Agribusiness offsets poor dairy returns at Donegal Creameries

DONEGAL CREAMERIES yesterday reported a 16.5 per cent rise in turnover to €69.6 million for the first six months of the year, boosted by a strong performance from its agribusiness unit.

The agribusiness profits offset poor returns from commodity dairy products, where profits fell from €1.8 million in the first six months of 2007 to €586,000 for the same period this year.

NCB Stockbrokers said poor dairy market returns hit Donegal more than its peers because it collects milk for sale to third party processors, "thus experiencing weaker returns in difficult markets than processors who manufacture the milk into products".

As a result, pretax profits for the period were €3.47 million, down on the €4.80 million reported over the same six-month period in 2007.

Donegal Creameries said it expects this year to be "more challenging" than 2007. The company said its balance sheet remains strong, with total assets rising by €18 million to €121 million.

Net debt increased to €14.4 million, reflecting, the firm says, the financing of investments and increased working capital requirements.

Earnings per share increased 5.8 per cent to 30.8 cent. An interim dividend of 7 cent per share will be paid on December 5th next.

Turnover at its agribusiness unit increased 23 per cent to €39.7 million. The firm said its seed potato business continues to grow, and that the outlook for this area of the business was positive.

The board is upbeat on the potential of its property and investment arm and said the conversion of the 2,500-acre An Grianán estate, near Burt in Co Donegal, to what would be the biggest organic farm in the State, is on target one year into a two-year plan.

Worrying the board are commodity dairy products and its producer supplier base.

At 4.30pm yesterday, shares in Donegal Creameries were unchanged at €5.80. The stock is down almost 8 per cent this year, outperforming the Iseq, which has fallen 35 per cent this year.