Dairygold 2019 Annual Results
Dairygold breaks €1 billion revenue ceiling for the first time
Today, Dairygold announced its financial results for 2019. The dairy and agri business Co-Operative delivered an annual turnover of €1.02 billion, an increase of €27.5 million (2.7%) on the prior year and an EBITDA of €56.6 million, an increase of €8 million (16%) on the prior year.
The operating profit for the year of €35.8 million, an increase of €6.8 million (24%) on the 2018 operating profit of €29 million.
Dairygold’s 2,750 Milk Suppliers expanded milk production by 50 million litres during 2019 to deliver a record 1.39 billion litres of milk to the Society over the year. This represents a 65% increase since the abolition of dairy quotas in 2014.
Dairygold invested €85 million of cash in capital projects during the year, primarily as part of its €130 million Phase II Post Quota Primary Processing Investment Programme. The Society has now invested €225 million in capital projects over the past five years. The year-end net bank debt of €157 million remains at a manageable level given the scale of the organisation and the levels of profitability being generated. At year end, the net asset value of the business was €373 million, an increase of €35 million (10%) on the prior year.
Commenting on the 2018 results, Jim Woulfe, CEO of Dairygold, said: “Dairygold delivered a strong financial result in 2019, supported by robust performances across our Dairy and Agri businesses and favourable property transactions. A decade of capital investment has now delivered significantly increased processing capacity and a more efficient dairy processing capability.”
2019 Financial Year – Key Figures
|Turnover||€1.02 billion|| €27.5 million on 2018, representing a 2.8% increase.|
|EBIDTA||€56.6 million|| €8 million on 2018, representing a 16% increase.|
|Operating Profit||€35.8 million|| 6.9 million on 2018, representing a 24% increase.|
|Net Bank Debt||€157.9 million|| €46.6 million. Bank debt to EBITDA ratio of 2.8:1|
|2019 Investment||€85.0 million||Part of €130 million Phase II Post Quota Primary Processing Investment Programme.|
|5 Year Capital Cash investment||€225.0 million||Over 5-year period from 2015 – 2019 driven by post quota milk expansion.|
|Net Asset Value||€373.0 million|| €35.1 million, representing a 10% increase.|
Speaking about the 2019 results Dairygold Chairman, John O’Gorman said; “Over the last ten years Dairygold has supported its Milk Suppliers to increase overall milk production by 65% and in the process completely transformed its business into a world class provider of dairy ingredients for the international marketplace. The business is financially strong and well invested, ready for Dairygold’s next phase of growth and development.”
Moderate growth in global milk production combined with modest demand provided a reasonably balanced global market for dairy produce throughout 2019, although the year was not without its own peak and troughs. As we look forward, the biggest threat to global dairy markets is the impact of the Coronavirus (COVID-19) on supply chains and demand. Meanwhile, the ongoing US/EU trade dispute continues to add a 25% tariff to Irish Cheese and Butter imports into the US.
Dairygold is currently concluding a €130 million capital investment programme required to deliver the increased processing capacity, product mix flexibility and commercial opportunity required to manage milk growth forecasts to 2023.
This investment is across three projects: to provide the appropriate infrastructure for the new Jarlsberg Cheese Manufacturing facility in partnership with Norwegian dairy processor, TINE SA in Mogeely(Cork); the redevelopment of Demineralised Whey production at Castlefarm Dairy Processing Complex in Mitchelstown(Cork) which will significantly increase capacity and a new Milk Evaporator and Drier at Dairygold’s Nutritionals Campus in Mallow(Cork).
Commenting on the Society’s dairy processing capability Mr Woulfe said; “Over the ten years since 2009, €425 million has been invested by Dairygold and its Partners across our four processing sites. This has delivered three new Milk Powder Factories, a new Cheese Factory in Mogeely and an enhanced Cheddar Factory in Mitchelstown, along with a complete regeneration of Whey Processing. In addition to the increased processing capability, these investments have also delivered advanced technology and efficiency.”
Agri Business, incorporating animal feed, fertiliser and grain, delivered a very satisfactory performance. With no notable weather extremes and good grass growth, there was a marked reduction in concentrate feed demand from the high 2018 level, while fertiliser demand was also reduced due to the excellent grass growth conditions in the spring. The Agri Business continued its €17 million capital investment programme in 2019 which involved the establishment of a centralised Agri Business Centre at Lombardstown to accommodate all Agri Business functions. It also facilitated the rebuilding of three Co-Op Superstore at New Inn, Mogeely and Ballinhassig.
The preliminary results of Dairygold’s 2020 – 2025 Milk Planning Census which Milk Suppliers were asked to complete in the early part of 2020 confirm that milk volume growth is expected to continue across the Dairygold catchment area, but it will be more measured and incremental than the growth rates we had in the first wave of post quota expansion. Speaking about the Census Mr. Woulfe said; “It is imperative that Dairygold has a clear line of sight on Members’ milk production intentions in order to schedule investment decisions appropriately. The Society is ambitious, but in order to maintain its prudent and modular approach to expansion, future milk volumes must be validated, prior to any further investment. We estimate that it will require circa €12 million of capital investment for every extra one million litres of peak processing capacity. Also, investment in primary processing ultimately diverts investment away from other value add initiatives. Dairygold will be analysing these issues, including appropriate funding models in order to maintain a sensible approach to future primary processing investment.”
Brexit remains a business concern. As the transition period progresses and the negotiations on the future trading relationship continue, it is critical that the future trade agreement is as close to the existing trading arrangements as possible.
COVID-19 is a rapidly evolving situation which has the potential to have a significant negative impact on the business, operationally, commercially and financially, with significant challenges experienced from farm to market. Continuity of food production is essential and it is clear that EU support measures for the Irish dairy industry are needed.
As part of Dairygold’s Business Continuity Planning, Dairygold has established an in-house Pandemic Response Steering Group. This Group is constantly monitoring the situation to ensure that all necessary actions and appropriate measures are being taken in the interest of securing the safety, health and wellbeing of our Employees, Suppliers, Customers, Contractors, Visitors and other key Stakeholders while maintaining business continuity.
With peak COVID-19 impact likely to coincide with peak milk processing in an industry that utilises a perishable raw material like milk, it is essential to explore all contingency measures. As a company and an industry we are putting significant effort into doing that. Dairygold is working with the other dairy processors, through Dairy Industry Ireland (DII) to identify all options for co-operation and pooling of resources.
Dairygold is continuously reviewing it approach to sustainability. The Society has heightened its focus on environmental protection measures at farm and factory level and has established a number of ambitious targets, including:
Dairygold will continue to build on the soil health, nutrient planning and watercourse protection programmes already established. In keeping with its co-operative ethos, the Society will partner with its Suppliers to meet its environmental targets to strengthen Ireland’s reputation as a world leader in grass-fed dairy production.
Commenting on the future strategy for the business, Chief Executive Jim Woulfe said; “Our capital investment programme over the last ten years has prioritised milk growth and processing capacity which has been hugely successful in facilitating unprecedented expansion at farm level to the benefit of our Members.
“The prudent investments we have made have established a world class processing base for the business as well as strengthening our research and innovation capability. There is now a strong foundation in place from which to leverage greater product innovation and higher value processing.
“Dairygold is now a very well invested business across its dairy and agri operations. We can develop our strategic planning to 2025 and beyond, confident in the knowledge that we are building on a very solid business platform, with the assets and capability in place to take full advantage of the growth opportunities that the dairy and agri sector will offer going forward.”
Please click here to view the full Annual Report and Financial Statements 2019.