Profits turn sour at creamery

DONEGAL Creameries maintained its dividend payments despite a 54% fall in post-tax profits to €1.74m.

More worryingly for the company, operating profits fell by 87% to just €643,000 for the year ended December 31, 2004.

Turnover fell by 12% to hit €118.33 million (2003: €134.45m), according to accounts released yesterday.

Their publication came later than anticipated due to a delay in receiving results from an associate company, Monaghan Middlebrook Mushrooms Ltd.

The only top line figures in the accounts which were not back on last year were the dividend payment, which remained static at 12 cents per share and the NAV (net asset value per share, excluding minority interest), which rose by 4.8% to €3.94.

The company’s shares closed unchanged at €4.25 yesterday, but down on May 31, 2004, when the shares closed at €4.60.

NCB stockbroker Paul Meade said the results were in line with the company’s April trading update, which disclosed that Donegal was experiencing its most challenging trading environment for some time and the results would include prior year adjustments.

Mr Meade said trading remains extremely challenging so far this year and EU farm policy changes would increase the level of uncertainty.

“Improved property and stevedoring profits in 2005 and a sustained improvement from its merged mushroom business should assist earnings recovery.

“However, a planning refusal for a retail and office development in Letterkenny is a significant setback.

“Our 2005 forecast of €4m PBT (profit before tax) and 32.6c look demanding as it assumes substantial improvements in both recurring and disposal property income. We will review these in light of the results,” he said.

Donegal Creameries said turnover in the dairy division for the year ended December 31, 2004 was €46.5m, a decrease of 3% on the 2003 figure of €47.9m, mainly due to lower volumes of milk traded on sales to other processors.

Managing director Ian Ireland said trading conditions remained difficult in some of the group businesses for the first number of months of 2005 and the full impact of the EU changes in agricultural policy were still difficult to assess at this stage.

“Nevertheless the directors believe that the group’s performance for the current fiscal year will be satisfactory,” he added.