Dairygold in Brexit-proofing mode

Dairygold in Brexit-proofing mode

By Pádraig Hoare

Dairygold has said it is taking steps to “Brexit-proof” its business and is exploring European opportunities after seeing its operating profits rise 85% last year on foot of the increase in butter prices.

The largest farmer-owned dairy co-operative in the Republic said operating profits rose to €32.4m, while it recorded a turnover of €965.5m, up from €756.1m in 2016.

Earnings before interest, tax, depreciation and amortisation (Ebitda) rose to €52.8m, up from €39m in 2016. Dairygold said the net asset value of the business was €335.5m at the end of the year, while net bank debt was reduced by 10% to €79.6m, which it called “prudent, given the scale of the organisation and levels of profitability”.

It invested a further €13.4m, bringing total investments over the past five years to just over €162m.

The rise in global butter prices to €7,000 a tonne last year was a major factor in the firm’s profits, but Dairygold cautioned that prices lowered from the fourth quarter last year.

The largest exporter of cheddar cheese to the UK said Brexit remained a significant challenge and that it was looking to Europe for opportunities.

Chief executive Jim Woulfe said the granting of planning permission for its Jarlsberg cheese facility in Mogeely, East Cork, with Norwegian giant TINE was vital. “Jarlsberg is our first major step in Brexit-proofing and if we were not granted planning, it would undoubtedly be a big concern. However we believe we have made a very good business case.”

He said that while more clarity was coming from political leaders regarding Brexit, it was still “one step forward and two steps back”.

Dairygold is preparing for a hard Brexit and doing what it can to progress its business, he said. He said the biggest concern was the transition period of a year not being long enough.

“Nine months is not long enough to diversify away. We are ready to deal with what is in our control but you cannot control the uncontrollable,” he said.

Dairygold is clearly focused on developing alternative routes to market and on product diversification as part of its risk mitigation and value-added strategies.

“Cheese is an important part of the portfolio. Equally we are exploring opportunities in mainland Europe, looking in the context of new routes to market. We’re very focused on it. It will be cheese-focused and it is evolving. You look now at elements such as whether it is in the customs union, the single market, common currency — these elements are really important now and where you are going to play in the future,” he said.

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