Australia’s biggest milk producer, Murray Goulburn, will shutter three processing plants and write off almost $150 million in debts owed by farmers following last year’s milk price fiasco.
Murray Goulburn said 105 workers would lose their jobs when it closed its plant in Rochester, Victoria, by March next year, and another 135 would be out of work with the closure of its plant in Kiewa, south of Wodonga, by September 2018.
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Its plant in Edith Creek, Tasmania, would shut by the end of this year at a cost of 120 jobs.
“These initiatives will ensure that MG has an improved processing footprint going forward,” the company said in a statement to the ASX on Tuesday morning.
“Once completed, the closures are expected to deliver an annualised net financial benefit of $40 million to $50 million.”
Murray Goulburn said on Tuesday it would write off debts owed to it by farmers under the controversial Milk Supply Support Package.
The co-operative set up the scheme early last year after it drastically and retrospectively cut its farm gate milk prices, throwing farmers who had budgeted on the higher price Murray Goulburn promised into financial turmoil.
Farmers were due to start making repayments in July, but all debts would be forgiven, the company said. Any farmers who had made repayments between July and September last year would be refunded.
The plant closures will cost 360 people their jobs. Photo: Jessica Shapiro
Murray Goulburn’s sweetener to farmers comes after the Australian Competition and Consumer Commission last week launched court action against the co-operative and its former chief executive, claiming they unfairly treated farmers.
The consumer watchdog said the company misled farmers by telling them to expect high opening and final prices for milk solids between June 2015 and April 2016.
Farmers who still supply Murray Goulburn will be hit with another cut to farm gate prices, with the company on Tuesday cutting its forecast from $4.70 a kilogram to $4.60 because of “weaker trading conditions”.
But Murray Goulburn said it remained committed to paying an average of $4.95 a kilogram this financial year.
To fund that price, the company said it would suspend dividend payments to shareholders immediately and deviate from its “profit-sharing mechanism”, which allocates dividend payments to shareholders based on farm gate milk prices.
As a co-operative, Murray Goulburn’s suppliers are also the company’s shareholders, meaning they will miss out on dividend payments in order for the company to pay them higher farm gate prices.
“The board of directors, with the unanimous support of the special directors, are of the opinion that these actions are in the interests of all relevant stakeholders,” it said.
Suspending shareholder payments would also shore up its balance sheet, the company said.
At 11am shares in MG Unit Trust, which was floated on the ASX in 2015 as a way for non-farmers to invest in Murray Goulburn, had fallen 10 per cent to 92.5¢ after investors learnt dividends would not be paid.
The funding vehicle floated at $2.10 a share but crashed during last year’s milk crisis and has not recovered.
Deputy Prime Minister and Nationals leader Barnaby Joyce said he was happy that farmers would be getting more money.
“What it puts up in big flashing lights is that the previous management of Murray Goulburn did some pretty ordinary things, and the ramifications of it have been widespread,” he told the ABC.