Maffra survives MG cut

Murray Goulburn is facing challenging times with a restructure and legal action.
Murray Goulburn is facing challenging times with a restructure and legal action.

MURRAY Goulburn's Maffra factory will remain open after the dairy processor named three other facilities for closure.

After undertaking an assets and footprint review in response to reduced milk supply, MG announced it will close its manufacturing facilities at Edith Creek, Rochester and Kiewa.

In other measures include:

Ceasing repayments of Milk Supply Support Package;

Total write-downs and associated deviation from the Profit Sharing Mechanism of up to $410 million, including non-recurring costs and a potential debt funded milk payment;

Dividend suspension and a review of dividend payout ratio, and

Forecast available farmgate milk price of $4.95 per kilogram milk solids maintained.


MURRAY Goulburn chief executive Ari Mervis is expected to announce the future of the Maffra plant on Monday.

After the Gippsland Times publication deadline, Mr Mervis is due to announce the next series of measures to cut costs and boost farmgate milk prices.

There was speculation the Maffra and Rochester plants will be shut, and concerns over the future of the Kiewa facility.

Meanwhile, the Australian Competition and Consumer Commission has filed proceedings against MG in the Federal Court.

The ACCC alleges the company engaged in unconscionable conduct and made false or misleading representations in contravention of the Australian Consumer Law. These allegations arose in connection with the milk price decrease announced by MG in April last year. 

The ACCC also alleges that former managing director, Gary Helou, and former chief financial officer, Bradley Hingle, were knowingly concerned in MG’s conduct.

ACCC chairman Rod Sims said the allegations related to representations made by MG to its Southern Milk Region dairy farmers between June 2015 and April 2016 about the average farmgate milk price it expected to pay them during 2015-16 financial year. 

“The ACCC alleges that Murray Goulburn’s conduct had an adverse impact on many farmers who, as a result of Murray Goulburn’s representations regarding the farmgate milk price, had made business decisions,” he said.

“The farmers relied on Murray Goulburn’s representations and were not expecting a substantial reduction in the farmgate milk price, particularly so close to the end of the season when it was not possible for them to practically readjust their expenditure.”

The ACCC alleges that from June 2015 until February 2016, Murray Goulburn misled farmers by representing that it had a reasonable basis for setting and maintaining an opening farmgate milk price (FMP) of $5.60 per kilogram of milk solids and a forecast final FMP of $6.05 per kg, and that it considered the forecast final FMP of $6.05 per kg was the most likely outcome, when that was not in fact the case.

The ACCC alleges that from February to April last year, MG misled farmers by representing it had a reasonable basis for expecting to be able to maintain its opening FMP of $5.60 per kg for the remainder of the season, and that it considered a final FMP of $5.60 kg was the most likely outcome for FY16, when that was not in fact the case.

“Many farmers are in a relatively vulnerable trading position, and rely on transparent pricing information in order to budget effectively and make informed business decisions,” Mr Sims said.

“In these circumstances, farmers were entitled to expect Murray Goulburn to have a reasonable basis for determining its pricing, and to regularly update farmers if there was any change in forecast prices.”

The ACCC is seeking orders against MG that include declarations, compliance program orders, corrective notices and costs.

The ACCC has decided not to seek a monetary penalty because, as a co-operative, any penalty imposed could directly impact on the affected farmers.

The ACCC is seeking declarations, monetary penalties, disqualification orders and costs against Mr Helou and Mr Hingle.

Separately, after careful consideration, the ACCC has decided not to take any further action against Fonterra Australia in relation to the step-down of its FMP, announced one week after MG’s in April 2016. 

“A major consideration for the ACCC in deciding not to take action was that Fonterra was more transparent about the risks and potential for a reduction in the farmgate milk price from quite early in the season,” Mr Sims said.

A statement from MG said the company was considering the proceedings, and noted the ACCC decided not to seek a monetary penalty.