Turnover at Lakeland Dairies falls 25%

LAKELAND DAIRIES made a pretax profit of €1.4 million in 2009, a year marked by volatile conditions in the dairy market.

Lakeland, one of the largest dairy processing co-ops in Ireland, secured stable profits despite a sharp drop in turnover, which fell 25 per cent to €325.7 million.

The year saw “the worst dairy markets for 35 years”, with massive volatility in global dairy prices and wet weather pushing up the cost of production for farmers, Lakeland Dairies chief executive Michael Hanley said.

The co-op described its results as “satisfactory”, given its commitment to supporting milk prices and its need to reinvest in the development of the business.

The price paid for milk by Lakeland fell to 21.5 cent per litre in 2009, before recovering to 25.5 cent per litre by the end of the year. The co-op’s farmers have ended the year with “higher overdrafts than they have ever had in their lives”, Mr Hanley said.

The Cavan-based co-op hoped to pay more sustainable prices for milk in 2010, he added.

An improvement in demand for milk and dairy products in recent months hints at more favourable conditions to come.

“The market has hardened as we have come into 2010, so there is cautious optimism that it will continue to harden.”

About 35 per cent of Lakeland’s turnover – some €114 million – comes from its food-service division, which sells high-margin products such as coffee creamers and mini-pack butters to fast-food restaurants, airlines and hotels.

Mr Hanley said this business had performed relatively strongly and was making “continuous strides”.

Lakeland has shut down its milk drying plant at Lough Egish, Co Monaghan, resulting in the loss of 15 jobs in 2009 and a further 40 to 50 this year. The co-op is consolidating its milk drying operations in Bailieborough, Co Cavan. About €9 million of the €20 million new development, which is due to come on line shortly, is funded by the Government’s dairy industry investment scheme.

The Bailieborough manufacturing facility will process 25,000 tonnes of butter products, allowing the company to counter cyclical spikes and troughs, which it said would be a continuing feature of the global food ingredients markets.

Lakeland said it had a strong balance sheet, with shareholders’ funds amounting to €71 million.