Dairygold back in black as profits hit €4.7m

Dairygold moved back into the black in 2005, as a restructuring at the co-op boosted profits. The Cork-based company posted pretax profits of €4.7 million for the year, marking a turnaround from a €22.5 million loss in 2004.

Dairygold chief executive Jerry Henchy said the result was particularly significant because it came against a backdrop of a deliberate lowering of margins in agri-trading and milk processing.

He attributed the ongoing improvement in the group's fortunes to its policy of reducing costs and concentrating on "core profitable activities".

The 2005 result came after Dairygold absorbed exceptional costs and amortisation of €16 million, much of which was due to the redundancies associated with exiting loss-making businesses. Mr Henchy does not expect further exceptionals of any scale to accrue this year. "We have the stable clean at this stage," he said.

News of progress made in 2005 comes as Dairygold embarks on its most radical restructuring yet: a division of the group into two parts. The first of these, Reox, will hold the firm's three non-farm businesses - consumer foods, home hardware and property - while the remaining entity will control Dairygold's traditional milk-processing and agri-trading operations.

Observers suggest the split could give Dairygold a combined valuation of up to €550 million, with €200 million of this due to Reox. Earlier this year, the combined group was valued at about €220 million on a grey market for its shares. This market has been suspended pending the reorganisation, with a new grey market to be set up for Reox next month.

Reox plans to borrow €400 million for development, most of which will be dedicated to Alchemy, its property business.

Alchemy concentrates on the development potential in old Dairygold creamery sites, with the company evaluating 52 properties at the moment. It has already produced plans for a €100 million development in Mallow, Co Cork and also plans developments in Midleton, Cahir and Ballinacurra.

Mr Henchy said about €100 million of Reox's overall investment would be pointed towards acquisitions in consumer foods. Dairygold already owns brands such as Galtee and Mitchelstown.

Last year's result came on turnover of €811.3 million from continuing operations, up 6 per cent on 2004. Total turnover fell by 4 per cent to €840.7 million.