Wednesday 17 July 2019

North milk deal delivers Brexit safety net

Michael Hanley, CEO of Lakeland Dairies
Michael Hanley, CEO of Lakeland Dairies

Louise Hogan Farming Editor

THE northwest-based Lakeland Dairies co-op believes it has a "massive safety net" against Brexit after its multi-million euro purchase north of the Border.

It is just over a year since the Co Cavan headquartered firm bought Northern Ireland's Fane Valley's milk business.

Michael Hanley, Lakelands group CEO, said the move - struck just a month ahead of last year's UK Brexit referendum - means they now have added "flexibility".

"We have two sites now in Northern Ireland," he said of their Co Down facilities. "The Banbridge facility gives us a fantastic safety net in relation to a Brexit scenario."

With two milk dryers on the site, Mr Hanley said they provide a "buffer" for the co-op allowing them to process all their Northern Ireland milk north of the border in the case of a "hard Brexit".

In addition, he said they had the added security of the food operations business at Newtownards and continued to sell to 80 countries worldwide.

"We can switch and swap between different geographies and different locations depending on free trade agreements post-Brexit," said Mr Hanley.

The milk flowing through the co-op will rise to 1.2 billion litres this year, with a 22pc surge on the back of increased supplies and the Northern Ireland deal.

The third-largest processor in the country now collects milk from 2,500 farmers in 15 counties on a cross-border basis.

"We would see the key area as being inward processing, which facilitates product moving out of the EU and into the EU without tariffs and duties," he said.

Following a year of volatility in the global dairy industry, the co-op reported revenues rose slightly by 2pc to €601m for 2016, with operating profits down significantly at €7.2m due to the volatile dairy market and supports for milk prices paid to farmers.

Revenues in the food ingredients segment of the business rose 9pc to €353.6m, with the €36m investment in the 7-tonne-an-hour milk dryer coming on stream at Bailieboro to help deal with the extra milk supply.

The agri-businesses revenues took a hit of 14pc to €53.3m, as the prices of feed and fertilisers were reduced and farmers curbed spending due to the low milk price. Mr Hanley pointed out that the major infant formula and butter producer is now turning milk into 240 different products which gives stronger flexibility. "The market has become somewhat stronger, however its continuing strength cannot be predicted," he said, with demand for dairy continuing to grow in Asia and the Middle East. He pointed out the board directors do not receive payment for their services but expenses are covered.

The nine key management members received €1.85m last year, up from €1.65m in 2015.

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