Murray Goulburn not immune to low dairy prices

Posted by AFN Staff Writers on 29th February 2016

CowMurray Goulburn says it is feeling the impact of a troubled dairy industry, revealing a slump in net profit to shareholders.

 

The dairy company, which owns the Devondale brand, announced a net profit of only AUD$10 million for the six months ended 31 December 2015. This was a 34.1 per cent drop on the previous 2014 corresponding period.

 

Murray Goulburn’s Managing Director Gary Helou attributed the drop to low milk prices.

 

“The first half has seen the continuation of the decline in Chinese imports of commodity dairy ingredients and the ongoing Russian embargo on dairy imports,” said Helou.

 

“This has been compounded by increased European milk supply, resulting in a period of significant oversupply in global dairy commodity markets, driving commodity prices towards record lows,” he said.

 

Profits do not include Coles contract win

 

The results were for the period before Murray Goulburn was awarded a five-year national contract with Coles supermarkets to supply its private label cheese products. It was announced on 1 February 2016 that Murray Goulburn would be replacing Bega as its private label cheese supplier.

 

Murray Goulburn moving towards higher-margin products

 

Despite a poor environment, Helou believes Murray Goulburn is continuing to perform well with the company continuing to move towards higher-margin, value-added ready-to-consume dairy foods.

 

“In Australia, Dairy Foods’ strong sales growth of 28.1 per cent [when comparing profit results from the six months ended 31 December 2015 with those of the same 2014 period] was underpinned by a surge in demand for Devondale consumer milk powders, dairy beverages sales across the chilled milk and UHT categories and a very strong performance by the food service business,” Helou stated.

 

International growth despite tough global climate

 

Murray Goulburn saw sales growth in overseas markets with Helou saying he was pleased that the company was able to expand its Asian distribution strategy. The dairy company has now established joint business plans with Chinese online retailing giants Tmall and JD.com.

 

Murray Goulburn to invest in new infant formula brand

 

Despite increasing competition from numerous competitors taking advantage of demand for Australian produced infant formula, Murray Goulburn said it will soon be launching a new infant formula brand.

 

“Our announcement today that we will launch Devondale Natra Start infant formula is an exciting milestone for Murray Goulburn,” Helou commented.

 

“We expect strong support for the Natra Start range by our customers, particularly those in China, where Devondale is a leading UHT and consumer milk powders brand,” he said.

 

“Looking ahead, we will continue to drive Murray Goulburn’s strategic focus on value added and ready-to-consume dairy foods, transforming the business as we progress on our journey to become a ‘first choice dairy foods company’ for our suppliers, investors, customers and consumers globally,” Helou said.