Bandon Co-op operating profits jump 112% as turnover rises 75%

BANDON Co-op in West Cork saw its turnover soar by 75% to €85 million during 2010, according to its annual accounts for last year.

Overall, the co-op saw its operating profits for the year climb 112% to €1.3m compared to a difficult 2009, in which its farming members suffered from low milk prices and difficulties in gaining access to banking credit.

Notable features in the co-op’s report included analysis of its future strategy plans for Bandon Vale Cheese — the cheese packing business it acquired for €2m in December 20009 — plus a welcome return to stronger milk and dairy prices, which led to an output increase from suppliers.

The co-op’s overall growth was achieved despite a 37% dip in profits to €1.2m in its associate companies — notably a poor 2010 for Clona Dairies, in which Bandon retains a 41% share.

The bulk of Bandon’s profits were generated by sales of milk to Carbery Creameries, in which the co-op owns a stake of just over 20%. Carbery added 26% to the milk price it paid to Bandon’s suppliers.

Overall sales to the creamery came to €27.8m for 2010, which also amounted to a 26% increase on 2009’s sales total.

The co-op’s chief financial officer, John Looney, said: “At the end of the day 2009 was a very difficult year for farmers. Thankfully, 2010 was a much better year overall, but better for some areas than others.

“There was an upturn in the retail sector, which was positive for both our own retail outlets and for farmers in that the rise was reflected in the price they were paid for milk and dairy products.

“However, the farmers would have liked the price to have reflected world prices a bit more closely, but the price paid by Irish retailers did not rise to match world price levels.

“Over the next 12 months the cheese price should remain stable. It has gone up to a level which is of benefit to everyone in the industry.

“Clona has been experiencing some difficulties, which is reflective of a lot of consolidation in that sector of the industry.”

Bandon’s divisions include dairy processing, feed compounders, vegetable production and retail centres, which include outlets in Kilbrogan, Kinsale and Enniskeane.

Bandon co-op expects that the benefits from its acquisition of Bandon Vale Cheese will be more visible in the coming years. The co-op has identified a number of areas in which synergies and cost-savings can be achieved with the cheese packing business.

This acquisition should also lead to a strengthening of the co-op’s relations with its existing customers as there is a sizeable crossover in the commercial base shared by both businesses.

The co-op acquired Bandon Vale in December 2009, at which time the cheese business was already tied into a three-year schedule to repay bank debts. Thus, for the now the co-op is restricted in the changes it can make in the business, which means that several cost-savings and synergies are yet to be implemented.

John Looney added: “Those savings won’t be reflected in the short term, but the synergies will be more possible in due course. It is part of a longer term strategy.

“It is a business with which we are very familiar as it has a lot of shared customers between it and our other operations.”

At present, Bandon Co-op is 8% over its milk quota, but is seeing a marked reduction in deliveries from its suppliers. It anticipates that supply levels will continue to fall for the remainder of the quota year from now until the end of March.