‘Extraordinary year’ sees profits at Kerrygold owner fall 17%

Ornua, the State’s largest dairy exporter, is keeping a “very close watching brief” on the upcoming US election cycle after being caught in the crossfire of a United States and European Union trade spat that saw the Trump administration impose tariffs on €6.4 billion worth of European exports in 2018.

On Wednesday, the co-operative reported a more than 17 per cent decline in its 2022 operating profit despite a significant surge in the Kerrygold maker’s revenues linked to inflation and an increase in sales.

Group turnover at the co-operative ballooned to a record €3.4 billion last year, an increase of 36.7 per cent from €2.5 billion in 2022 as it carved out a bigger slice of the market for itself, particularly in Germany and the US, selling more than 11 million packets of butter and cheese globally each week.

Ornua’s operating profits fell by 17.2 per cent from €153.7 million in 2022 to €127.2 million, however, in what it described as an “extraordinary year” for the dairy industry. The company said that milk price growth of 40 per cent in the year had been offset by “rapidly” rising input costs, “including fuel, feed and fertiliser, impacting at farm level”, while global demand for milk also declined by around 1 per cent.

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Despite increasing the retail price of Kerrygold as many as three and four times in some markets, earnings before interest and taxes at Ornua also slipped in 2022, falling 11.5 per cent to €157 million with higher input costs narrowing the company’s margins.

Speaking to The Irish Times, Ornua chief executive, John Jordan, said that while milk prices have softened somewhat in early 2023, “it will take some time” for consumers to see the benefit. “But, I would say it’s probably fair to say we’re past the peak of some price increases and we should see some softening at consumer shelf level later in the year.”

Looking ahead, Mr Jordan said that the upcoming US presidential election is “very much on [Ornua’s] radar” after former US president Donald Trump declared his candidacy late last year.

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The Biden administration has suspended a Trump-era tariff on European butter imports, a 25 per cent levy that saw Ornua pay an additional €50 million in US taxes in 2020. Mr Jordan described the tariff as “a Kerrygold tax”, because 92 per cent of the butter imported into the US from Europe is Ornua’s.

“Certainly, we’re keeping very close watching brief on the general election in the US next November,” he said. “There would be a concern that if there was a return to Republican leadership – and, indeed, if it was the former president. He could reintroduce those tariffs. Although, maybe, it would be on a different set of products. So, certainly a watching brief and we’re not out of the woods.”

Despite the challenges, Ornua said it had delivered value for its 14,000 members in the form of a €72.5 million “value payment”, made up of monthly and year-end cash bonuses and a premium paid on purchases of milk from members.

It said it had also paid “strong product prices” on the €2.3 billion of dairy products it purchased last year.

Hailing Ornua’s “exceptional sales performance” last year, Mr Jordan said: “We are very optimistic for the future of our brands and our business, supported by a newly remodelled five-year strategy, focused on addressing emerging challenges and opportunities to drive sustainable growth in key markets, ensuring we continue to deliver value for our member co-operatives and the 14,000 Irish dairy farming families we represent.”