MG settles for $650,000 with ASIC over profit cut

19 Nov, 2017 05:18 PM
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Embattled dairy processor Murray Goulburn (MG) will have to pay $650,000 after admitting it breaching its continuous disclosure obligations to shareholders.

As part of a court settlement deal with the corporate watchdog, the Australian Securities and Investments Commission, MG has agreed to pay the penalty as a consequence of its behaviour in the lead-up to last year's profit downgrade and dramatic farmgate milk price cut to farmers.

ASIC brought Federal Court proceedings against MG, alleging that from March 22, 2016 to April 27, 2016, it failed to notify the Australian Sexurities Exchange it was unlikely to achieve forecasts it made in February.

Under the terms of the settlement MG has agreed it breached its obligations on one occasion.

The maximum penalty for a breach is $1 million. ASIC said the court would determine the final amount of the penalty.

An ASIC spokesman also confirmed other investigations were continuing into other aspects of MG's conduct.

MG chairman John Spark welcomed the conclusion of ASIC's investigation.

The company said it was not alleged by ASIC that the company deliberately contravened its continuous disclosure obligations.

In April 2016 MG slashed its profit forecast by as much as 40 per cent and announced retrospective price cuts on its milk payments to farmers.

In that update MG said it expected a net profit after tax of between $39m and $42m, just two months after forecasting a net profit of about $63m.

That was down from its prospectus forecast of $89 million.

MG's shares plunged on the announcement, which caused turmoil for its suppliers that reverberated around the dairy industry.

In the 18 months since, many farmers have deserted the distressed dairy processor, and the total milk volume it processes has plummeted.

MG, and its former chief executive Gary Helou, still face an Australian Competition and Consumer Commission (ACCC) prosecution for alleged unconscionable conduct.

The ACCC case alleges MG had known for many months leading up to the April update it would fail to meet its forecasts.

MG has signalled it will defend the allegations.

Its board has now agreed to sell the business to Canadian dairy heavyweight Saputo - a controversial move that caused a stir at the dairy processor's annual meeting in Melbourne.

Mr Spark said the settlement was in the best interests of the dairy processor.

"Murray Goulburn takes its disclosure obligations very seriously and has co-operated fully with ASIC during its investigation of these matters," he said.

FarmOnline

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