Co-ops discuss dairy investment

DAIRYGOLD, THE State’s largest co-operative, has held talks with Glanbia about a joint milk-processing investment, but there is “nothing more firm at the table at this time”, the co-op’s chief executive has said.

Speaking to The Irish Times as Dairygold reported a 9 per cent rise in revenues last year, Jim Woulfe stressed that Dairygold already had well-invested processing sites in Mitchelstown, Mallow and Mogeely, all in Co Cork.

“Our Mitchelstown site already has planning permission, while we are preparing a planning permission submission for Mallow by the summer.”

Dairygold and Glanbia, which are both preparing for the abolition of milk quotas in 2015, together process about half of the State’s milk supply. Dairygold is forecasting a 63 per cent increase in milk production from its suppliers by 2020.

Full-year results from the co-op reveal a 9.3 per cent rise in revenue last year to €758 million, as the it benefited from strong dairy markets. Operating profit, however, declined by 15 per cent from €26.2 million in 2010 to €22.1 million, reflecting the once-off profit in 2010 of €7.3 million from the sale of Aryzta shares which had been earmarked to part-finance the acquisition of properties from Reox Holdings, in which the co-op has a 26 per cent stake.

Operating profit on Dairygold’s core activities increased by 20 per cent last year to €22.6 million, up from €18.9 million in 2010.

About 30 per cent of the co-op’s revenue derives from its agri-operations and retail businesses, with 70 per cent deriving from its dairy processing business. Dairygold processes around 940 million litres of milk annually.

Some 40 to 45 per cent of Dairygold’s milk input is processed into cheese and whey, a by-product of cheese production which is a key ingredient in infant formula.

Dairygold is one of the leading producers of cheddar cheese for the British market and sells continental cheese into Italy and Germany. It also is a major player in the infant formula market.

About 10 per cent of its dairy processing business goes to Danone, which has an infant formula plant in Macroom, Co Cork.

Dairygold’s agri-operations had a strong year, benefiting from record grain yields. However, its agri-retail business, which consists of 39 stores across its catchment area in Munster, was hit by weak consumer sentiment, while promotional activity put a pressure on margins.

The co-op invested €33.9 million in the business last year, €15.4 million on capital expenditure and €18.5 million on acquiring the property assets from Reox Holdings. Dairygold’s net debt stood at €67.2 million at the end of the year.