BOOMING prices on world dairy markets last year have produced record profits of £20.8 million for the Irish Dairy Board. And despite a sharp fall in prices in the current year, the board is expecting further profit growth.

The IDB, which is owned by the country's agricultural co-operatives, is best known for the international marketing of Kerrygold butter. Sales of Kerrygold rose 6 per cent last year, accounting for a disproportionate amount of the small increase in sales of branded/retail products from £655.7 million to £658.2 million.

Overall, the board's turnover rose by 7.6 per cent to £1.25 billion, driven largely by a surge in sales of commodity dairy products such as butter, cheese and skim milk powder which rose from £388.2 million to £590.9 million. The demand from commodity dairy products meant that the board sold no product into EU intervention compared to £117 million worth of intervention sales the previous year.

But since the beginning of 1996, the market for dairy products has changed dramatically. Russian buying of butter has all but dried up and a surge in dairy production from Australia and New Zealand followed the end of the drought in that region.

IDB chief executive, Dr Noel Cawley, said prices had fallen by 7-8 per cent the equivalent of 12.75p per gallon of milk since the beginning of the year. However, he did not foresee further price cuts because current prices were at EU intervention levels.

"We will sell product into intervention this year and buy it back again in due course," he said. Dr Cawley added that he did not expect any reduction in profits in the current year because of the fall in world markets.

"The situation has changed around this year. New Zealand and Australia have had a good production season and we don't see the Russians in the market in any substantial way at least until the autumn. We're also beginning to feel the breeze from GATT," he stated.

On last year's record performance, Dr Cawley said the 6 per cent increase in Kerrygold branded sales was a major contributor "and we are hopeful of a further increase in the current year".

Sales were strong in Britain, Germany, Belgium, and Greece while a first time contributor was South Africa where the board sold 1,000 tonnes of butter in the first year.

Cheese sales in Britain through Adams Foods were good, said Dr Cawley. In Belgium, the board reached full capacity in its Yoko cheese operations and was looking at expansion of these operations.

The board's chilled foods distribution operations in the US performed well. Operations were expanded into Denver through the acquisition of a local company. "We now have scale in Denver, Los Angeles, Chicago and Washington, but we would look at a few add on acquisitions," said Dr Cawley.

Last year, the board spent £10.4 million on acquisitions. The biggest investments were a 75 per cent stake in VRM, the company which distributes its products in Germany a majority stake in the t'Melkblok cheese ripening operation in Holland and on Food Speciality in the US.

With members' funds of £133.4 million and borrowings of £67.6 million, the board has a gearing of 51 per cent and is in a good position to make medium sized acquisitions.

The board paid a record price to its Irish suppliers and £3 million cash bonuses. It also redeemed £3.96 million in loan stock.