Hundreds of jobs go as Murray Goulburn closes 3 dairy processing centres

Darrian Traynor/Getty Images

The downturn in the dairy industry has now hit jobs in milk processing.

Murray Goulburn is closing dairy processing centres at Edith Creek, Tasmania, and Rochester and Kiewa in Victoria with the loss of more than 300 jobs.

The company also announced write-downs of $410 million.

The moves by Australia’s biggest dairy processor are to lower its costs following a business review prompted by reduced milk intake across the network.

A short time ago, Murray Goulburn’s unit trusts were down 12% to $0.91.

Ari Mervis, appointed CEO in December after a management shakeup, says he’s acutely aware of the impact the decisions will have.

“We are committed to ensuring that we provide our affected employees with appropriate levels of support and the recognition that they deserve during this period of transition,” he says.

“These have been difficult decisions to make, however they are necessary steps on the journey to ensure the future strength and competitiveness of Murray Goulburn.”

The write-downs of $410 million include non-recurring costs and a potential debt funded milk payment.

The coop has also suspended dividends and is reviewing its dividend payout ratio.

The processing centre closures will mean the loss of about 360 jobs and will deliver an annual saving of between $40 million to $50 million. The net financial benefit in 2018 will be about $15 million.

Murray Goulburn expects to spend $60 million to enable the closures, largely funded by maintenance capital expenditure no longer required.

Restructuring costs will be about $37 million, mostly redundancy payments to employees.

Murray Goulburn posted a loss of $31.9 million for the half year to December, with revenue down 14.8% to $1.176 billion, a trailing impact of last year’s global dairy glut.

The business is facing legal action by the ACCC (Australian Competition and Consumer Commission) over broken promises it made dairy farmers about what they would be paid for their milk.

The allegations relate to representations made by Murray Goulburn 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 the financial year.

The farmgate milk price is a weighted average paid to dairy farmers in Victoria, South Australia and southern New South Wales.

The ACCC says Murray Goulburn “misled” farmers by representing that it had a reasonable basis for setting and maintaining an opening price of $5.60 per kilogram of milk solids and a forecast final price of $6.05.

The cooperative later announced it would pay only $4.75 a kilogram because of falling global prices and unfavourable foreign exchange rates.

Today Murray Goulburn maintained its 2017 forecast farmgate milk price of $4.95 per kilogram.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.