Dairygold warns hard Brexit would wipe out UK cheese sales
State’s largest farmer-owned co-op reports record turnover but issues stark Brexit warning
Hard Brexit: “The impact would be devastating,” says Dairygold chief executive Jim Woulfe. Photograph : Matt Kavanagh
Dairygold, the State’s largest farmer-owned processor, has warned that its sizeable UK cheese business would effectively be wiped out in the event of a hard Brexit with World Trade Organisation (WTO) tariffs.
The Cork-based food group is the biggest Irish exporter of cheddar cheese to the UK, outside industry body, Ornua. It exports about 30,000 tonnes of cheese to the UK market each year, which equates to about one-fifth of its total dairy sales.
Chief executive Jim Woulfe warned that a no-deal Brexit with the imposition of WTO tariffs would equate to an additional €50 million in costs, which, if borne by the consumer, would result in a 50 per cent price hike in the UK.
“This would knock us out of the UK market. The impact would be devastating,” Mr Woulfe said. “We’d have to diversify quickly. So we’d start shifting product from what is currently a cheese and whey stream into a milk powder stream,” he said.
He was speaking after Dairygold reported record turnover of just under €1 billion for last year, driven by strong global demand for dairy. This delivered an operating profit of €29 million for 2018, down €3.5 million on 2017. The fall-off in profit relates to the co-op’s decision to support members with higher milk prices during two difficult weather events last year.
Mr Woulfe said the company had invested in additional refrigeration facilities in the UK to allow it to stockpile 15,000 tonnes of cheese ahead of Brexit, enough to supply its customers for the next six months.
While Brexit was casting a shadow over the market , he said the dairy industry here was in the middle of the biggest boom in the history of the State, fuelled by a massive jump in dairy demand globally and the lifting of restrictive EU milk quotas in 2015.
Since 2009, milk volumes processed by Dairygold have risen by 60 per cent to 1.3 billion litres. Mr Woulfe said the average Dairygold supplier – there are 2,850 – had seen supply jump from 270,000 litres of milk a year at the start of this decade to 470,000 litres now.
To process the increased supply, the co-op is investing heavily in the business. As part of a €130 million investment programme between 2018 and 2020, Dairygold, in conjunction with Tine, Norway’s largest co-op, is building a new facility to produce Jarlsberg cheese on the site of its existing speciality cheese plant at Mogeely, Co Cork. This will be operational at the start of next year. It is also investing in a major new drying plant at its nutritional campus in Mallow.
At the end of 2018, the net asset value of Dairygold was €338 million while bank debt stood at €111 million, the latest results show.