Dairygold pretax profits, revenues decline in ‘testing’ year

Dairygold, the State's largest farmer-owned dairy cooperative, has reported lower profits and revenues for 2015, a period which its chief executive Jim Woulfe described as a "testing" year.

The co-op reported a pretax profit that declined by 71 per cent from €32.2 million to €9.2 million.

Reflecting lower market returns, Dairygold recorded a turnover of €784.9 million, down 7.5 per cent on the €848 million recorded a year earlier. Earnings before interest, tax, depreciation and amortisation (ebitda) was 12.5 per cent lower at €41.2 million versus €47.1 million in 2014.

Turnover in the group’s food ingredients business, which accounts for 71 per cent of overall revenues, was down 10 per cent to €423 million.

The society’s agribusiness division turnover declined 2 per cent to €221 million.

Profit

Operating profit totalled €19.2 million as against €28.6 million in the preceding year after the society paid out in excess of €20 million to members to support farm gate prices.

“We’re now 27 months into a downward cycle in prices that started in the early months of 2014. During a time in which the marketing has weakened, milk production has substantially increased. Given the environment, margins have been slimmed and trimmed on the basis of maximising milk price support for our members,” said Mr Woulfe.

He said further support would be considered for members if required in 2017, a year which Mr Woulfe forecast would be “challenging.”

“We certainly see another nine months of tough market conditions and we will see price corrections. Currently, in Ireland milk prices at farm gate level are below the cost of production and that’s a tough dynamic for the co-operative movement,” he said.

Last year, Dairygold said it received an additional 182 million litres of milk as it sought to take advantage of the end of the quota. This represents an 18.7 per cent rise in volumes versus 2014. Overall, the society said it received a record annual volume of 1.16 billion litres of milk from its members.

Value

The net asset value of the business rose by €19.4 million to €315.5 million over the year while net bank debt increased to €96.2 million from €71.6 million.

The co-op said it invested a record €50.9 million in its post quota capital investment programme last year, bringing the total investment programme to over €200 million in the last seven years.

Dairygold, which employs 1,149 people, said staff costs, including wages and salaries, totalled €59.5 million last year, as against €60.2 million in 2014.

Nine top executives shared approximately €2.68 million in pay, bonuses and pension contributions last year. Mr Woulfe defended the society's decision not to give a breakdown of individual salaries given the disquiet over pay levels at Ornua.

He said the co-op had complied with and gone beyond FRS 102 reporting standards, adding that to reveal further details on remuneration would put the society at a disadvantage compared to rivals.

Rewards

"We're in Mitchelstown and therefore just 25 minutes away from Ringaskiddy and Little Island and so we are competing against the likes of Apple, PepsiCo, EMC, Schering-Plough and Eli Lilly to win talent. The last thing we want to do is to start nakedly exhibiting the rewards we offer to our executive team. It would not be a wise move to go into more details," he said.

Mr Woulfe said members had not raised the issue of remuneration as yet but added the society would deal with if “if any when it arose.”

year.”

The co-op reported a pretax profit that declined by 71 per cent from €32.2 million to €9.2 million.

Reflecting lower market returns, Dairygold recorded a turnover of €784.9 million, down 7.5 per cent on the €848 million recorded a year earlier. Earnings before interest, tax, depreciation and amortisation (ebitda) was 12.5 per cent lower at €41.2 million versus €47.1 million in 2014.

Turnover in the group’s food ingredients business, which accounts for 71 per cent of overall revenues, was down 10 per cent to €423 million. The society’s agribusiness division turnover declined 2 per cent to €221 million.

Operating profit totalled €19.2 million as against €28.6 million in the preceding year after the society paid out in excess of €20 million to members to support farm gate prices.

Production

“”We’re now 27 months into a downward cycle in prices that started in the early months of 2014. During a time in which the market has weakened and milk production has substantially increased. Given the environment, margins have been slimmed and trimmed on the basis of maximising milk price support for our members,” said Mr Woulfe.

He said further support would be considered for members if required in 2017, a year which Mr Woulfe forecast would be “challenging”.

“We certainly see another nine months of tough market conditions and we will see price corrections. Currently, in Ireland milk prices at farm gate level are below the cost of production and that’s a tough dynamic for the co-operative movement,” he said.

Last year, Dairygold said it received an additional 182 million litres of milk as it sought to take advantage of the end of the quota. This represents an 18.7 per cent rise in volumes versus 2014. Overall, the society said it received a record annual volume of 1.16 billion litres of milk from its members.

The net asset value of the business rose by €19.4 million to €315.5 million over the year while net bank debt increased to €96.2 million from €71.6 million.

The co-op said it invested a record €50.9 million in its post quota capital investment programme last year, bringing the total investment programme to over €200 million in the last seven years.

Dairygold, which employs 1,149 people, said staff costs, including wages and salaries, totalled €59.5 million last year, as against €60.2 million in 2014.

Bonuses

Nine top executives shared approximately €2.68 million in pay, bonuses and pension contributions last year. Mr Woulfe defended the society’s decision not to give a breakdown of individual salaries given the disquiet over pay levels at Ornua.

He said the co-op had complied with and gone beyond FRS 102 reporting standards, adding that to reveal further details on remuneration would put the society at a disadvantage compared to rivals.

“We’re in Mitchelstown and therefore just 25 minutes away from Ringaskiddy and Little Island and so we are competing against the likes of Apple, PepsiCo, EMC, Schering-Plough and Eli Lilly to win talent. The last thing we want to do is to start nakedly exhibiting the rewards we offer to our executive team. It would not be a wise move to go into more details,” he said.

Mr Woulfe said members had not raised the issue of remuneration as yet but added the society would deal with if “if any when it arose”.