or come to any conclusions, regarding any of our factories.

“I can’t say anything about any specific manufacturing facility ... I hope to be in a position at our October AGM to be clearer about the outcomes of our strategic review.

“We do not intend to mothball assets for the sake of it.

“We will be looking at everything on a commercial basis.”

Mr Mervis said suppliers should have faith, and it was a slow process to return the milk price to its former heights.

“Our responsibility as a management and board is to do everything practical and everything possible that we can to give our farmers every reason to stay with us,” he said.

“The milk price is the important factor.

“It is something we are single-mindedly focused on.

“It is why we are addressing our cost and revenue line as quickly as we can.

“Our focus is on maintaining a competitive milk price to shore up the two billion litre lower milk intake that we have and, given that lower capacity, allocate our milk intake to those product streams that are the most profitable.”

Mr Mervis said the company had come out earlier than usual with its opening price in response to suppliers’ wishes.

“We are maintaining $5.20 per kilogram milk solids and our underlying assumptions support this price,” he said.

“We also have $100 million of funding in place if required to support this price.

“We recognise how important it is for our suppliers that they can be sure of the amount they are going to receive this year.

“The access to this funding will only be used if required, and it should give an added level of protection and certainty to our supplier base.”

One former supplier, Stephen Dwyer, said he had been concerned at the co-operative’s direction for years.

“The exodus from MG began and continues as the co-op loses supply and shuts plants,” he said.

“3.6 billion litres of milk (is) now diminished, as of August 15 this year it was down to two billion litres. “

Mr Dwyer said another wave hit the 30th of the same month, and a final wave would hit on June 30 next year, when contracted suppliers who bought more than 60 per cent of shareholding would be allowed to leave.

“It is a snowball going down a hill gathering pace as it goes,” he said.

“Perhaps there is no way out as it has began selling its profitable enterprise.

“As it closes factories it risks alienating more suppliers.

“It cannot rely on its closed assets because someone will buy them and take more suppliers.

“The huge plants with limited input would risk losing more and more money.

“The Maffra plant could be next.”

Mr Dwyer suggested that the company begin using branding that emphasised the source of its milk, using Maffra as an example.

“It is quite frankly a marketer’s dream,” he said.

“Murray Goulburn had the ability, through its numerous factories that source milk from separate regions, it could market niche markets from each.

“It was the only company in Australia that could do it (and) as it closes factories, its chances diminish.”

Gippsland Senior
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