Despite difficult trading conditions, at year end MG had reduced net debt after cash by $35 million to $445 million.
Murray Goulburn Co-operative has a net loss after tax of $370.8 million for the 2017 financial year.
The co-operative received 2.7 billion litres of milk, down 21.8 percent compared to FY16, while revenue of $2.5 billion was down 10.3 percent compared to FY16
- FMP1 of $4.95/kg MS, including $0.35/kg MS of balance sheet support
- Net loss after tax of $370.8 million, after MSSP de-recognition, footprint rationalisation and other one-off costs announced on 2 May 2017
- Underlying Net Profit After Tax (NPAT)2 of $34.7 million
- Year-end net debt of $445 million, 7.5 percent below FY16
- No final dividend
- Strategic review commenced
Commenting on the result MG’s Chief Executive Officer, Ari Mervis, said:
“MG has experienced a difficult year as a result of the significant reduction in milk intake and adverse seasonal conditions. In order to mitigate the resulting impact, a number of important initiatives have been undertaken.
“These include implementing the manufacturing footprint review, de-recognising the contentious Milk Supply Support Package (MSSP), and delivering on previously announced cost out initiatives.
“Furthermore, 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. These are all necessary steps to strengthen and improve the performance of MG.”
Revenue in MG’s Dairy Foods segment declined by 8.0 percent to $1,221 million. This result was largely driven by lower adult milk powder (AMP) sales, which declined by $93 million, compared with FY16 when cross border sales for this product grew significantly. Lower AMP sales also resulted in MG recording lower Devondale branded sales, which were down 14 percent to $502 million.
MG’s Ingredients business benefited from improved commodity prices in FY17 with average sales per tonne up 10.5 percent, net of the impact from a higher average exchange rate.
However, total Ingredient and Nutritional sales were $958 million, down 12 percent. MG’s Ingredients sales fell 7.0 percent, and Nutritionals sales contracted by 34.5 percent as a key international customer increasingly self-sufficient.
Balance sheet and debt position
Despite difficult trading conditions, at year end MG had reduced net debt after cash by $35 million to $445 million.
MG’s gearing level at year end was 37.7 percent, up from 29 percent in FY16 as a result of material impairments due to MG’s business and footprint review, including the MSSP de-recognition. The strong focus on working capital resulted in a 31 percent reduction in closing net working capital, releasing $164 million in cash.
MG has not recognised $68 million of tax assets relating to its asset and footprint review. This tax asset does however, remain available for MG’s future use. This has been approved by the Directors as a deviation to the Profit Sharing Mechanism. An independent expert’s opinion has been obtained concluding that this further FY17 deviation is in the overall interests of supplier shareholders and unitholders as it is consistent with the deviation relating to the asset and footprint review approved in May 2017.
Following further milk losses after the recent payment of all FY17 growth incentives, MG now expects total FY18 milk intake to be approximately 2 billion litres. MG however confirms that it is maintaining an FY18 opening Southern Milk Region FMP of $5.20/kg MS.
A final FMP above $5.20/kg MS remains under review and is subject to various factors including favourable movements in exchange rates4 and dairy commodity prices over the balance of the financial year, as well as retaining appropriate levels of milk intake.
The Board of Directors has agreed that MG has the ability to deviate if necessary from the Profit Sharing Mechanism to the extent required to pay an FY18 FMP of $5.20/kg MS, by providing access to up to $100 million. As required by the Profit Sharing Mechanism Deed, an independent expert’s opinion has been obtained concluding that this deviation, if required, is in the overall interests of supplier shareholders and unitholders.
