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Slater and Gordon today has announced it is investigating a potential investor class action against Australia’s largest milk supplier, Murray Goulburn Co-operative, and its subsidiary MG Responsible Entity Limited.

The potential class action is on behalf of all current and former investors who acquired units in Murray Goulburn’s listed entity MG Unit Trust before 27 April, 2016, including through the capital raising conducted in July 2015 when MGC listed on the ASX.

The claim, which Slater and Gordon is investigating together with litigation funder IMF Bentham Limited, relates to guidance provided by Murray Goulburn in its Product Disclosure Statement (PDS) issued on 2 July, 2015, regarding its likely revenue and profits from the sale of milk products during the financial year ending 30 June 2016.

In its PDS, Murray Goulburn provided a forecast to its shareholders and unit holders of a FY16 net profit after tax of $85.8 million.

On 29 February 2016, Murray Goulburn announced a revised FY16 net profit after tax forecast of approximately $63 million, citing historically weak dairy commodity prices.

On 12 April 2016, and again on 18 April 2016, Murray Goulburn confirmed that Chinese regulators were tightening regulations on imports of milk products into China but denied that the anticipated regulatory changes would have a material impact on Murray Goulburn’s business.

Then, on 27 April 2016, only two months before the end of the financial year, Murray Goulburn downgraded its FY16 net profit after tax forecast to $39 to $42 million.

In announcing the FY16 Downgrade, Murray Goulburn blamed:

  1. Weak growth in Chinese demand for adult milk products in the first half of April 2016, resulting in reduced expectations for sales and revenue during the fourth quarter of FY16.
  2. A strengthening AUD:USD exchange rate.
  3. A downward revaluation of milk product inventory expected to be sold in FY17.

On the same day, Murray Goulburn also confirmed that its CEO and Managing Director Gary Helou and its CFO Brad Hingle would resign from their respective positions.

In response to the news, Murray Goulburn Co-operative’s unit price fell more than 40% from its prior closing price of $2.14 in a single day, closing trading at $1.26 per unit.

Slater and Gordon and IMF are investigating:

  1. Whether Murray Goulburn misled investors in MGC by issuing the FY16 profit forecast in its July 2015 PDS and/or the revised forecast in February 2016 without a reasonable basis.
  2. Whether Murray Goulburn breached its continuous disclosure obligations under the ASX Listing Rules and the Corporations Act 2001 (Cth) by failing to announce the FY16 downgrade, or any part of it, prior to 27 April 2016.
  3. Whether MGC unit holders are able to recover losses incurred as a result of the above possible contraventions.

Slater and Gordon Senior class action lawyer Tim Finney said the firm will investigate whether Murray Goulburn has misled the market.

“Our initial investigations have identified inconsistencies between Murray Goulburn’s statements to the market regarding its likely profits in the 2016 financial year, and the factors that would affect its performance.

“Yesterday’s downgrade was of such a scale that it cannot be explained by the excuses that have so far been provided.

"We are investigating whether the true cause of Murray Goulburn’s downgrade was an aggressively optimistic profit forecast – built into its Product Disclosure Statement – that the company was simply never going to achieve.”

Investors who are interested in participating in a potential class action or who wish to receive more information, can opt in here.

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