Strong demand and cost savings transform Lakeland Dairies’ fortunes

BUOYANT global demand and an 18 month restructuring programme has yielded very positive financial results at Lakeland Dairies, the country’s second largest co-op.

Strong demand for dairy products and significant cost savings turned a substantial loss at the Monaghan-based group of €7.2 million in 2006 into an operating profit of €5.5m last year.

Sales rose €43m to €455m, while net debt was more than halved to €33.2m.

Shareholders funds increased by €11m to €79m. Operating profits come after interest charges of €1.1m were paid and before exceptional items, including rationalisation costs, of €200,000.

Over the past 18 months, Lakeland has implemented a strategic restructuring plan.

On the operational side, Lakeland Foodservice increased to 60 the number of export markets now served, resulting in a 14% hike in turnover to €111m. The group is the leading dairy foodservice operator in Ireland and Britain through its range of cooking ingredients, dairy mini-portions, creams, ice-creams, frozen yoghurts and low lactose-based dairy products.

Rising global sales of dairy commodities were driven by demand in Asia, especially China, but drought in Australia was also a factor.

The group’s food ingredients division did well as a result of the supply shortages and sales rose 17% to €302m. Investments in new technology delivered further gains from casein and whey.

Lakeland Agri-Trading achieved an exceptional performance with record ruminant sales volumes, even though turnover contracted by 31% to €41m, which had been anticipated following a major divestment of retail stores.

Chief executive Michael Hanley said 2007 was “a transformative year” for the group, but warned of tougher times for dairy farmers this year.

Dairy markets have seen major price cuts, particularly in commodities with serious implications for milk prices.

“The credit crunch, financial market uncertainty and the strength of the euro against the dollar and sterling are also having a serious impact, particularly on our export returns,” he said.

“All of this will undoubtedly have a downward effect on the milk price payable to producers in 2008,” Mr Hanley said.