Carbery remains acquisitive as part of its post-Brexit strategy, buoyed by strong 2018 accounts

Joe Dermody talks to directors of Carbery Group, which has just published its accounts for 2018.

Carbery remains acquisitive as part of its post-Brexit strategy, buoyed by strong 2018 accounts

Joe Dermody talks to directors of Carbery Group, which has just published its accounts for 2018.

Carbery Group, the West Cork-based international ingredients company, remains primed for acquisitions in target global markets, underpinned by a solid financial performance in 2018.

Its 2018 accounts showed operating profits up 4.5% (+10.6 % on a constant currency basis) of €32.4m (2017: €31m). Turnover was up 1.5% (+2.9% on a constant currency basis) to €423.5m from €417.3m in 2017.

Its EBITDA (earnings) rose 5.2% to €43.9m, up from €41.8m in 2017.

The group has seen milk supply into the Ballineen hub from its four-member West Cork co-ops rise 5% to 536 million litres last year, and up 35% in the five years since the abolition of quotas.

Carbery is also investing €100m over the next two years, notably €78m in its new production facility for mozzarella and other new cheeses, which ties in with recent strategic acquisitions.

While the company is confident in its post-Brexit plans for its UK businesses, it will also continue its diversification strategy.

Last year's acquisition of Italian flavour company Janousek sees Carbery develop its flavour footprint in Europe, while it is also doubling the size of its Asia operations at Samut Prakan in Thailand.

Carbery's headquarters at Ballineen, Co Cork.
Carbery's headquarters at Ballineen, Co Cork.

During 2018, Carbery invested a further €18m across its global operations, bringing total investment in the business over the past five years to a total of €90m. The €78m planned production investment in Ballineen will come entirely from borrowings.

The company's net debt stood at just over €30m for 2018, up from €12.7m in 2017.

“We remain acquisitive. We are seeing good momentum in our business internationally,” said Jason Hawkins, CEO of Carbery.

Asia is booming for us, and it is becoming a more and more exciting market for our nutritional platform. We are moving into higher end protein solutions, infant formula and health-focused nutritional products.

“As we look forward, acknowledging uncertainties in relation to Brexit and other challenges we may face in the dairy market, we are actively addressing these challenges by diversifying our offering in order to expand into new geographic markets to grow and futureproof our business.

“Everything we do to diversify will help reduce the impacts of Brexit, while we are also looking at solutions that will allow us to continue to supply to our customers in the UK, which will still be a strong market for quality product.”

Carbery is keen to stress that its international strategies are all informed by its core focus on its members and suppliers.

While 2018 featured severe weather challenges, the Bandon, Barryroe, Drinagh and Lisavaird co-ops all paid out a leading milk price throughout the year.

Jason Hawkins, CEO, Carbery Group.
Jason Hawkins, CEO, Carbery Group.

“It was important for us to support the milk price to our suppliers last year,” said Jason Hawkins. “Our core objective is to add value to our shareholders, and one key way that we do this is through the milk price.”

Carbery announced its fixed milk price scheme for its milk suppliers in December 2018 to offer some income stability in a volatile dairy market.

The Carbery Board declared a €4.3m bonus based on 2018 milk supply and took the decision to set aside this amount for its stability fund, for future payments at times of price volatility.

Despite Brexit having been pushed back several months, Mr Hawkins expects the Carbery milk price to remain within a relatively stable range for the rest of 2019.

In terms of sectoral performance, Carbery's dairy business was in line with expectations in 2018.

Its nutrition business, which includes a broad range of protein products, performed strongly in 2018, driven by organic volume growth and Carbery's moves into new and emerging markets across the globe.

Continued investment in nutritional research and development has enabled the growth of specialised nutritional ingredients for the infant, sports and clinical nutrition markets globally, with a particular focus on Asia and North America.

Cheese blocks on the production line at Carbery's facility at Ballineen, Co Cork.
Cheese blocks on the production line at Carbery's facility at Ballineen, Co Cork.

Synergy, Carbery Group’s international taste division, is a leading supplier of flavourings, extracts and essences. It supplies customers around the globe from operations in Europe, North America, South America and Asia.

Also during 2018, Synergy also extended its facility at Wauconda, outside Chicago, to enable increased manufacturing capacity for its American markets.

“We are committed to growing our business on a sustainable basis, delivering on our promise to our farmers, our employees, and our local community,” said Jason Hawkins.

We believe that the Group’s global approach to business, coupled with continuing investment in new products and market growth opportunities, will put us in a strong position to deal with perceived challenges over the long term.

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