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Saturday 24 February 2018

Arrabawn open to more buyouts after €4m profit

Better world dairy prices, higher milk volumes and Dawn takeover help to boost turnover

Dairygold bosses Michael Harte, chief financial officer; Vincent Buckley, chairman; and Jim Woulfe, chief executive, take an alternative look at the company's annual results, which saw the co-op announce an operating profit of €18.9m for last year
Dairygold bosses Michael Harte, chief financial officer; Vincent Buckley, chairman; and Jim Woulfe, chief executive, take an alternative look at the company's annual results, which saw the co-op announce an operating profit of €18.9m for last year
Caitriona Murphy

Caitriona Murphy

Arrabawn Co-op has not ruled out the possibility of further acquisitions in the future after its takeover of the Dawn Dairies business from Kerry Group helped the co-op add almost €3m to its operating profit before exceptional terms in 2010.

The Nenagh-based co-op recorded an operating profit of €4.24m before exceptional items for 2010, compared with €1.26m in 2009.

Turnover at the co-op last year was €169.1m, an increase of €43.3m on 2009. The dairy division turnover was €116.7m, compared with €76.4m in 2009, while turnover in the trading division increased to €52.4m from €49.5m in 2009. Shareholders' funds amounted to €30.6m compared to €28.9m in 2009, Arrabawn chairman Michael Flaherty reported.

The improved turnover and profit were driven mainly by better world dairy prices, higher milk volumes from suppliers, and the acquisition of the Dawn Dairies business, he said.

"The acquisition made good commercial sense for us because there was spare capacity in our Kilconnell plant and it also eliminated duplication as the two operations were collecting, processing, and distributing milk in the same geographical area," he said.

Speaking to the Farming Independent, Arrabawn financial controller Michael O'Kelly said that while there were no further acquisitions on the horizon right now, the co-op would not rule out future acquisitions.

"For the immediate future, the focus is on making what we have as efficient as possible but if something else happened or came up, we would certainly have to look at it," said Mr O'Kelly.

While Mr O'Kelly welcomed the improved dairy markets and higher milk prices being paid to farmers, he warned that too high a milk price would not be a good thing for farmers or co-ops.

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Substantial

"If the price goes too high, we move back into a situation where buyers substitute other products for dairy ingredients," he pointed out.

Meanwhile, Dairygold also reported a substantial increase in profits and turnover for the 2010 financial year. Operating profit on the society's core activities was €18.9m last year, up from €11.8m in 2009, while turnover increased to €693.6m, up €138.4m on the previous year.

Profits were further boosted by share trading undertaken by the co-op to part finance the planned acquisition of Reox Holdings properties. This share trading generated additional income of €7.3m, bringing the overall operating profit figure recorded in the accounts to €26.2m.

Dairygold chief executive Jim Woulfe said the increase in profits and turnover was generated across all of the co-op's the main business activities.

Mr Woulfe said the 2010 performance reflected improved efficiency of plant, optimisation of product and customer portfolios and strong returns from international dairy markets.

"Our agri-operations benefited from the increased demand for farm inputs to support higher milk production on-farm, as well as our success in boosting our share of the feed and fertiliser market, while our retail sales grew, following the first full year's operation of the seven stores acquired from Reox Holdings plc in late 2009."

During 2010, Danone's decision to retain Dairygold as a key raw material supplier to its expanded infant formula facility in Macroom was a positive boost for the co-op. The Danone plant is expected to treble its production capacity to 100,000t annually. Dairygold Food Ingredients also became the largest supplier of 90pc demineralised whey, an infant formula ingredient, in China last year.

Indo Farming