Murray Goulburn managing director Gary Helou is stepping down as a global diary glut forces Australia’s largest milk processor to downgrade its profit forecasts by at least a third and to cut prices paid to farmers.
The cooperative’s listed unit trusts shares fell by 34% to $0.72 in early trade on the ASX.
The chief financial officer, Brad Hingle, has also resigned following Helou’s decision. He will stay to assist with the finalisation of the 2016 results.
David Mallinson, the executive general manager of business operations, has been appointed interim CEO. Before joining Murray Goulburn three years ago, he was commercial director for Fonterra, the world’s second largest milk processor.
The company today revised expected full year net profit after tax to between $39 million and $42 million, down from the previous forecast of $63 million, a number which had been downgraded from initial expectations of $89 million.
Fully franked dividends are expected to be between 7.1 cents and 7.8 cents per unit for the full year, including the interim distribution of 3.5 cents, down from an expected 11.3 cents.
Murray Goulburn is being hit by lower prices, a greater than 10% unfavourable movement in the AUD/USD exchange rate and lower than expected adult milk powder sales in China.
After a review of the business, Murray Goulburn says the 2016 financial year outlook of the farm gate milk price of $5.602 per kilogram provided in February is no longer achievable.
The cooperative now now expects its milk pool to be $170 million to $220 million lower than forecast, resulting in a farm gate price of between $4.75 and $5.003.
The cooperative, which formed in 1950, last week requested a halt of its listed unit trusts to assess the impact of market conditions on its full year outlook.
The industry is suffering from a global glut of dairy products 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.
The low prices dragged Murray Goulburn’s profits down by a third to $10 million for the six months to December.