Koroit spared in MG's closures

However MG is in negotiations with the National Union of Workers about dropping the plant from seven day a week processing to six or five days a week processing.

MG has announced three of its older and smaller processing plants, two in Victoria and one in Tasmania, will close with the loss of about 360 jobs as part of the company’s bid to staunch the impact of its declining milk supply on its profits.

The MG plants to shut as part of staged closures that will extend to September next year are at Rochester and Kiewa in northern Victoria and Edith Creek in Tasmania.

The closures follow a significant decline in the company’s milk supply following its slashing last year of the milk price its pays to dairy farmer suppliers.

In other elements of its urgent response to the decline in its milk supply, MG is to repay $6 million it took from dairy farmers last year as part of its controversial claw-back of milk payments, known as its Milk Supply Support Package.

MG’s independent financial advisers, Grant Samuel, had recommended the scrapping of the claw-back arrangements because it said they were viewed by milk suppliers as “fundamentally unfair” and were “a fundamental obstacle to stabilising milk supply.”

It said the scrapping of the claw-back arrangements would cost a total if $148 million, which included the $6 million in reclaimed payments that would be returned.

In a further sign of its poor profitability, MG also announced it would borrow up to $30 million to meet its forecast of a $4.95 a kilogram milk solids for its closing price to its dairy farmers this season.

MG said its “total write-downs and associated deviation from its Profit Sharing Mechanism” in response to its falling milk supply would cost up to $410 million, which would include non-recurring costs and the potential debt-funded milk payment.

It also suspended dividend payments including the final dividend for 2016-2017.