Dairy board chief warns industry to be more efficient

The Irish dairy industry needs to examine urgently how it can become more efficient at farming, processing and marketing before dairy prices begin to fall in the second half of the Agenda 2000 agreement, the chief executive of the Irish Diary Board, Dr Noel Cawley, has warned.

Speaking after the board announced its results for 1999, Dr Cawley and chairman Mr Tom Cleary stated that the Irish dairy industry had a good future "if we get the cost base right", but would not be drawn on the number of plants that would be required to process Ireland's three main dairy products - butter, skim milk powder and cheddar cheese.

"In Agenda 2000, we did very well and there will be no reduction in prices until the second half of the agreement. But there are indications that the review in 2003 will be brought forward and things may not end up as good as we thought.

"I'm not sure that all we got in Agenda 2000, we will get for the full term, and the long-term future may not be as bright as we thought," Mr Cleary said.

The dairy board itself had a good 1999, with a difficult first half being balanced by a recovery in the second half.

The current year has shown a strong improvement, with dairy commodity prices recovering to the extent that the board has increased by 4.5 per cent the prices it pays co-ops for their produce. Last year, turnover increased marginally to €1.8 billion (£1.4 billion) and operating profits were almost unchanged on €33.1 million. Pre-tax profits, however, were up 14 per cent to €30.2 million (£23.8 million), while the board ended the year with net debt of €87.7 million, a gearing of 39 per cent.

Dr Cawley said it was "regrettable" that the board had failed to make any acquisitions last year, having gone close in five bids for companies in the US and continental Europe.

"We are looking at acquisitions which will give us improved market opportunities - packing and distribution companies," he said. He added that the board was confident of completing two acquisitions in the western US shortly. "These two companies have sales of $70 million (€77.5 million) and would be a significant addition to our business in the US," he stated.

The branded Kerrygold consumer business had a good year on export markets, with sales up almost 7 per cent. There were record sales of Kerrygold butter in Germany, while British sales were described as "satisfactory". The board expects a boost to British sales this year after the launch of Kerrygold spreadable butter at the end of 1999. Overall, the board spent €13 million on advertising Kerrygold, an increase of 10 per cent on the previous year.