Donegal Creameries’ profits fall sharply in downturn

DONEGAL Creameries was hit by the decline last year in global dairy markets and suffered a sharp fall in profits as a result of shrinking demand.

The group’s financial figures for 2008 show sales rose 3.4% to €129.9 million, while profits at the operating level fell sharply from €9.3m to €5.8m.

Last year’s profit figures were boosted by a €1.1m gain from the revaluation of an investment property in the group’s portfolio.

In 2007, the corresponding gain was €3.2m.

Commenting on the figures, Ian Ireland, group managing director, said the group had delivered a solid performance in very challenging times.

In particular, he said the decline in the global dairy market had a significant impact on the group’s dairy division.

In that context, he said the “painful downside of volatility is being felt by producer and processor alike. This, however, was partly offset by a solid performance from our liquid milk business”.

Within the group, underlying profits were €4.7m, down from €6.1m in 2007, mainly due to dairy commodity prices and less activity in the property market.

Agribusiness performed well with the seed potato business continuing to flourish and the group’s recently established garden centres making a useful contribution.

Expansion into organic foods continued with further conversion of lands at An Grianán estate together with increased organic activities at Donegal Potatoes.

The group also invested in additional resources to drive this strategy, the statement with the accounts said.

Underlying earnings per share from continuing activities before the impact of re-valuations of investment properties and a deferred tax rate change was 46.1 cents (2007: 56.9 cents).

Despite the challenges of 2008 and the economic climate, the group’s balance sheet remains strong.

“We are confident that over the next few years the group will continue to deliver value for its shareholders”, said Mr Ireland.

The directors are recommending a final dividend of 9c per share bringing the total dividend to 16c per share, an increase of 3% on 2007. The economic climate and outlook have changed significantly in the last 12 months and the group has adapted to meet these new challenges.

“In the short term, we have to deal with the impact of weak sterling on retail sales in Donegal for both dairy and agri-inputs and a weakening global economy,” said Mr Ireland.