Business Irish

Sunday 20 October 2019

Dairygold open for merger talks as turnover nears €1bn

Cork-based co-op says it's open to alliances that will benefit members, and warns of need for transition period as Brexit looms

Dairygold CEO Jim Woulfe. Photo: Miki Barlok
Dairygold CEO Jim Woulfe. Photo: Miki Barlok
Gavin McLoughlin

Gavin McLoughlin

Dairygold is open for merger talks with fellow co-ops as the dairy industry braces for the impact of Brexit.

CEO Jim Woulfe told the Irish Independent that the company is "always open to change".

"We're open constantly to reshaping, reforming if there's betterment for our members," he said adding that Dairygold had come about from the merger of Mitchelstown and Ballyclough co-ops three decades ago.

"When we can take out costs, we'll take out costs and we'll collaborate with whoever to take out costs ... we don't have a closed mind."

Chairman John O'Gorman said Dairygold had "never made a secret that we were open to collaboration in whatever shape or form that would take".

Dairygold also said Brexit uncertainty was overshadowing the market. About 13pc of the company's revenue comes from the UK.

"No level of planning could insulate any EU organisation, trading with or through the UK, against the implications and consequences of a hard or no-deal Brexit.

"That is why it is critical, no matter what the final outcome of the negotiations, that there is a sufficient transition period, to fully prepare for the future trading relationship between the EU and UK. Even then, the Dairy Industry will suffer serious consequences in the event significant tariffs applying," Dairygold said.

Meanwhile, Mr O'Gorman said any merger would have to consider the value of the Dairygold name to the co-op's members, for whom the history of the Cork-based organisation is important. Mr Woulfe said this factor would be a "barrier" in any merger, and added that there were no merger talks ongoing at the moment.

The comments were made shortly after the completion of Lakeland Dairies' merger with LacPatrick. Mitchelstown-based Dairygold previously made an attempt to merge with the Arrabawn co-op based in Nenagh, Co Tipperary.

Last autumn, the head of Ibec arm Dairy Industry Ireland predicted further mergers were inevitable after the Lakeland-LacPatrick deal. Massive 'super co-ops' tend to be a feature of rival milk-producing nations, whereas here the industry is relatively fragmented.

"From the Department of Agriculture to farm organisations, people have been saying that consolidation will happen, but to date it has not," Dairy Industry Ireland director Conor Mulvihill told the Irish Independent. "What has occurred here has been organic growth. In Ireland, people operate very locally, and the co-op is a part of this, there is a lot of loyalty at farmer level towards the organisations. In addition, the farmers own the co-ops."

Dairygold posted record turnover of €992.9m last year, saying its financial performance was "satisfactory", and that it had paid €15m to suppliers in milk price premiums in order to help them cope with the effects of the extreme weather.

The company is looking to diversify and committed €130m last year to help fund whey powder and non-cheddar cheese programmes.

It has a joint venture with Norwegian cheese-maker Tine, to supply Irish milk for the production of Jarlsberg cheese.

It said the outlook for next year's milk price will likely depend on global demand - which may prove sluggish amid an emerging global slowdown.

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