Milk processor Murray Goulburn has posted a $40 million after-tax profit in a year it slashed returns to farmers.
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MG released its 2016 financial reports to the Australian Stock Exchange on Wednesday morning.
It revealed a $34.5m increase in profit before tax or 150 per cent up on the 2015 financial year. But after-tax the profit was reduced to $40.6 million. That number was 61 per cent up on the $25.2 million in the 2015 financial year.
In April the dairy processor revealed a revised net profit forecast of between $39 million and $42 million, less than half its prospectus forecast of $89 million from last year.
Murray Goulburn interim chief executive David Mallinson said it had been a challenging year for the co-op.
“We faced an environment comprised of very challenging macro settings, including sustained low commodity prices, a volatile Australian dollar, changes in Chinese regulations, and difficult seasonal conditions across many of our key regions,” he said
“This has placed our suppliers and Australian dairy farmers generally in a very difficult environment.
“The board, MG’s management team, and I personally have also acknowledged to all our key stakeholders that MG’s farmgate milk price downgrade so late in the year added to the challenge.”
Murray Goulburn said it had received 2.5 per cent less milk from its farmers during the 2016 financial year with a total of 3.5 billion litres produced.
It said the final price paid to farmers for the financial year would be $4.80 per kilogram of milk solids in line with the guidance provided in April for a price of $4.75 to 4.85.
However, this was sharply down on the co-operative's previous forecast for a price of $5.60 per kilogram. The April downgrade triggered a dairy crisis.
Speaking before Wednesday’s announcement, Greta dairy farmer Justin Evans said Goulburn Murray’s actions since April when it told milk suppliers they had been overpaid and owed the co-op money back had been hard to swallow.
“If you’re supplying milk and you’re losing 40 cents a kilo just in production costs, it’s a bit of a kick in the face for them to say ‘we want that back this year just to get it off our books’,” Mr Evans said.
“This is not the farmers’ fault, it wasn’t our doing.”
Mr Evans many dairy farmers were waiting to see the financial results, and reports from the Australian Competition and Consumer Commission’s investigation into the dairy industry’s April farmgate price cut, and claw back.
Murray Goulburn cut its debt from $635m in FY15 to $480m in FY16 and reported “[t]his result was primarily driven by the proceeds received from the listing of the MG Unit Trust in July 2015, and early efforts to sustainably reduce working capital” including $51m predominantly from receivables.
MG will look to reduce costs by $10-15 million in FY17, including by cutting jobs.