Murray Goulburn looking to capitalise on China FTA

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Australian dairy giant Devondale Murray Goulburn said global dairy market was faltering, but a free trade agreement (FTA) with China could turn things around.

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Chairman Philip Tracy said Russia’s ban on dairy imports from Australia, US and the European Union has rocked the global market, although international demand for Australian dairy foods generally remained strong, particularly from Asia.

“Given these factors, we do expect international dairy commodity prices to recover, but it is difficult to predict the timing and strength of the recovery,” Mr Tracy said, as per The Australian.

“On a very positive note, the free trade agreement with China is a huge win for Murray Goulburn and for the dairy industry broadly.”

Speaking at the dairy cooperative’s annual meeting, Mr Tracy said the formal enactment of the agreement would improve Australia’s competitive position relative to New Zealand, giving it advantage in some products.

“It is now up to Murray Goulburn to further develop our products and supply chain into China to capture value from the opportunity the free trade agreement provides,” Mr Tracy said.

He also told shareholders that the company was still consulting dairy farmers on changes to its capital structure, which involves maintaining 100% farmer control but allows investment in Murray Goulburn through a separate, non-voting unit trust.

According to him, a new structure would allow the company to raise the much needed funds to rejuvenate its manufacturing facilities and supply chain.

He said in order to supply dairy foods to Asian customers, Murray Goulburn would need to invest approximately $500 million in technology and automation over the next three to five years.

Murray Goulburn’s fourth round of supplier meetings is planned for early 2015, which will be followed by an extraordinary general meeting to discuss a potential capital raising in mid-2015.