Murray Goulburn discloses losses, ASIC and ACCC investigations

The downturn in the dairy industry has taken its toll on the country’s largestmilk processor, Murray Goulburn Co-Operative, which has reported heavy losses while disclosing it is under investigation by both the corporate regulator ASIC and the competition regulator, the ACCC.

In the December half, it lost $31.9 million, a sharp reversal from the $9.3 million profit of a year ago.

Earnings were hit by a drop in revenues to $1.17 billion from $1.38 billion, as wholesale milk prices slumped andmilk supplies fell as dairy farmers shifted to supplying other processors.

The half year figures followed the booking of heavy impairment charges for a pricing support package provided to troubled dairy farmers last year.

Last October,Murray Goulburn warned of a steep fall in itsmilk volumesas farmers switch to supplying rival processors or quit the industry following its decision earlier to slash farmgate prices paid for milk and effectively opened the door for farmers not to repay an earlier assistance package

At that time, it warned of a 20 per cent hit to volumes due to both a wet spring and also farmer defections.

In the event, the outcome was a 20.6 per cent fall in milk intake during the half, due to record rainfall in parts of Victoria in September which hampered crop production as well as aggressive competition as rivals sought to replace lost intake due to the poor weather, it said.

TheCo-Operativealso confirmed it is subject to investigations by both the corporateregulatorASIC, the Australian Securities Investments Commission over potential breaches of the Corporations Actas well as the competition regulator the ACCC, the Australian Competition andConsumerCommission over possible breaches of the Competition and Consumer Act.

The Co-Operativehas been subject to criticism over its accounting treatment of the $183 million support packageprovided to farmerswith a firm of forensic accountants raising detailed questions about the accounting treatment of the move.

There is also a class action afoot which the company is defending.

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