Business Irish

Wednesday 21 March 2018

Dairygold profits jump by a third as demand for milk rises

Dairygold chief Jim Woulfe
Dairygold chief Jim Woulfe
Sarah McCabe

Sarah McCabe

DAIRYGOLD has reported record profits as the co-op prepares to enter a new era with the abolition of milk quotas.

The Munster-based agricultural co-operative made an operating profit of €27.3m last year, its latest results show, an increase of 33pc on the year before, after bad weather around the world boosted demand for milk.

Sales jumped by 16pc to €847m. Turnover from its agri business division, which provides feed and fertiliser to Irish farmers, jumped 11pc to €250m.

Feed sales were up 12pc and fertiliser was up 22pc amid bad weather in Ireland in the first five months of last year, which forced farmers to buy raw materials rather than rely on their own resources.

Turnover at its food ingredients division, which processes about a fifth of all Irish milk output into whey and powder products, jumped 20pc to €455m. Milk prices averaged 38.1c per litre over the year, nearly double the 21.8c paid out per litre in 2008.

Prices have benefited over the last 18 months from major weather events across the globe, which impacted global supplies.

The results clearly evidence Irish milk suppliers' desire for expansion in the run-up to the abolition of milk quotas in 2015, when competition will be opened up across Europe and the demand/supply equation will entirely determine prices. Dairygold's suppliers provided more milk than ever before in 2013, about 959m litres, and expect to increase supplies by two-thirds in 2020 in comparison to 2011 output.

But speaking to the Irish Independent, chief executive Jim Woulfe urged caution regarding expansion.

"Our approach is prudent and modular; we are building up volumes as is needed," he said. The co-op plans to invest €200m in its own facilities between now and 2020 but this is being done in a phased approach; a €33m upgrade to its facilities at Castlefarm in Mitchelstown was recently completed.

It has asked its 3,000 suppliers to forecast the volumes they expect to produce for the next two years, to assist with investment planning. It is also working with Teagasc to provide advice and direction to farmers about sustainable expansion. "Managing cash flow is crucial in an expansionary era," said Mr Woulfe.

He expects milk price volatility to continue as the quota system is removed, including both falls and rises.

"But I think in the overall context we're in a good position," he said. "We are able to produce milk from grass, cheaper than many of our competitors. That's very important."

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