DAIRYGOLD Co-operative Society is preparing to sell financial and property assets to raise €75m to make acquisitions to bolster its new health and nutrition business, the Irish Independent has learned.
Chief executive Jim Woulfe told the Irish Independent that the co-op was planning to liquidate €26m in financial investments and was acquiring planning permission on its remaining property portfolio to enhance its sale value.
He said Dairygold was expecting to raise cash from the disposals and possibly borrow further funds to acquire an operating company in the nutritionals sector, where the co-op has been investing heavily in recent years.
"We want to use those funds to acquire an already developed business," Mr Woulfe said.
"We might take on some leverage, but as a co-op, we're not going to go wild."
Dairygold has a debt to earnings ratio of 2.2 to 1 after paying down nearly €39m in borrowings in 2020. Leveraging back to 2019 levels would give the society a potential war chest of €115m.
Dairygold has been pushing into health and nutrition following €425m of capital investment in new production and processing facilities over the last decade.
The co-op is betting that getting into premium ingredients made from milk protein will deliver incremental growth and higher margins than its core dairy and agribusiness activities.
"The investment was all done to meet members' ambitions," said Mr Woulfe. "Downstream from milk there are higher value opportunities in protein powders destined for dairy deficit areas in Asian markets where they command extra margin."
Mr Woulfe said Dairygold was looking at possibilities in ingredients for baby formula and fortified dairy powders for the adult nutrition market.
"It's lifestyle nutrition at both ends of the life cycle," he said.
Dairygold’s profits fell and revenue flatlined in 2020 as demand for dairy products in foodservice declined due to global Covid restrictions.
The co-operative recorded earnings of €53.8m for the year, a 4.9pc reduction on 2019 which the society said was due to exceptional non-core property activities that year.
Revenue came in at just over €1bn, essentially the same as 2019’s performance. Operating profit was substantially lower than the previous year at €26m, after a €7m charge related to capital investment.
Dairygold produced 2.7pc more milk in 2020 than the year before, but prices fell sharply in the first half of the year due to the first wave of Covid lockdowns across the world.
Prices recovered somewhat in the second half amidst a surge in retail consumer demand, but sales to the foodservice segment suffered a “huge collapse”, the co-op said.
Other challenges in 2020 included Brexit and the EU-US trade dispute.
“2020 saw the culmination of a decade of significant expansion and growth,” said Mr Woulfe.
“It was a project driven decade of carefully managed expansion, while simultaneously laying the foundation for future high value business opportunities.
“We now turn our focus to higher margin driven activities. Our core dairy and agri businesses are now well invested with clearly aligned operational management structures,” he said.
"We have established a new health and nutrition business to deliver on our new strategic focus. As a result, Dairygold is in a strong position to reap the rewards of the improved trading environment which should emerge as the global economy rebounds.”
Mr Woulfe announced his upcoming retirement yesterday after working in the business for over 42-years of which he served the last 12 as chief executive.
Dairygold will now begin the process to recruit a successor and he will step down from his position at the end of the year when a new chief executive has been appointed.