Murray Goulburn to improve efficiencies by closing three plants and reducing workforce by 360

Anticipated to impact around 360 employees, Murray Goulburn has announced its intention to close its plants at Edith Creek (Q2 FY18), Rochester (Q3 FY18) and Kiewa (Q1 FY19). The closures will probably start this coming August and occur in a staged manner.

On the financial side, the closures are ultimately expected to deliver $40 to $50 million with a net financial benefit of $15 million in the FY18.

MG expects to spend $60 million of capital expenditure to enable the closures, which will be largely funded by maintenance capital expenditure no longer required at the sites, will write-down assets of $99 million and expects to incur cash restructuring costs of approximately $37 million. These cash costs predominantly comprise redundancy and entitlement payments to impacted employees.

In the same release MG also announced:

• Forgiveness of the Milk Supply Support Package (MSSP).
• Total write-downs and associated deviation from the Profit Sharing Mechanism of up to $410 million, including non-recurring costs and a potential debt funded milk payment.
• Dividend suspension and a review of dividend payout ratio.
• FY17 forecast available farmgate milk price of $4.95 per kilogram milk solids maintained.

As Australia’s largest dairy foods company with an annual turnover of $2.5 billion, it’s unfortunate that the only way they can see to improve efficiency is to shed staff and plants. Taken to its illogical conclusion, ultimate efficiency would be achieved with no staff and no factories.

Read the complete MG release here.