Australia’s biggest milk producer, Murray Goulburn, will shutter three processing plants and write off almost $150 million in loans made to farmers following last year’s milk price fiasco.
Murray Goulburn said 105 workers will lose their jobs when it closes its plant in Rochester, Victoria, by the end of 2017, and another 135 will be out of work with the closure of its plant in Kiewa, south of Wodonga, by mid-2018.
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Its plant in Edith Creek, Tasmania, will shut by September 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 loans made to its farmers under the controversial Milk Supply Support Package.
The co-operative offered the loans early last year after it drastically cut its farm gate milk prices, throwing farmers who had budgeted on the higher price Murray Goulburn had promised into financial turmoil.
Farmers were due to start repaying the loans in July, but all debts would be forgiven, the company said. Any farmers who had made repayments on their debts 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 revising its forecast from $4.70 per kilogram down to $4.60 because of “weaker trading conditions”.
But Murray Goulburn said it remained committed to paying an average of $4.95 per 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.
An independent expert’s opinion concluded that deviating from the profit sharing scheme was in the best interests of farmer shareholders and non-farmer unitholders.
Suspending shareholder payments would also shore up its balance sheet, the company said.
More to come