Aurivo ready for 25% expansion

Aurivo Co-op, formerly Connacht Gold, is to invest €40m to boost its processing capacity, with its milk supply set to rise 25% over the next five years.
Aurivo ready for 25% expansion

Some 98% of the co-op’s 1,000 suppliers have signed up to the co-op’s new three-year supply agreement, their faith buoyed by a 70% rise in operating profits to €8.9m last year, and an average annual milk price of 36.2cpl despite the price collapse in milk markets.

Aurivo produces 350m litres of milk annually, exporting 75% to almost 50 countries. The bulk of its 25% increased milk output will continue to be directed to its existing overseas customers in the form of enriched milk powder.

It has also added sports nutrition to its business mix with the €28m acquisition last month of My Goodness Ltd, the UK producer of For Goodness Shakes.

“We feel we are in a strong position for increased exports around the world. Our suppliers have great confidence in our strategy. We will be investing in expansion in the coming years, but to date we haven’t needed to due to the work we did on Lean with Enterprise Ireland,” said Aaron Forde Aurivo chief executive.

“Aurivo is confident that our deep global customer relationships will continue to unlock new opportunities. A very good example of those new growth opportunities is our recent acquisition of My Goodness.

“This is a fast-developing nutrition business that is set for significant growth in the UK, Ireland and further afield in international markets. The acquisition enables us to develop a leading position in this high growth sector,” he said.

Milk output is up 10% since the start of the year, and the co-op is around 3% over quota, which could see suppliers facing a collective super levy bill of €1.5m to €2.2m. This will be resolved through staged payments. Suppliers share a milk cheque of about €128m annually, and this is set to rise €30m in the coming years.

Aurivo chief financial officer Donal Tierney said while turnover was marginally down (2014: €447m versus 2013: €454m), the co-op’s performance was strong in the face of declining markets. Good weather also reduced demand from milk suppliers for Aurivo’s animal feed. By contrast, the co-op’s 2013 animal feed sales were strong, driven by bad weather.

The co-op’s expansion is set to create 300 jobs. Aurivo employs around 700 people in its west of Ireland bases.

Net debt is at €1.4m, having stood at €12.9m in 2013, and shareholder funds are at €38.2m, comparable to €38.7m in 2013.

Another change for Aurivo in 2014 was the rebranding of its stores to Homeland, Homeland Agri or Homeland Plus. Its low-fat butter products, branded as Connacht Gold, continue to increase market share.

Aurivo’s report carries a commentary on troubles in cattle marts nationally.

“With a greatly changing environment, marts countrywide will be challenged to adapt and grow as the dairy herd expands, margin pressure continues in the beef trade, and quality demands mean restrictions on animal age, weights and movements will be greater,” the report states.

“One of the frustrations of the business is lack of adequate enforcement of regulations across the trade. Aurivo is delighted to be in compliance with the trade regulations but would ask all operators are treated equally in the interests of fairness and protection of sellers’ funds.”

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