Donegal profit hit by potato difficulty

A difficult potato season has severely impacted on Donegal Creameries’ half-year results.

The company recorded a profit after tax of €246,000, down from a profit of €1.1m in the same period last year.

The company is no longer focused on the dairy market following the sale of its liquid milk and retail agri-stores business. Its main area of business is seed potato produce and its developing speciality, value-added dairy business.

The seed potato market across Europe was badly hit at the start of the year, but the board of Donegal Creameries remain confident that they can recover their losses in the second half of the year.

In its half-year report, the board said: “Our produce business was impacted by what has been a difficult European seed potato market in the first half of 2012. The performance of our seed potato business is materially weighted towards the final quarter of the calendar year, and the board remains confident of a strong performance for the full-year 2012.”

NCB analyst Darren Greenfield agreed with the board assessment. He said: “The fall in operating profit was due to an oversupply of seed potatoes in the period, which resulted in a significant fall in prices. Prices are expected to recover in the season ahead and the company is expecting a stronger H2, although, with c.75% of this division’s profits generated in Q4, visibility is somewhat limited.”

The board said they were happy with the performance of their speciality dairy business, based in the UK.

The Different Dairy Company produces the Rumblers yoghurt and oat pots as a food-to-go offering focused on the UK market, as well as the Organic For Us range of yoghurts, sold in Ireland.

Rumbler’s performed strongly during the period with further retail listings secured on the back of good momentum in 2011. In contrast, the Organic For Us products face a challenging consumer market in Ireland characterised by continued discounting and promotions which impact negatively on margins.

Overall, the board is hopeful that it will achieve full-year earnings of €5.1m, up 5% on 2011, based on an expectation of strong performance from its produce division in the second half of the year.