Murray Goulburn reports record revenue for 2014 financial year
Australia’s largest dairy co-operative Murray Goulburn Co-operative Co. Limited (Murray Goulburn), has announced record sales revenue of $2.917 billion for the 2014 financial year, up 22 per cent on the previous year.
Growth was delivered from across all Murray Goulburn’s major divisions, particularly in exports which recorded 30 per cent growth year-on-year to $1.5 billion. Particularly strong growth was delivered in the strategic segments of Nutritional Powders, up 19 per cent, and 77 per cent growth in international Consumer and Food-Service dairy foods. Exports accounted for over 51 per cent of Murray Goulburn’s revenue.
Murray Goulburn is best known by its principal brand “Devondale” and is therefore commonly also described as “Devondale Murray Goulburn”. Devondale Murray Goulburn is Australia’s largest dairy food company. Devondale Murray Goulburn was formed in 1950 and remains 100 per cent dairy farmer controlled, with more than 2,500 farmer-shareholders and more than 2,000 employees. Devondale Murray Goulburn is also Australia’s largest dairy food exporter to the major markets of Asia, the Middle East and North Africa, and the Americas. Devondale Murray Goulburn produces a range of ingredient and nutritional products, supplies the food service industries globally and its flagship Devondale brand is sold nationally.
“International dairy food prices were at very high levels during the 2013/14 year, underpinned by the strong demand from Asia and the Middle East,” said Gary Helou, Murray Goulburn’s Managing Director. “Our focus on the value growth segments of Nutritional Powders and international Consumer and Food-Service dairy food exports, combined with the robust growth in Murray Goulburn’s milk supply helped Murray Goulburn deliver an exceptionally strong year.”
Gains from WCB sale
Net profit after tax was $29.3 million, slightly down from $34.9 million in the previous year. Murray Goulburn’s balance sheet was further strengthened with total equity increasing by $59 million during the year, including $36 million gain from the sale of its stake in Warrnambool Cheese and Butter (WCB), which was recognised directly in equity.
Milk price and volume increase
Murray Goulburn’s final weighted-average available farmgate milk price paid to its supplier/shareholders was up 37 per cent on the previous year at $6.81 per kilogram of milk solids (approximately 51 cents per litre).
Total payments to suppliers/shareholders for the year were more than $1.7 billion, representing 61 per cent of total sales, compared to 50 per cent of sales last year. When combining the final milk price of $6.81 with the dividend of eight cents per share, the total return to suppliers/shareholders was on average $6.90 per kilogram of milk solids.
Murray Goulburn increased its milk intake in 2013/14 by 8 per cent to 3.4 billion litres of milk in contrast to total Australian milk production which remained stagnant at 0.4 per cent. Murray Goulburn’s share of Australia’s milk pool now represents 37 per cent of Australia’s milk supply, up from 33 per cent last year.
Improving efficiency and productivity
Mr Helou said Murray Goulburn would also continue its focus on delivering further efficiency and productivity gains across its business units during this year.
“At the same time we are pushing forward with the value added growth components of our strategy, which are starting to gather momentum, with the two daily pasteurised milk plants coming on line plus an additional $127 million capital expenditure approved last year to bolster Murray Goulburn’s capabilities and market connectivity in our Consumer Cheese, Dairy Beverages and Nutritionals expansion,” Mr Helou said.
Long term underlying dairy foods demand from Asia remains strong with a net reliability on imports to satisfy the ongoing growth in per capita consumption. However, Murray Goulburn said international dairy prices have declined significantly from last year’s historic highs mainly due to production growth in exporting countries, namely New Zealand and the European Union, and the compounding impact of high inventories in China and the recent Russian trade ban on EU, US and Australian dairy imports.
Given global demand growth, Murray Goulburn said it anticipated some recovery in international commodity pricing but it is difficult to predict the timing and strength of this change.
Murray Goulburn is carefully monitoring the impact of the Russian trade ban, particularly the impact on trade flows from the EU to other export destinations.
Given the current market conditions Murray Goulburn is revising its full year forecast for the Southern Milk Region to $6.00 per kilogram of milk solids (i.e. the current farmgate price). This is down from a range of $6.15 to $6.30 per kilogram of milk solids. In this market it is unlikely that Murray Goulburn can provide for any step ups in 2014/15 pricing unless there is a significant improvement in markets.
Murray Goulburn will seek to mitigate downside risk via factors within Murray Goulburn’s control, such as cost reductions within the business and product mix optimisation.
Over the next few weeks Murray Goulburn said it would continue to assess the impact of the Russian trade ban and further assess China’s re-entry in the market and provide regular updates to suppliers as required.