Increasing milk prices boost Dairygold profit

DAIRYGOLD'S OPERATING profits increased by

21.5 million last year as strong prices for dairy products lifted turnover by 15 per cent to

625 million.

The co-op's dairy and agri-trading operations accounted for

15.5 million of the profit with the remainder accruing from share trading. This compared with a profit of

1.2 million in 2006.

Dairygold declared a milk bonus of 3.45 cents per gallon which amounted to an additional payment of

6.1 million during the year to December 31st, 2007. The equivalent payment for 2006 was 2.35 cents.

Jerry Henchy, Dairygold chief executive said the sharp fluctuations in milk prices experienced last year were likely to become the norm.

"We are entering a period of far greater milk price volatility. We saw milk prices rise from 25 cents a litre to 40 cents a litre. That is a huge price rise when it hadn't moved in years."

He said farmers, processors and customers would have to adapt to a situation where milk price fluctuations of 20 and 30 per cent become more common.

Dairygold reduced its net debt again last year from

42 million to

38.3 million. When consideration is given to a redeemable interest bearing bond of

33 million from Reox Holdings - the spin-off company that holds its non-farming property, consumer foods and DIY retail businesses - Mr Henchy says the firm's debt is effectively zero. This left the co-op in "a strong position to go out and do deals".

Mr Henchy said Dairygold would gradually increase its production capacity until 2015 when milk quotas will be "effectively removed. Post 2015, our production will go up 40 per cent."

Dairygold is in the process of diversifying its shareholding to include dividend yielding stocks. As of December 31st last, the market value of the co-op's stake in IAWS, One51, FBD and Reox had fallen marginally to

123 million.

The

6 million profit from share trading in 2007 was reinvested, he added.

"As a co-op, a shareholding that creates a reasonable balance between capital appreciation and dividend is useful. It gives us options about how we use the dividend and the current portfolio is basically non-dividend bearing," he said.

Dairygold said it had paid consistent share interest to members of

2.29 million.

Shareholder funds in Dairygold grew by

14 million to

248.6 million last year with an increase of

2 million in share capital based on the issuing of bonus shares.