Saturday 1 October 2016

Dairy chief expects milk pool to begin levelling off

Published 05/05/2016 | 02:30

Lakeland Dairies chief executive Michael Hanley
Lakeland Dairies chief executive Michael Hanley

THE Lakeland Dairies chief believes the massive growth rate in the world's milk pool will begin to level off as farmers continue to feel the pain of poor prices.

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Group CEO Michael Hanley said the markets had proved "tough" during 2015, with the absence of Russia from the marketplace due to political moves at EU level leaving a major gap.

"That is a major customer gone, China has been buying less and there seems to be less revenue about in the oil importing countries," he said.

"We had a good year in the business," said Mr Hanley, pointing out their annual results for 2015 showed profits before tax had increased 10pc to €12.8m despite a slight drop in overall group revenues to €588.5m.

Under new accountancy regulations that have seen a number of agri-businesses reveal top level pay for the first time, Lakelands reported eight key managers received €1.65m in total last year while board members receive only expenses.

He said they did not intend to break down the figures for key personnel any further.

The figures showed staff costs amounted to €41.6m including pay and pensions, with almost 700 people working across all divisions. It was up from €36.7 in 2014 when there were 667 people on the payroll.

"There was a lot of extra milk processed and we try and keep the head count as low as possible," he said. "Salaries and pay scales are benchmarked so there is a definite structure there." He reported milk supply had surged 13pc with the removal of milk quotas last year, which has helped to drive efficiencies.

"We have extra customers for all that milk," he said

However, he said they did see a levelling off in the rise of the milk supply worldwide.

"At current prices there is no profit only losses for farmers at current prices. There will continue to be growth for '16 but you will see growth subdued.

"There will be no expansion in '17 or '18, very little across the world. Where farmers have already set in motion the breeding patterns you are going to see an uplift for '16 and for '17.

"Prices have to be realistic and there has to be a sustainable margin for all the stakeholders - at current prices there is no margin in it for milk suppliers."

The annual results come as Lakeland Dairies Co-op is now on track to become the third largest processor in the country with a milk pool of over 1.1 billion litres after a deal was struck this week to purchase Northern Ireland's Fane Valley's milk business for an undisclosed sum.

Lakeland is also due to see its €36m investment in a 19 tonne/hour milk powder drier at Bailieboro, Co Cavan come on stream in the next month.

It saw food service revenue from products supplied to hospitality, catering and convenience markets increase by 6pc to €201.7m.

Revenues from the food ingredients division fell by 14pc to €324.4m, with 107,000 tonnes of milk powder exported and over 31,000 tonnes of butter.

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