Business

Lakeland reports €8m loss amid once-off restructuring charge and weaker dairy market returns

Cavan-based group hit by weaker dairy prices and exceptional charges related to a restructuring of its business

Ccross-Border dairy group Lakeland Dairies last year closed three plants and made over 50 staff redundant. Photograph: Getty Images

Eoin Burke-Kennedy
Wed Apr 17 2024 - 13:00

Lakeland Dairies made a loss of €8.1 million last year, down from the profit of €24.5 million the previous year, on the back of weaker dairy market returns and a once-off €14.5 million charge related to the restructuring of its business.

The cross-Border dairy group last year closed three plants and made over 50 staff redundant to realign its processing footprint with future market demand. The move resulted in exceptional impairment and redundancy costs of €14.5 million.

“Combined with the general reduction in market returns, we have reported a net loss of €8 million for the year,” chief executive Colin Kelly said. “It is important to note that these exceptionals are exactly just that – exceptional. They are once-off effects that will not recur on an ongoing basis.”

The Cavan-based group’s latest financial accounts show revenue fell from €1.9 billion to €1.6 billion in 2023 as dairy market prices fell sharply on the back of excess supply, weaker consumer demand in traditional markets and a fall-off in demand from China as Beijing seeks greater dairy self-sufficiency. The weaker returns saw Lakeland’s operating profit fall from €32.5 million to €14.8 million but the group insisted this was in line with “the significant market volatility experienced in 2023″.

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“The market downturn started during the third quarter of 2022, with buyers sitting on stock which had been bought at record high prices,” it said. “This resulted in a dramatic demand reduction as the market moved to work through these higher-priced products.”

Lakeland said it processed 2 billion litres of milk collected from 3,200 farms across 17 counties last year, exported 240 products to over 100 countries.

Mr Kelly warned, however, that the post-milk quota era of exceptional output growth was over, with the industry facing a “new environmental reality” driven among other things by stricter nitrate limits.

He said the lower 220kg nitrates derogation for Irish farmers (and the potential for it to be lowered again when the EU revises the rates) had placed a ceiling on milk production. 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 water quality linked to the recent surge in dairy output.

Mr Kelly said Lakeland projected its milk volumes would be largely unchanged over the next five years because of the new limits and that the focus now had to be on increasing the value-add associated with dairy products.

The group recently completed the acquisition of Belgian-based butterfat business De Brandt Dairy, expanding its supply chain and its access to markets. Mr Kelly said Lakeland had agreed an acquisition fund of €100 million to fund future purchases.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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