Meet your MG board candidates

UPDATE 31/08/16: Congratulations to Lisa Dwyer, Craig Dwyer, Kelvin Jackson and Harper Kilpatrick for being elected to the MG board and to all the other candidates for putting their hands up.

Murray Goulburn farmer shareholders will soon vote to elect new members to the board of directors. The dairy processor accounts for a huge chunk of Australia’s milk and tends to set the benchmark for the milk price, so its performance is important to most farmers in the south-eastern states.

The candidates have been touring the country to introduce themselves but since only a small percentage of shareholders attend the meetings, Milk Maid Marian offered this post as an added platform to help MG farmers make an informed choice.

The candidates were invited to answer two questions in a video that is three minutes or less:

Q 1: Tell us about you, how you farm and your roles outside the farm

Q 2: What would you work to change at MG if elected and why?

Three of the candidates, Lisa Dwyer, Raelene Hanratty and Harper Kilpatrick sent in their videos. Here’s your chance to learn a little more about them!

Lisa Dwyer

Raelene Hanratty

Harper Kilpatrick

Bernhard Lubitz, Leongatha board candidate

1. In principle, I support the value-add strategy, if it really is adding value in the form of increased margin and profit, and not just adding cost. Value adding is easy to say but harder to do. It needs brand development and marketing, leading to brand awareness, which hopefully will grow market share. MG has little experience of all of this. It can go seriously wrong very quickly if not handled well and it needs to have serious capital and resources behind it to make it work. MG seems to be spreading itself very thinly in multiple areas rather than implementing this in a stepped and staged way. For example, our new ready-to-consume beverage range, which includes the milk shakes and coffee drinks, seems to be more an act of “look at me”, to satisfy both the unit-holders and farmers that the value-adding strategy is being implemented and proceeding. These products need to be in the petrol station/convenience store and bakery refrigerated cabinets to succeed, but as we have no route trade to get them there (this would cost in the order of $10m to develop) and there is no brand awareness, it just sits on supermarket shelves or is given away at supplier meetings. As yet we have been given no information of the expectations for these products and the marketing and development of these products. There were also a range of value-added shredded cheeses “Il Migliore” that were developed to compete with Bega and Mainland and launched at the AGM last November. They, however, failed to sell in volume and the products have now been withdrawn. Value adding is easy to say, hard to do.

2. An independent review undertaken as to what led to this situation and a full report to farmers.

In broad terms, I would like to see a new seven-person industry-based board, consisting of highly qualified industry based directors, to oversee the activities of the manufacturing and processing facilities and its managers to be able to fully develop and deploy these value-added strategies.

In addition to this industry board, there should be a farmer oversight board, consisting of directors from small, medium and large dairy enterprises from all the regions, so that there is diversity of views. The chair of this board would become the deputy chair of the manufacturing board. All farmer directors would also rotate, on a regular basis, as observers on this manufacturing board. The farmer oversight board would also have its own executive officer and funding.

This new structure would give the farmer owners of the co-op more time to assess the performance of the board and the company. The farmer oversight board would also have the resources to bring in outside independent analysts to assist in analysing what is going on with the company on an in-depth basis, not just internally but externally as well. This does not mean that we farmer-suppliers will lose control of our co-op. We will have the final say over what the company will and will not proceed with, but it will give us more time and breathing room to competently assess what needs to be done without hindering MG’s business activities and that’s the most important objective.

The supplier relation committee taken out of the board’s control and handed to suppliers with its own funding, while still reporting to the board and suppliers. The chairman of this committee will also sit on the MG board as a special qualifications director. I envisage that this committee will, over time, evolve to act as the farmer oversight board

The complete review of milk pricing and structure, looking at all aspects of milk pricing including production incentives, next-generation packages, growth incentives to see if they really are adding value to farmers and to the co-op. Are they hindering an open and transparent milk pricing structure? This review will be undertaken by the new supplier relations committee that is independent and at arm’s length from the co-op itself. It will report its findings directly to farmers and the board. This review should also focus on the widening gap in milk price paid to MG farmers. An example is the production incentive payments that act as a pseudo pyramid payment scheme.

I am totally against the clawback. I want to know why MG does not have the ability to fund the $200m on its own balance sheet because last November it received $460m of new capital. It also has had significant asset sales and leasebacks and the windfall from the failed WCB takeover attempt.

Where has this money gone and what has it be used for? Remove the ability for MG to ask for milkclaw back overpayments to be repaid if they misjudge the market from the company and unit trust’s constitution. The clawback amount is fixed to your specific farm overpayment, the same as the proposal for suppliers who could take advantage of the early payback offer.

