Profits plunge €14m at Dairygold

PROFITS before tax plunged from €15.9 million to €1.3m in 2008 at the north Cork-based Dairygold Group.

In one of “the most challenging [years] on record” the society said the dramatic downturn in global dairy hit dairy prices hard turning bumper results of 2007 on their head. Operating profits of€2.3 million contrasted sharply with the figure of €21.4m in 2007.

Rising costs including energy, fertiliser and feed ingredients all rose sharply and hit the bottom line hard, the company said.

Despite the rough trading environment, and the added cost difficulties, acting chief executive Michael Harte described the outturn as “a satisfactory performance under the circumstances”.

Much of the loss is accounted for by €20m paid out to farmers during the year to compensate for the sharp drop in milk price caused by the collapse in global dairy markets.

Turnover increased to €688m, up by €63m on the 2007 figure of €625m, accounted for by increased sales across the group except for Food Ingredients in Ireland where turnover decreased in line with the fall in dairy commodity prices.

The €20m subvention “reflected the policy decision taken by the Dairygold Board to continue to support members from the full severity of the poor market returns”, the group said.

Throughout 2008, Dairygold continued to pay a leading milk price, despite falling market returns, said Mr Harte.

Group chairman Vincent Buckley warned in his comments accompanying the 2008 results the group would not be able to sustain the commitment to its farmers in 2009 as prices for milk stay low.

“By the beginning of 2009 with dairy market returns plunging yet further against a background of a severe global economic downturn it had become clear that, despite our aspirations for a strong milk price, it would no longer be possible to continue to support milk price to 2008 levels.”

Given the unrelenting downward pressure on milk price, Mr Buckley called for immediate Irish Government and EU action to address the difficulties facing producers at a time of production constraint. It was neither just nor realistic “to expect farmers in any part of the EU to accept prices for milk which are lower than those which prevailed 20 years ago”, he said.

If this persists then family farming will “be severely impacted”.

Former chief executive Gerry Henchy who was removed from his post this year received a single line mention in the annual report. Mr Buckley’s report states: “I wish to acknowledge the work and endeavours of Jerry Henchy for the society during his tenure.”

When all charges including goodwill are accounted for, the group saw a net loss for the year of €3.2m down from a net profit of €10.1m for 2007.

During the 12 months, assets in the group decreased €43m to €205.6m reflecting a fall in pension assets, the translation of foreign assets and the negative contribution to the figures by Reox Holdings which owns 4Homes and a virtuallymothballed property division under the name of Alchemy.

Net borrowings increased €29.9m to €68.2m at year end 2008 involving investments committed to in 2007, but carried out last year.