Creameries positive despite fall in profits

DONEGAL Creameries has given a positive outlook for the full year, despite a tough first half which saw year-on-year profit decline and an increase in net debt.

The Letterkenny-based dairy and agri-services company yesterday reported a pre-tax profit of €805,000 for the first six months of 2011. This was down by €3.23 million on the corresponding period last year.

After-tax profit, for the period, was down by €2.77m on a year-on-year basis to €862,000. Earnings per share came in at 8.5c; down from the 35.7c generated in the first half of 2010; but group revenue rose by 13.5% year-on-year to €68.75m.

However, the company’s net debt increased to €24.6m. This was up from €20.1m at the halfway stage in 2010 and from €23.2m as of the end of last year. The interim dividend per share, for stockholders, remained unchanged at 7c.

Donegal’s management said that the results reflect the challenging domestic market conditions experienced since the second half of 2010, in particular the market for liquid milk. “This is due to the significant time lag in recovering cost increases within a very competitive market,” the company added.

Turnover rose in each of the group’s core divisions of dairy (which still showed a loss), agri-inputs and produce; and management is hopeful of a good full-year performance in the latter two categories, in particular.

“Progress can be made on the recovery of cost price increases in the dairy division. The board remains confident of progress in its key strategic areas of produce, niche dairy, associate investments and expects further acquisitions this year,” group chairman, Geoffrey Vance said.

Management said the group’s balance sheet remains strong with total assets of €115.7m.