Irish dairy sector will beat Brexit threat and grow - agri firm chief
Origin Enterprises boss convinced our farmers will secure new international markets for grass-fed products
Production by Irish dairy farmers will continue to grow despite Brexit as they secure new markets, according to the CEO of Origin Enterprises.
Tom O'Mahony told the Irish Independent that he was "hugely confident" of the capacity of farmers and the industry to adjust to the "new paradigm".
He pointed out that since milk quotas were abolished in 2015, production has significantly accelerated.
"Our competitive advantage is grass-based production of milk and dairy," he said.
"We believe production will actually grow. It's gone up almost 50pc already, from 5.5 million litres to 7.3 million litres," added Mr O'Mahony. "There is probably more to go on that.
"They will find alternative markets," he said. "I'm absolutely, hugely confident in the capacity of farmers and the industry to adjust to the new paradigm here."
Mr O'Mahony was speaking as Origin Enterprises issued a strong set of first-half results, which sent its shares as much as 8pc higher in early trading as they beat expectations.
The group provides agri-services to farms across countries including Ireland, the UK, Poland, Ukraine, Romania, Belgium, as well as Brazil. It said it had seen good autumn and winter cropping.
He said that Origin has stockpiled about €10m worth of agri products in the UK to ensure a smooth transition for its business there in the event that Brexit hits supply chains. The company supplies products such as fertilisers.
"Clearly, Brexit is a concern," said Mr O'Mahony. "That's particularly the case around the lack of certainty. A lot of our focus in the short-term has been on the supply chain, making sure that we're able to service our customers. We have to make sure we have the inputs available."
He said that Brexit is also likely to bring about a longer-term structural change to the UK cereal sector, with increased consolidation as some farmers decide to exit the business.
Origin's revenue for the first-half of its financial year was 19.5pc higher at €701.6m, boosted by its acquisition last year of a majority stake in Brazilian company Fortgreen. On an underlying basis, revenue was 13.6pc higher, excluding the €21.3m in revenue from Fortgreen.
Origin's operating profit was €9.1m in its first half, compared to €2.3m in the first half of its 2018 financial year. The €9.1m figure included a €5.5m operating profit by Fortgreen, and highlighted the seasonality of Origin's business. For a full year, Fortgreen is expected to account for about 10pc of Origin's total operating profit.
On a like-for-like basis, Origin's operating profits were 44.2pc, or €1m higher for the latest period.
Mr O'Mahony said that Origin currently has the capacity to spend about €100m on additional acquisitions.