Weakening dairy product prices hits company

DONEGAL CREAMERIES' An Grainan Estate, near Burt in Co Donegal, could become the biggest organic farm in Ireland, if not in Europe, its managing director Ian Ireland told the company's agm in Letterkenny yesterday.

The company already has around 700 acres devoted to organic production near the Derry border and has plans to develop a further 2,000 acres for organic vegetables, crops and dairy enterprises.

However, the company's shares had their worst day in three months - falling 20 cent or 3.5 per cent to €5.55 - as the market digested an agm statement saying its dairy unit had a "challenging" first half and that: "The significant weakening of most commodity dairy products from the positions achieved in 2007 is having substantial impact on the margins in the group's dairy business". The company added: "We remain confident of the full year performance."

Mr Ireland told the meeting that as part of the company's continued diversification, land has been acquired in Northern Ireland and it continues to build its property portfolio.

The company has also increased its stake in Monaghan Mushrooms from 23 per cent to 35 per cent. Mr Ireland said that he expected the company to meet market expectations in 2008. Company chairman Geoffrey Vance described the results as "excellent." Shareholders voted in favour of paying a final dividend of nine cents per share, bringing the total dividend to 15.5 cent, up 10.7 per cent.

Commenting on the company's performance, Jonathan Simmons of NCB Corporate Finance noted that the share price - which has hovered around €5.75 recently - was down around 12 per cent on this time last year, but compared favourably with other agri-business concerns like Greencore, Glanbia and Kerry Group. He placed a target price of €7 on the stock.

Reflecting at the meeting on the results for the year ending December 31st, 2007 - which saw turnover grow by 12 per cent in 2007 and pre-tax profits rising 307 per cent to almost €15 million - Mr Ireland said that the key divisions were performing well.- (Additional report Bloomberg)