Dairygold delivers record revenues and profits jump 

John O’Gorman, Chairman, Dairygold, Conor Galvin, Chief Executive, Dairygold and Michael Harte, Chief Financial Officer. The Co-Operative delivered a record turnover of €1.17bn. Picture: Fennell Photography

Dairygold Co-Operative saw turnover reach record levels of €1.17bn last year, an increase of 15% or around €152m on 2020.

It meant the Cork co-op returned an operating profit of €30.4m, an increase of €4.4m which the company said reflects a robust performance across all the society’s businesses, despite the challenges of the Covid-19 pandemic.

The dairy business turnover increased by €112m to €871.6m, driven by increased sales volumes and strong dairy market returns. Dairygold collected and processed 1.49bn litres of milk in 2021, a 4.2% increase on 2020.

Last year, the society paid an average quoted milk price of 36c per litre (cpl), significantly higher than the milk price of 30.4cpl in 2020. The average milk price paid was 41.0cpl (2020: 34.7cpl), based on average milk solids and the inclusion of quality and sustainability bonuses.

Dairygold said dairy markets remained buoyant throughout 2021 through a combination of low global milk supply growth in the main exporting regions and strong international demand, in particular from China.

However, it warned that several factors are expected to impact demand for dairy products for the remainder of 2022. The ongoing Ukraine invasion and the resulting disruption, including to supply chains, will significantly affect both the availability and the cost of a large range of inputs, including fertiliser, energy, packaging, and raw materials, the society said.

“The resulting inflation, which is already being felt at farm and factory level, will create challenges for profitability in the entire value chain.”

However, the earnings released this week show the society’s accounts are in good health. Earnings before tax and interest (EBITDA) were €57.6m, an increase of €3.8m in 2021, reflecting the increased level of profitability in the core business.

Following a decade of significant capital investment, Dairygold said it reduced its bank debt by €11m to €108.2m. At the end of 2021, the net asset value of the society stood at €422.2m, an increase of €34.5m on 2020.

Dairy Ireland’s turnover in 2021 was €733m, an increase of €101m on 2020, driven by increased sales volumes and prices. Dairy sales volumes of around 243,000 tonnes were a record for the business, reflecting increased milk volumes and reduced stock holdings.

Dairygold’s agri business delivered a very strong performance across all activities in 2021 with turnover increasing by €32.3m to €276.2m. Dairygold’s network of 26 co-op stores remained open during Covid-19 restrictions.

Last year was a year of significant change in Dairygold, as Jim Woulfe handed over the leadership to Conor Galvin. Mr Woulfe, as chief executive, led the business through 12 years of substantial transformation and growth.

Dairygold chief executive Mr Galvin said the business is in a good financial and operational position.

“Following a decade of significant capital investment, the business has a strong EBITDA, manageable debt, and a successful model for member funding. Our focus has shifted from milk expansion to creating more value per litre of milk.

“We are currently conducting a business-wide strategy review which is expected to be completed by the end of April. This strategy will provide an updated roadmap for the business for the next five to 10 years, as we seek to continue to maximise returns for our members, through higher-margin activities while also clearly focusing on meeting our crucial greenhouse gas reduction targets.”

Dairygold also said that the installation of a third evaporator at the Mallow Nutritionals Campus is being finalised. This project will give the society an extra capacity of 3m litres of milk per week, to bring the overall peak week capacity to around 55m litres. It said this and other investments will provide the necessary capacity to manage the forecasted peak week volume to at least 2025.

However, further investment will be required in certain processing facilities, from a business continuity perspective, which may also provide additional capacity and provide contingency.

“With milk production now slowing to more modest levels of growth, the strategic focus of the Dairy Ireland business has now shifted from capacity management and infrastructure investment to higher-margin processing and adding value to the litre of milk, in a sustainable manner,” the society said.

Dairygold’s overseas businesses in the UK and Germany both performed in line with expectations, the society said, delivering a good return while also being strategically important routes to market for Dairygold cheese.

The UK is still a net importer of food and Dairygold said its UK business remains well placed to continue to grow market share. To that end, 2021 saw the completion of a capital investment programme at its cultured dairy facility in Leeds, to deliver improved efficiencies and product quality.

Dairygold chairman John O’Gorman said the performance of the business during the pandemic is testament to the resilience of the business and the capability and support of Dairygold’s members, customers, and employees.

“Unfortunately, as we emerge from Covid-19 we now see the fragile geopolitical situation in Europe as a result of Russia’s invasion of Ukraine.

“Dairygold’s thoughts and prayers are with the people of Ukraine. Dairygold has made a corporate donation of €30,000 to the Irish Red Cross in an effort to support the humanitarian efforts. The ongoing invasion is presenting supply chain issues and directly impacting input costs for our members.”