MGC cost strucutre

From my research,

Estimated MG cost can broken down into the following(in million):


----------------------------------------------------- (Cost of Manufacturing)
Plant Fixed Cost 666 (24%)
Production Labour Cost 355 (13%)
Manufacturing input 246 (9%)
(utility, packing, other ingredient)
-----------------------------------------------------
Milk Payment: 1098 (40%)
Distribution: 194 (7%)
Marketing: 93 (3%)
Administration: 59 (2%)
Finance: 23 (<1%)

It is anticipated that 20% milk loss in FY 2017. The fact that milk production is directly correlated to the economy of scale, means that less milk will create under-utilized capacity in MG processing plants, less economical spending in distribution, marketing etc per unit of goods produced.
Essentially, fixed cost stays the same, no matter how much less milk MG produces.
From my understanding(see the cost structure), about 60% of the total cost(including milk payment) is variable cost, scaled with milk production and 40% is fixed cost.

20% milk intake loss probably only translates to 12% cost saving.

In the hindsight, the dissolved deal between MG and Mead Johnson not only saves MG capital but also reduces its risk of overcapacity/over-investment in plants. The trends points to a slight decline in milk production in Australia. I rarely see a bad news, which turns out to be a good one.
The blown-deal with MJ is one of them. In the next few years, MG milk intake will stay much the same, after accounting for the 20% drop in milk intake.

For 2017, from my model (20% drop in milk intake)
Average GDT vs NPAT
GDT = 800, NPAT = 34 million (including franking, =48)
GDT = 850, NPAT = 41 million (including franking, =58)
GDT = 900, NPAT = 48 million (including franking, =68)
GDT = 950, NPAT = 62 million (including franking, =88)
GDT = 1000, NPAT = 65 million (including franking, =93)

The model uses FMP=4.95 and indicates surplus in milk payment. MSSP recoup is feasible.
MSSP problem will likely to resolve as GDT improves.