Victoria-based dairy co-operative Murray Goulburn has announced it will invest $127 million in three new capital projects at its existing sites in Victoria and Tasmania, as well as proposed changes to its shareholding structure.

The new projects, which will be delivered over the next 12 to 18 months, consist of:

• The $74 million investment at Cobram will build a world class cheese cut and wrap facility to serve Australian and Asian consumer and foodservice markets.

• The $38 million investment at Koroit and Cobram will increase capacity for production of nutritionals for growing international infant nutrition markets.

• The $14 million investment at Edith Creek will install and commission a flexible small format cup and bottle filling line to commercialise a range of dairy beverage products for consumer markets in Australia and Asia.

Mr Helou said the three new projects involved investment in “world-leading technology with state-of-the-art automation” for processing and packaging a range of dairy foods destined for Asian and Australian consumers.

“The plants will carry superior capabilities to customise dairy products for local preferences with efficiency and speed to meet the growing demand for high quality and safe dairy foods from Australia,” Mr Helou said.

“These investments secure sustainable, skilled jobs in regional Victoria and Tasmania and add to higher farmgate returns, which in turn funds regional growth with the vast majority of money spent by farmers in their local communities,” Mr Helou said. “Our goal is to increase the farmgate milk price by $1 kilogram milk solids by 2017, a level which we believe will encourage existing and new suppliers to invest in their farm business and profitably grow milk production,” he said.

The projects are dependent on upgrades to regional infrastructure, particularly energy, and Devondale Murray Goulburn will seek to work with the Government and energy providers to deliver the upgrades.

The new projects in Victoria and Tasmania follow on from the 2013 announcements of the $120 million investment in two new daily liquid milk facilities in Melbourne and Sydney, as well as $19 million in projects to increase UHT capacity at Leongatha, $5 million for consumer butter at Koroit, as well as a further $2 million to increase cheese capacity at Cobram.

“We are investing in the future of Devondale Murray Goulburn to deliver higher farmgate returns, as we strive to navigate a new path to meet and serve the growing needs of international consumers and customers for Australian made dairy foods,” said Gary Helou, Murray Goulburn Managing Director.

“We are building a better connection with key markets to become the first choice in dairy foods and investing in the future of the Australian dairy industry with the aim of returning it to profitability and growth, ensuring our relevance in the global market,” Mr Helou said.

Proposed changes to shareholding structure

Meanwhile, Murray Goulburn has also recently proposed a cancellation of its A-class preference shares, after a review of its share register. Under the terms of the proposal, current A-class preference shareholders would receive $1.25 for each A-class preference share they own.

Murray Goulburn said the A-class preference shares were an “old class of share” that had been closed to new shareholders for more than a decade.

In a letter to current A-class preference shareholders, Murray Goulburn said its Board recognised “the close connection many A-class preference shareholders have to Murray Goulburn”. However, given the nature of the class, with fixed dividends, very small shareholdings and more than 20 per cent of shareholders being unable to be contacted, Murray Goulburn considered a cancellation to be the best option.

The cancellation proposal

Like other Murray Goulburn preference shares, the Co-operative said its A-class preference shares were non-voting and can only be sold through a Murray Goulburn-facilitated process.

Murray Goulburn said the proposed cancellation would provide all A-class preference shareholders with “an opportunity to realise the value of their A class preference shares at an attractive price”.

The proposal will only proceed if it is approved by a vote of 75 per cent of Murray Goulburn’s ordinary shareholders (Murray Goulburn’s current suppliers) at an Extraordinary General Meeting (EGM) and a vote of 75 per cent of A-class preference shareholders at a separate meeting of A Class preference shareholders (A-Class Meeting).

The EGM and A Class Meetings are both scheduled to take place on 6 June 2014. If the cancellation is approved, it will occur soon after the date of the EGM.

Capital restructure

Murray Goulburn recently announced that it is investigating a potential capital restructure. The restructure is subject to various shareholder and regulatory approvals and has not been finalised. The Co-operative said the proposed cancellation of the A-class preference shares was unrelated to the capital restructure. Regardless of whether the cancellation occurs, it is not proposed that the capital restructure will facilitate any trading in, or revaluation of, the A class preference shares.

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