New CEO at Australia's Murray Goulburn seeks to regain farmer trust

[SYDNEY] The new chief executive of Australia's largest dairy processor Murray Goulburn said on Monday his first priority will be to restore the trust of the cooperative's farmers angered by a late cut to milk prices.

Murray Goulburn on Monday named brewing executive Ari Mervis as its CEO, replacing Greg Helou who stepped down in April amid a surprise profit downgrade just nine months after a sharemarket listing that added non-voting shares to voting shares held by farmer owners.

The co-operative's relationship with its farmers soured in April after it slashed the price it paid to suppliers by as much as 20 per cent after a slump in global milk prices due to oversupply.

The cuts surprised and angered farmers, who said it came so late in the season that they had little chance to react.

Should dairy farmers reduce milk production or sell to other processors, Murray Goulburn could find it hard to source milk for products such as infant formula for international markets. "The important thing is to restore the supplier base and supplier confidence," Mr Mervis, who will join in February, told Reuters. "Trust is earned, it is not commanded. Over time, once they have that confidence, things will begin to improve." He said it was too early to comment on the group's broader strategy.

Under its former CEO, Murray Goulburn sought to export high-value products such as nutritional dairy items to countries like China. But soft demand and above market costs for their milk supplies forced the company to more than halve its profit outlook to A$39 million (S$41.6 million).

Murray Goulburn chairman Philip Tracy said the company had good brand value in China, which would stand it in good stead.

However, Mr Mervis will face a difficult global dairy market, amid ample global supplies and sluggish demand.

A regulatory change on infant milk formula imports in China is also leading some suppliers to dump stock at heavy discounts, temporarily depressing the market.

Murray Goulburn shares were trading down 2.7 percent on Monday at A$0.91, a more than six-month low.

REUTERS