Murray Goulburn Co-Operative is pining its hopes on a more competitive price it will pay for milk purchased from dairy farmers at the mid-year start of the new season as it seeks to recover from a disastrous 2016 as low prices prompted farmers to slash supplies to the troubled group last year.
Farmers have shunned the milk processor, the country's largest, shifting the supply of around 250 million litres to other processors in the December half, since rival groups are offering a better price for their milk.
In the December half, its milk supplies fell a heavy 20.6 per cent, it said, which bit directly into revenues which fell to $1.17 billion from $1.38 billion.
In the December half, it lost $31.9 million, a sharp reversal from the $9.3 million profit of a year ago.The half loss followed the booking of heavy impairment charges for a pricing support package provided to troubled dairy farmers last year.
Last October, Murray Goulburn warned of a steep fall in its milk volumes as farmers switch to supplying rival processors or quit the industry following its decision earlier to slash farmgate prices paid for milk and effectively opened the door for farmers not to repay an earlier assistance package
At that time, it estimated it would suffer a 20 per cent hit to volumes due to both a wet spring and also farmer defections, which was close to the final outcome.
Industry wide, milk supplies fell an estimated 10 per cent due to poor weather in September in particular when record levels of rain caused flooding which hampered crop production. Low milk prices also saw a number of farmers quit the industry.
The Co-Operative also confirmed it is subject to investigations by both the corporate regulator ASIC, the Australian Securities Investments Commission over potential breaches of the Corporations Act as well as the competition regulator the ACCC, the Australian Competition and Consumer Commission over possible breaches of the Competition and Consumer Act.
The Co-Operative has been subject to criticism over its accounting treatment of the $183 million support package provided to farmers with a firm of forensic accountants raising detailed questions about the accounting treatment of the move.
There is also a class action afoot which the company is defending.
A heavy cost cutting regime is underway as well as moves to also to release more cash from working capital to help reduce debt.
As part of the efforts to revive the group's fortunes an asset review is underway "which is well advanced - and all encompassing" with further details to emerge soon, analysts were told.