Suppliers question new MG

By Country News on March 14, 2017
  • Suppliers question new MG

    Director Nat Akers

  • Suppliers question new MG

    Upgrading of Cobram Murray Goulburn factory.

How did you come to be working for Murray Goulburn and why did you take it on?

I worked 27 years with SAB Miller until it was taken over by ABB (in October).

I decided at the time of acquisition that I wouldn’t be staying with SAB Miller.

I was going to make no decisions, but take a break.

Day zero of putting my feet up, I got a phone call from a head hunter.

Sometimes opportunity knocks very softly, and I said: ‘Please give me a call in February, I’m not in any position to make any decisions now’.

Up until then I only knew what I had read in the media about Murray Goulburn and some of it was not flattering.

For me, this a business that matters. It’s important.

Murray Goulburn is a serious and incredibly important contributor to society.

It’s a type of role that if I had said ‘no’, I would have regretted it.

Hopefully I will be part of its successful journey to the next chapter.

Is Murray Goulburn still a co-operative in nature or is it becoming just another corporation?

At Kiewa on Monday night I had a supplier come up to me and said: ‘The dairy industry remains a fantastic industry to be in. Some people are turning to beef because, 35 years later, beef has a fantastic return. I wouldn’t be turning to beef because their cycles have a lot more down than up’.

Can you believe that the local school was holding a charity to collect for the farmers?

How can the journalists report on us being so down and out, when the reality is that we are going through a tough time, with debt levels that are incredibly high.

But we will survive.

On the co-operative issue, the business has become large with about 2.8billion litres of milk.

The co-operative itself elected about two years ago to become Murray Goulburn Co-operative Co Ltd and elected to issue units on the ASX and to have a listed share register.

With that comes the benefits of being able to tap into capital markets and different forms of funding, but with that comes the responsibility and onus of complying with stock exchange rulings. 

When you list you have continuous disclosure requirements which means that anything that is price sensitive needs to be shared with the market at the same time, and at a specific time when you become aware of the information.

Since the events of last April and the interest from the ACCC and ASIC hanging over the co-operative, rather than say something that could unintentionally incriminate you, they defaulted to saying nothing, because it is safer, and trying to get our house in order, first.

The intention is to swing back into succinct, clear and appropriate comms (communications) that are in compliance with ASX requirements and regulations.

The other thing that I find fascinating, and intriguing, is that co-operatives bring together your operations for a combined and mutual benefit, and if you look at the genesis of the co-operative in the 1950s and you look through Mr McGuire’s years, that’s exactly what it was. That’s what made it so strong.

It’s very interesting that you have different views and very different co-operative members.

You have some who will be milking 2000 cows and running 12 months a year and some with 100 cows and are not investing and may not be in the industry forever.

One of the suppliers last night was very vocal in saying: ‘We are the co-operative, we are in this together through thick and thin. Yes, the management and the board, you have a lot to answer for and you have to resolve it, but we have to stick together’.

The very next questions was from someone who lived close to Cobram and said: ‘I live very close to Cobram and my milk goes straight there. Why aren’t I paid a premium and all local farmers paid a premium and you can be guaranteed of that factory running at an efficient level which brings down the cost.’

Now, what is a co-operative? There are very large co-operatives around the world and there are some that are incredibly successful and very profitable with very affluent head offices.

I don’t think that’s what it is about.

I think it’s about delivering to all your stakeholders in the appropriate way and getting the message through that we don’t keep any of the money in the business. Everything is repatriated.

Even in the form of dividends of which 60 per cent go to our farmers because our farmers are shareholders ... Who also aren’t very happy because their unit prices have halved since some of them were acquired.

Ari Mervis

Previous employment: Carlton and United Breweries chief executive officer and SAB Miller Asia Pacific managing director.

Residence: Melbourne.

Family: Wife and three children.

Qualifications: Bachelor of Commerce from the University of the Witwatersrand in South Africa.

Started with Murray Goulburn: February 13, 2017

Term: No fixed term.

Total fixed remuneration: $1.5million.

Termination terms: Murray Goulburn may terminate within the first year by giving 12 months’ written notice, after that, six months’ written notice.

The part that I can sympathise with is that historically where it was only a co-operative you could have a town hall meeting with the suppliers and you could tell them everything. ‘This is the price, this is what we can expect and this is what can happen’.

Does the company have some social responsibility to suppliers?

Every company has a social responsibility.

I think the reality is that it’s not as if Murray Goulburn has this pool available to distribute.

We are big supporters where we can.

We try to create additional value through things like agronomists who provide on-farm input and support.

Last night I was told, can we have more meetings with more field staff who help us and bring knowledge.

Murray Goulburn trading gives us excellent prices on seed and fertiliser and they are two of the biggest line items.

I think they are looking for that kind of support.

Trust needs to be restored and confidence has to be rebuilt.

It’s not just about a financial hand-out.

How do I benefit from being a member of a co-operative?

How has Murray Goulburn handled contract suppliers who want to withdraw?

I imagine everyone who enters into a contract expects to honour that contract and to be honoured from both sides.

If we entered into a contract which was breeched by either side it would be inappropriate.

The reality is that most contracts tend to be shorter term, up to about three years.

We have had some farms who have breeched contract and our first step is to go and engage with them before commencing legal proceedings.

But contracts need to be honoured and if we breeched them, then equally we should be held to account.

Would the company take them to court?

We would explore our avenues and all our options.

(The company said about one quarter of the supplier base was contracted and the number in dispute was a very small number.)

After five supplier meetings, what are the farmers saying?

The clear views are, how can you restore our trust and confidence?

We both need each other.

How are we going to go about doing that?

They have spoken extensively about the milk supply support package (the clawback).

Coming in fresh, I see very clearly both sides of the equation, why the company did this, and the supplier reaction.

They are asking about the cost base of the business, why we have so many production facilities, of potentially sub-scale, and what the milk price will be next year.

Obviously it needs to be competitive, it will always be susceptible to global commodity prices, but they also know that things should be better.

Murray Goulburn’s factories are processing less milk in some factories than their competitors, like Fonterra.

We operate in a whole host of milk streams.

We need to look holistically at the amount of milk we are going to receive, which stream we put that into and where best to put it.

That’s a piece of work that is well advanced.

But I intend not to rush it because I want to make sure it is done properly.

I also realise that our cost base influences price.

What about selling assets and leasing back?

I’m not at that point yet. I have to decide what the footprint is, before I get to that stage.

By Country News on March 14, 2017

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