Monday 22 January 2018

Rural Ireland faces being decimated by Brexit with 'appalling' tariffs - Dairygold chairman

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James Lynch Dairygold Chairman

Colm Kelpie Brexit Correspondent

Rural Ireland faces being decimated by Brexit, the chairman of Dairygold has warned.

The United Kingdom's departure from the European Union, if it leads to tariffs and customs controls, will have a profound impact on the DAIRY sector and present a "frightening and appalling vista", the farmer-owned co-operative told the Irish Independent.

"From the farmer's perspective ... it is rural Ireland that is being impacted. You hear people talk about the positives that may come out of Brexit. That's not going to filter into rural Ireland," chairman James Lynch said. "You'll have decimation in rural Ireland with the beef, and the dairy and the mushrooms, you have the drink industry. There is so much of an impact out there, and it's how we're going to deal with it is going to be the challenge."

Jim Woulfe, the CEO of the cheese and butter producer, said Brexit was a "sleep disturber" and he painted a bleak picture of how it would impact the cheddar cheese sector in particular at the launch of the co-operative's annual results.

"In what we're going into, no doubt, tomorrow or next year is going to be worse than today," Mr Woulfe said.

"There's no doubt that if the fintech and all that sector will do good for inside the Pale, whatever minuscule benefits will occur there. What will happen in rural Ireland, the Government can't ignore that. If we take the World Trade Organisation (WTO) tariff, it would have a frightening consequence. It is going to impact people because it is going to eat into the margins."

The WTO tariff on cheese is €1,671 per tonne, Mr Woulfe said. "That's a frightening and appalling vista," he added.

Read more: Dairygold announces €17.5m operating profit

Mr Woulfe said the total milk pool in the country was about 6.6bn litres, with 6bn litres going into manufacturing. Of that, a third goes into cheese, he said, mainly cheddar which makes up a high percentage of Dairygold's portfolio.

"Butter is impacted as well, but not to the same extent," he said. "The reality is that it's cheddar cheese". Cheddar exports to the UK have already taken a hit. In March, UK imports of cheddar of which Irish product accounts for some 80pc totalled 4,162 tonnes - 633 tonnes (13pc) less than the same month last year, according to official UK customs figures.

Cheddar producers will not suddenly be able to shift products to another European country instead of Britain because the latter is where the demand lies, Mr Woulfe added. "In as much as beef is impacted significantly, in as much as the mushroom industry and the horticultural industry is really impacted - from the dairy perspective, the cheddar cheese club is really impacted," Mr Woulfe said. "It's the top of our agenda right now."

He added that the company is examining the worst case scenarios but that it didn't have any solutions. These analyses included the prospect of developing new products.

Asked if the company would question, in the event of a hard Brexit, whether it was worthwhile continuing the level of business in Britain, Mr Woulfe said he hoped the outcome would avoid the need for this.

Meanwhile, Dairygold recorded turnover of €756.1m last year, down from €784.9m, in part due to the weakening in sterling.

That delivered earnings before interest, tax, depreciation and amortisation (ebitda) of €39m, down from €41.2m in 2015. Operating profit hit €17.5m, while increasing milk price support to its members to about €25m..

Its capital investment programme continued with a further €15m injection, bringing total investment over the past six years to €200m.

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