Quarterly reporting to farmers of sales and production targets. Have they been met? Reports to include milk price updates and confirmation as well as regular updates on the value-add strategy undertaken. MG needs to demonstrate how it is going to report to farmers in regards to lifting the underlying milk price by $1kgMS by the FY2107 using the developed reporting matrix as indicated in the prospectus.

MG, along with the UDV and the ADF, should work towards developing a process that requires all milk processing companies to submit their opening milk prices to DA so they can all be simultaneously announced on June 1, to prevent any price fixing and to ensure that the process is open and transparent.

I would like to see a discussion regarding one person, one vote.

Sharing up. I would like to see that all new suppliers would be shared up on day one with virtual shares equal to their milk solids requirements so they are on an equal footing regarding maximising milk price. Over time they will purchase shares to the required value as opposed to what is occurring now. It’s about fairness and equity.

3. Given the events of recent months the upcoming MG board elections provide an opportunity for suppliers to reassess the role of directors on the MG board, and the role and performance of the board as a whole within the co-op.

At the core of these events is the failure of the board, and especially the chairman, to control the process, the strategy and the risks involved in implementing the new value-added vision, from a commodity-based to a high value-added co-op. The board seems to have been caught up in the hype and spin they presented to the farmers, along with the plans to lift the milk price by $1kgMS, to grow the milk pool and unlock the so called value of our $1 shares.

It is the board and the chairman’s role to keep control of the company and its CEO. It has to maintain the balance between what’s possible and achievable when implementing change and the risk this change brings to the co-op’s existing business structure. Internal governance processes have broken down and failed. The board must have belief in its role and have the ability to challenge proposals presented to it and the capability of the chairman is crucial in this respect. It is time for a full renewal of the board, carried out in an orderly manner, as we need to ask whether the current directors are competent to retain the stewardship of our co-op. For the above reasons, I think the chairman should step down at the AGM.

I am also not opposed to the unit holders being paid a dividend on their units, if a real profit is generated by the co-op, not the pseudo profit that has been created for the sole purpose of paying a dividend. Borrowing $200m, then allocating $40m for the pool payment, and $12m to pay tax, the leftovers given to support milk price, all of this has to be paid back with interest by the farmers makes no sense at all and is inherently unjust and unethical. Remember these are investments, not a bank guarantee with certain interest payable against a loan.

Remembering that the board did not seek an independent expert report to invoke the suspension of dividend clause as they themselves did not think this.

The chairman with his actions has destroyed value and that’s one thing a director of a company is not allowed to do. The most valuable asset this co-op has is its farmers and the milk they produce. Once you remove it, it is very hard to get back. It is not a hole in the ground that can be bought, sold or traded on a whim. MG will no longer be able to call itself the price setter in the Australian dairy landscape. It will be chasing and trying to keep up for years to come.

Remembering that the board did not seek an independent expert report to invoke the suspension of dividend clause as they them selves did not think this was not out side of foreseeable advents

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One thought on “Meet your MG board candidates”

bernhard

August 10, 2016 at 7:11 pm

Bernhard Lubitz, Leongatha board candidate

1. In principle, I support the value-add strategy, if it really is adding value in the form of increased margin and profit, and not just adding cost. Value adding is easy to say but harder to do. It needs brand development and marketing, leading to brand awareness, which hopefully will grow market share. MG has little experience of all of this. It can go seriously wrong very quickly if not handled well and it needs to have serious capital and resources behind it to make it work. MG seems to be spreading itself very thinly in multiple areas rather than implementing this in a stepped and staged way. For example, our new ready-to-consume beverage range, which includes the milk shakes and coffee drinks, seems to be more an act of “look at me”, to satisfy both the unit-holders and farmers that the value-adding strategy is being implemented and proceeding. These products need to be in the petrol station/convenience store and bakery refrigerated cabinets to succeed, but as we have no route trade to get them there (this would cost in the order of $10m to develop) and there is no brand awareness, it just sits on supermarket shelves or is given away at supplier meetings. As yet we have been given no information of the expectations for these products and the marketing and development of these products. There were also a range of value-added shredded cheeses “Il Migliore” that were developed to compete with Bega and Mainland and launched at the AGM last November. They, however, failed to sell in volume and the products have now been withdrawn. Value adding is easy to say, hard to do.

2. An independent review undertaken as to what led to this situation and a full report to farmers.

In broad terms, I would like to see a new seven-person industry-based board, consisting of highly qualified industry based directors, to oversee the activities of the manufacturing and processing facilities and its managers to be able to fully develop and deploy these value-added strategies.

In addition to this industry board, there should be a farmer oversight board, consisting of directors from small, medium and large dairy enterprises from all the regions, so that there is diversity of views. The chair of this board would become the deputy chair of the manufacturing board. All farmer directors would also rotate, on a regular basis, as observers on this manufacturing board. The farmer oversight board would also have its own executive officer and funding.

