Business

Dairygold reports declines in revenue and profit, citing weak demand

Cork-based dairy processor says retaining Ireland’s derogation from the EU’s nitrates directive ‘critical’

Michael Harte, Ann Fogarty and Sean O Brien with the Dairygold Annual Report 2023. Photography By Gerard McCarthy

Eoin Burke-Kennedy
Wed Apr 10 2024 - 12:24

Cork-based dairy processor Dairygold has reported a significant fall-off in revenue and profit for 2023 on the back of lower milk output, weaker global demand and ongoing cost pressures linked to the inflationary crisis.

In its latest set of annual results, the group also warned that retaining Ireland’s current derogation from the EU’s nitrates directive was “absolutely critical” for farmer and processor viability.

The State’s third-largest milk processor said turnover fell by 15 per cent to €1.4 billion last year, a decrease of €254.7 million compared with 2022, which it said reflected “the significant fall in market returns over the course of 2023.”

Operating profit fell by more than 40 per cent to €23.9 million.

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The group said the weaker results also reflected - in part - the board’s decision to pay stronger milk and grain prices to suppliers to “minimise the impact” at farm level. The co-op’s average quoted milk price for 2023 was 38.4 cents per litre, down 16.5 cents on the previous year.

After a strong 2022, dairy market conditions globally deteriorated last year on the back of softer Chinese demand, driven by a weaker Chinese economy and Beijing’s drive for greater dairy self-sufficiency.

Significant inflationary pressures also impacted consumer spending with sales volumes being “adversely affected”.

“2023 was a difficult year for the dairy and tillage sectors, as market returns declined significantly from the unprecedented highs of 2022,” Dairygold interim chief executive Michael Harte said.

“Unfavourable weather conditions, combined with continued high input and processing costs, created a perfect storm for farmers and processors alike,” he said.

Dairygold said it processed 1.41 billion litres of milk last year, a 4.7 per cent decrease (70 million litres) on the previous year, making the third-largest dairy processor on the island.

Cheese accounted for over 40 per cent of its product. It sells about 90,000 tonnes of dairy products through export agency Ornua.

The group’s largest division Dairy Ireland saw turnover fall to €795 million, a decrease of €239 million on 2022, primarily reflecting a year-on-year decrease in market returns but also a reduction in milk supply.

“The level of future milk volumes will largely depend on how the sustainability challenges are addressed by the dairy industry and this is a critical focus for the society,” Dairygold said.

Mr Harte said it was “absolutely critical” for the Irish dairy industry that the current nitrates derogation is retained at 220kg organic nitrogen per hectare when the current four-year derogation is reviewed at the end of next year.

Ireland is one of three EU member states that has a derogation to enable some farmers to work with higher nitrate levels but the derogation is coming under pressure as a result of declining levels of water quality linked to a massive expansion in dairy since the lifting of EU milk quotas in 2015,” he said.

“If the 220kg disappears and we’re back to 170kg (the standard level allowed across the EU) that’s going to have an impact on future milk volumes across the industry, which will have an impact on farmer viability which will have an impact on processor viability and will have a significant impact on the rural economy as well.”

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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