Dairygold delivers €27m profit

Dairygold’s €27.2m operating profit for 2014 is a virtual carbon copy of the co-op’s 2013 results, achieved in a year of marked global milk price volatility and despite investing €50m in expanding its processing facilities.
Dairygold delivers €27m profit

While global milk prices fell by around 50% from February to December 2014, Cork-based Dairygold paid its suppliers an average of 38.9c per litre of milk. The country’s largest farmer-owned dairy processor shielded its members from the twin impacts of falling demand in China and Russia’s dairy import ban.

Turnover reached €848m, marginally up on 2013, while earnings on core activities rose by €1.8m to €47.2m. The co-op’s debt now stands at €71.6m, up from €60.9m.

Of the €50m invested during 2014 in the Mitchelstown and Mallow facilities, member contributions made up €9.5m.

The net asset value of the co-op has risen 2% to €280m. Milk supplies rose 2% to 975m; of significance here were the record levels of solids, which will give the co-op added value in its expanding product portfolio.

Dairygold has now completed its €33.5m special ingredients facility at Castlefarm, Mitchelstown, and has begun work on its €83.5m milk processing facility in Mallow. The expansion will continue in the phased plan agreed with co-op members.

“Our milk suppliers’ forecast of up to a 60% increase in milk production output will mean processing an extra half a billion litres of milk annually by 2020,” said chief executive Jim Woulfe.

“In a study carried out for Dairygold, it was estimated the economic benefit of this growth by 2020 would be €226m annually and create 1,200 full-time jobs. As the raw material is sourced locally, the majority of this benefit will find its way back into the local economy, which will be hugely beneficial for the local economy.”

The €83.5m investment in the first phase of the regeneration of the Mallow milk processing site is progressing on schedule, with full commissioning due in early 2016. Overall, the co-op’s investment will bring the total weekly milk processing capacity to between 45m and 50m litres by 2016, depending on the product mix.

In relation to failed talks with neighbouring co-ops with regard to consolidation, Mr Woulfe said Dairygold’s board was still of the view that consolidation would ultimately benefit members.

“Whilst there seemed to be little momentum for consolidation, Dairygold believes that it is necessary and will keep an open mind on the matter.”

Chief financial officer Michael Harte said the investments were creating pharmaceutical standard food processing facilities, which will facilitate greater volumes of higher value dairy ingredients.

He also highlighted the fact that the co-op’s debt only rose by €10m in a year featuring a €50m investment.

“That shows great strength in Dairygold’s ability to generate cash. We dealt with €40m of our expansion investment within one year. Our members have put €9.5m into the revolving fund and the loan note; and we are paying 4% on the loan, a far higher return than any money deposited in a bank.”

Dairygold also backed its suppliers in the face of falling global milk prices.

As well as paying an average of 38.9c per litre, in December the co-op also eased pressure on farmers’ fund contributions. The co-op raised the milk price threshold for monthly contributions to its revolving fund from 27c to 30c per litre. Milk suppliers are not required to make a contribution to the Dairygold Revolving Fund when the Dairygold quoted milk is below 30c per litre in any given month.

Mr Harte also highlighted the impressive performances of Dairygold’s two core businesses, Food Ingredients Ireland and Dairygold Food Ingredients Overseas. Turnover at the Irish arm rose 3% to €470m, while the overseas business rose 8% to €149m.

Dairygold divested its non-core overseas businesses last year. Its German consumer business was acquired by the Irish Dairy Board, while Kerry Group acquired its French cheese powder and flavourings business.

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