This new structure would give the farmer owners of the co-op more time to assess the performance of the board and the company. The farmer oversight board would also have the resources to bring in outside independent analysts to assist in analysing what is going on with the company on an in-depth basis, not just internally but externally as well. This does not mean that we farmer-suppliers will lose control of our co-op. We will have the final say over what the company will and will not proceed with, but it will give us more time and breathing room to competently assess what needs to be done without hindering MG’s business activities and that’s the most important objective.

The supplier relation committee taken out of the board’s control and handed to suppliers with its own funding, while still reporting to the board and suppliers. The chairman of this committee will also sit on the MG board as a special qualifications director. I envisage that this committee will, over time, evolve to act as the farmer oversight board

The complete review of milk pricing and structure, looking at all aspects of milk pricing including production incentives, next-generation packages, growth incentives to see if they really are adding value to farmers and to the co-op. Are they hindering an open and transparent milk pricing structure? This review will be undertaken by the new supplier relations committee that is independent and at arm’s length from the co-op itself. It will report its findings directly to farmers and the board. This review should also focus on the widening gap in milk price paid to MG farmers. An example is the production incentive payments that act as a pseudo pyramid payment scheme.

I am totally against the clawback. I want to know why MG does not have the ability to fund the $200m on its own balance sheet because last November it received $460m of new capital. It also has had significant asset sales and leasebacks and the windfall from the failed WCB takeover attempt.

Where has this money gone and what has it be used for? Remove the ability for MG to ask for milkclaw back overpayments to be repaid if they misjudge the market from the company and unit trust’s constitution. The clawback amount is fixed to your specific farm overpayment, the same as the proposal for suppliers who could take advantage of the early payback offer.

Quarterly reporting to farmers of sales and production targets. Have they been met? Reports to include milk price updates and confirmation as well as regular updates on the value-add strategy undertaken. MG needs to demonstrate how it is going to report to farmers in regards to lifting the underlying milk price by $1kgMS by the FY2107 using the developed reporting matrix as indicated in the prospectus.

MG, along with the UDV and the ADF, should work towards developing a process that requires all milk processing companies to submit their opening milk prices to DA so they can all be simultaneously announced on June 1, to prevent any price fixing and to ensure that the process is open and transparent.

I would like to see a discussion regarding one person, one vote.

Sharing up. I would like to see that all new suppliers would be shared up on day one with virtual shares equal to their milk solids requirements so they are on an equal footing regarding maximising milk price. Over time they will purchase shares to the required value as opposed to what is occurring now. It’s about fairness and equity.

3. Given the events of recent months the upcoming MG board elections provide an opportunity for suppliers to reassess the role of directors on the MG board, and the role and performance of the board as a whole within the co-op.

At the core of these events is the failure of the board, and especially the chairman, to control the process, the strategy and the risks involved in implementing the new value-added vision, from a commodity-based to a high value-added co-op. The board seems to have been caught up in the hype and spin they presented to the farmers, along with the plans to lift the milk price by $1kgMS, to grow the milk pool and unlock the so called value of our $1 shares.

It is the board and the chairman’s role to keep control of the company and its CEO. It has to maintain the balance between what’s possible and achievable when implementing change and the risk this change brings to the co-op’s existing business structure. Internal governance processes have broken down and failed. The board must have belief in its role and have the ability to challenge proposals presented to it and the capability of the chairman is crucial in this respect. It is time for a full renewal of the board, carried out in an orderly manner, as we need to ask whether the current directors are competent to retain the stewardship of our co-op. For the above reasons, I think the chairman should step down at the AGM.

I am also not opposed to the unit holders being paid a dividend on their units, if a real profit is generated by the co-op, not the pseudo profit that has been created for the sole purpose of paying a dividend. Borrowing $200m, then allocating $40m for the pool payment, and $12m to pay tax, the leftovers given to support milk price, all of this has to be paid back with interest by the farmers makes no sense at all and is inherently unjust and unethical. Remember these are investments, not a bank guarantee with certain interest payable against a loan.

Remembering that the board did not seek an independent expert report to invoke the suspension of dividend clause as they themselves did not think this.

The chairman with his actions has destroyed value and that’s one thing a director of a company is not allowed to do. The most valuable asset this co-op has is its farmers and the milk they produce. Once you remove it, it is very hard to get back. It is not a hole in the ground that can be bought, sold or traded on a whim. MG will no longer be able to call itself the price setter in the Australian dairy landscape. It will be chasing and trying to keep up for years to come.

Remembering that the board did not seek an independent expert report to invoke the suspension of dividend clause as they them selves did not think this was not out side of foreseeable advents

LikeLike