Farm Ireland

Saturday 17 February 2018

IDB slam poor bank support

Darragh McCullough

Darragh McCullough

The Irish Dairy Board (IDB) has raised serious questions about the commitment of Irish banks to the much anticipated expansion of the dairy sector.

The group is now looking for €350m in a new banking deal to fund their cash requirements for the next three years, €100m more than they had budgeted previously.

However, IDB CEO Kevin Lane was critical of the support that his company had received from the Irish banks for their funding proposals.

"We've plenty of interest from foreign banks but the question has to be asked why the taxpayer is being asked to support our banks if they don't support the development of Irish businesses," he said.

Last October, Lane told a dairy conference that the total cost of coping with a 50pc expansion could be as much as €850m.

"I stand by those numbers," he said at the announcement of the group's results for 2010. "If anything they have increased in the interim. I still believe co-ops will need to invest €400m in their facilities, even though I have heard some commentators claiming that it can be done for little or nothing."

It has been more than seven years since the IDB has made a purchase of any significance, but Mr Lane was adamant that his executive team were actively looking for new opportunities.

"We don't expect to see Christmas without having made a move in this regard," he said.

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The CEO said his first 12 months at the helm of the group that employs over 3,700 people worldwide was to completely reassess the entire organisation with a view to re-positioning the business for the future.

Results for last year have left the IDB with profits down on 2009 by 33pc to €27m, despite an increase in turnover. However, the main reasons for the increase in turnover were improvements in currency exchange rates.

Management blamed the drop in profitability on higher raw material prices along with aggressive competition in the US where its DPI distribution business is based.

This accounts for approximately one third of the company's turnover, and management said that the return on investment from this division had fallen below 10pc in the last year.

"We have refocused on core activities that involve getting our members' products to profitable markets," commented Mr Lane. However, the IDB are reluctant to offload their US distribution business .

"As long as we can make a return on investment of over 11pc we are happy to keep this business," he said. "But the focus has switched from growth to efficiency and we've put in a completely new management team to ensure this happens."

Mr Lane said that with 80pc of the IDB's dairy exports sold within the EU, his focus will now be on developing new markets for Irish dairy products in North Africa, the Middle East and Asia.

"They are riskier markets but we've decided to give them a lash. It could be a case of investing millions in a plant to process Irish milk powder into something that suits local tastes or it could just be a man on the ground looking for customers."

The IDB established a sales office in China and distribution channels in Algeria last year.

The biggest success story for the IDB was the launch of a new spreadable butter called Kerrygold Extra. It was a marketing success, boosting sales by 16pc.

"That was a phenomenal performance which surprised us because we thought it would impact on our existing butter business. But it has successfully tapped into a new demographic."

Indo Farming