FDBusiness.com

In spite of difficult international dairy market conditions, Lakeland Dairies, the Irish co-operative, turned in a very robust performance with revenues up by 2% to €601 million, yielding an operating profit of €7.2 million before exceptional costs, and EBITDA of €18.9 million the year ended 31st December 2016. Lakeland Dairies closed the year with a strong balance sheet and shareholder’s funds of €102 million.

Lakeland Dairies operates across 15 counties on a cross border basis in Ireland, processing milk into a wide range of value-added dairy foodservice products and food ingredients. The co-operative has a portfolio of 240 different dairy products which it exports to 80 countries worldwide.

As a farmer owned co-operative, Lakeland Dairies strongly supported the milk price that it pays to dairy farmers throughout the year, while ensuring an appropriate level of re-investment to drive the future long term growth and development of the business. All developments have been achieved without any requirement for levies or sharing up by milk producers.

Lakeland Dairies acquired Fane Valley Dairies in May 2016, increasing milk intake by 22% to 1.1 billion litres. The continuing benefit of this additional milk flow, together with generally increasing milk supplies, will take full effect in the current year as intake rises to 1.2bn litres of milk – contributing to economies of scale.

The Food Ingredients Division performed strongly in a challenging year with revenues increasing by 9% to €353.6m. The acquisition of Fane Valley Dairies contributed substantial extra milk volumes for processing, helping to meet consistent demand for a wide range of dairy food ingredients. Bailieboro Dryer No. 3 (Milk Powder Plant) was completed and commissioned in time for the peak milk production season, including new robotic systems, along with an overall efficiency upgrade across the entire processing footprint. Lakeland Dairies continued to build on its strengths as a major provider of ingredients to the infant formula and nutritionals markets. It is now able to produce over 160,000 tonnes of milk powders a year and over 50,000 tonnes of butter on a single site.

Foodservice revenues of €194.1 million include a reduction of 3.8% from the previous year which is primarily due to pricing sensitivity in an intensely competitive market climate. The overall volume of sales remained positive where Lakeland has a diversified and innovative product mix, adding further value to every litre of milk processed. The co-operative’s major new Global Logistics Centre in Newtownards played an important role meeting customer demand in key market segments including hospitality, catering and convenience, using highly automated systems with maximum effectiveness and efficiency.

Agribusiness revenues decreased by 14% to €53.3 million for the year. The reduction in revenue relates to a combination of lower sales volumes due to the overall difficulties experienced by dairy farmers during the year, plus feed and fertiliser price reductions to ensure that Lakeland supported our customers as much as possible. Lakeland manufactured over 160,000 tonnes of high performance animal feeds and sold 20,000 tonnes of fertilisers, supported by the co-operative’s expert Rumismart technical team and excellent customer service.

Michael Hanley, group chief executive of Lakeland Dairies, comments: “In a challenging and sometimes unpredictable dairy market environment, Lakeland Dairies continued to make very positive progress in 2016. Our developments have further advanced our competitiveness and processing scale. We are especially pleased that, in spite of difficult market conditions, we sold all of our output to really well established customers where we have consistently increasing levels of demand.”

He continues: “After going through a sustained period where international dairy markets have been very volatile, the market has become somewhat stronger, however its continuing strength cannot be predicted. Our aim is to be the most efficient and most competitive dairy processor in line with the highest, world class standards of operation, and we are well advanced along that pathway. We want our milk producers to see the best possible and most sustainable returns from their dairying. With the strategic investments we have made, we are able to process as much milk as our suppliers can provide.”