Murray Goulburn managing director Gary Helou will step down from his role after the dairy co-operative slashed its profit forecast by as much as 40 per cent and cut the price it pays farmers for their milk.
Mr Helou will leave the top job less than a year after Murray Goulburn’s partial float on the ASX, which raised $500 million from investors.
The company released a trading update on Wednesday morning stating it now expected a net profit after tax of between $39 million and $42 million. In February the company predicted a net profit of about $63 million. That was down from its prospectus forecast of $89 million.
Shortly after the market opened, Murray Goulburn’s shares plunged as low as 37.6 per cent to $1.34. The shares hit a 52-week high in late December of $2.70.
Chairman Philip Tracy said the size of the gap between previous profit estimates and actual sales figures was too great. He said Mr Helou offered his resignation to the board at the weekend, which was accepted immediately.
Mr Tracy cited China’s crackdown on online sales as one of the reasons for the downgrade.
“This has really caused some doubt in the minds of traders,” Mr Tracy said.
This appeared at odds with an announcement to the ASX two weeks ago that the co-operative didn’t expect changes to Chinese e-commerce regulations to materially hit earnings.
Asked why the change of position in such a short timeframe, Mr Tracy said the board hadn’t seen the March quarter sales figures when the initial announcement was sent to the ASX.
“This has happened in the last few days,” he said.
“Every quarter we look at the results and the March results came up for consideration last week. We could see there was a downturn… and sent management to look at the April numbers, which were affected by the [Chinese] regulatory changes.
“The quantum of that gap [between sales estimates and actual figures] warranted swift action.”
Mr Helou was bullish right up until last Wednesday – two days before the trading halt – about the co-operative’s shift away from commodities to higher value products, and confident Murray Goulburn’s $6 a kilogram farm gate price was achievable.
Mr Tracy said: “Gary is a proud man and was pretty disappointed [with the downgrade]”.
“It got to the point where he offered his resignation and we accepted it.”
But Mr Tracy praised Mr Helou, saying history would judge him as a “visionary leader”.
“Gary has made a significant contribution to MG and has been a powerful driving force behind out transition to become a globally recognised, ASX-listed food business,” he said.
Mr Helou said the company had transformed and delivered “premium” prices for farmers.
“While maintaining this price has proven difficult in current market conditions, I firmly believe MG has the foundations in place to support a strong and successful business in the years ahead,” he said.
Yet, the co-operative on Wednesday slashed the price it will pay farmers for their milk for the first since the financial crisis.
In February the company predicted a farmgate price of $5.60 per kilogram of milk solids. It now expects that number to be between $4.75 and $5 per kilogram of milk solids. It is the fist step down in the milk price since the financial crisis.
The co-operative cited a spike in the Australian dollar and a global dairy market that continues to weaken after China slashed its spending on bulk dairy imports and amid Russia’s ongoing trade sanctions on many western products.
“The board is very disappointed that MG could not ultimately generate milk prioces for FY16 either as disclosed in the product disclosure statement published in May 2015 or as revised and notified to suppliers and investors on February 29,” the co-operative said in a statement to the ASX.
Murray Goulburn will support the cash flows of farmers for the balance of FY16 and then recover that cost within the next three years.
Mr Helou will stay on at Murray Goulburn for a “short period” to assist interim chief executive David Mallinson, who was previously the company’s executive general manager for business operations.
Mr Helou will also cease being a director of the co-operative. Chief financial officer Brad Hingle will also leave the company.
It expects to pay a full year dividend of 7.1 to 7.8 cents a share based on the $39 million to $42 million profit forecast.
Source: Sydney Morning Herald
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