Australia’s largest milk supplier, Murray Goulburn Co-operative, faces a possible class action by shareholders after this week’s profit downgrade.
Tim Finney, a senior class action lawyer at Slater and Gordon, says his firm is investigating whether Murray Goulburn misled the market.
“Our initial investigations have identified inconsistencies between Murray Goulburn’s statements to the market regarding its likely profits in the 2016 financial year, and the factors that would affect its performance,” Tim Finney said.
The potential class action, by Slater and Gordon with litigation funder IMF Bentham, is on behalf of investors who acquired units in Murray Goulburn’s ASX-listed entity MG Unit Trust.
The dairy industry is suffering from a global glut caused by weaker demand and overproduction. Slower economic growth in China, a major export market for milk producers, has slowed demand. And in Europe, there’s been sharp rise in production coupled with Russian import restrictions closing a major market to those producers.
In its 2015 prospectus, Murray Goulburn forecast a net profit after tax of $85.8 million. In February, Murray Goulburn announced a revised forecast of $63 million, citing historically weak dairy commodity prices.
On 27 April, only two months before the end of the financial year, Murray Goulburn downgraded its net profit forecast to $39 to $42 million.
Murray Goulburn blamed weak growth in Chinese demand for adult milk products, a strengthening AUD/USD exchange rate and a downward revaluation of milk product inventory expected to be sold in 2017.
On the same day, Murray Goulburn also confirmed that its CEO, Gary Helou, and its CFO, Brad Hingle, were resigning.
Murray Goulburn Co-operative’s unit price fell more than 40% in one day to $1.26 per unit.