FDBusiness.com

Ornua, Ireland’s largest exporter of dairy products, delivered a strong trading performance in 2018. Group turnover reached €2.082 billion with group EBITDA of €60.5 million, up 12.5%, and operating profit rose by 14.8% to €40.4 million. The performance was achieved during a period of significant and sustained investment across its facilities and brand portfolio.

The late production season and Brexit planning resulted in Ornua carrying additional stock over the year-end, bringing net debt to €110.1 million compared to €0.3 million net cash in the prior year. Owner of the Kerrygold brand, Ornua exports to over 110 countries around the world.

Ornua is firmly committed to creating value for Irish dairy farming families through the delivery of strong product price returns, as evidenced by the Ornua Purchase Price Index vs LTO (European Milk Prices) average of 99%. In 2018, Ornua purchased 342,400 MT of Irish product and paid a total Members’ Bonus of €19 million, up 27% year-on-year. 570 million litres of milk equivalent were purchased by Ornua under fixed price contracts, helping protect members against volatility.  In supporting its member financing requirements, Ornua provided €350 million to members in working capital facilities via the Reverse Invoice Discounting Facility.

Brand Performance

2018 was an excellent year for Kerrygold.  A combination of top-quality milk, state-of-the-art member production facilities and a well invested brand has secured phenomenal growth in key strategic markets of the US, Germany and the UK. Highlights include accelerated growth in Germany where Kerrygold Butter is the fastest selling product of all food and drink brands in the German retail market. Kerrygold enjoyed 25% volume growth in the US, the ninth consecutive year of double-digit volume growth. Today, Kerrygold Butter is the number two butter brand nationally with US consumers purchasing 2.6 million packets of the iconic gold foil each week.

Ingredients Performance

Ornua Ingredients, one of the leading providers of bespoke cheese and dairy solutions to the global food manufacturing and foodservice sector, delivered strong purchase volumes and continued to grow its value-added routes to market for Irish dairy products. In the US, Ornua Ingredients had a record year with double-digit volume growth. Ornua Ingredients Europe saw its new product pipeline grow significantly during the year with a new line commissioned in Ledbury, UK. In addition, work commenced on the construction of Ornua’s cheese facility in Spain, a state-of-the-art 110,000 sq. ft production facility expanding Ornua’s growth opportunities across continental Europe.

John Jordan, chief executive of Ornua, comments: “We are pleased to report a strong trading performance for 2018, driving a further uplift on the record growth of 2017. This strong performance was achieved against a challenging global environment characterised by highly volatile butter prices, drought conditions in Europe, economic uncertainty due to Brexit and global trade wars.

“Kerrygold had a stand-out year and our US ingredients business delivered record growth. The strength and impressive growth of Kerrygold allowed Ornua to pay a product brand premium of €18 million to our members for Kerrygold product. Following decades of investment in the Kerrygold brand by our members and Irish farmers, our focus is on protecting this premium positioning and delivering on our strategy to extend Kerrygold from a world-class butter brand into a world-renowned dairy brand.

“Our key focus for 2019 is to drive growth for our full brand portfolio and food ingredients businesses across our 110 markets and to continue to deliver value for the 14,000 dairy farmers we represent.”

Market Outlook

Global demand in 2019 is forecast to grow between 1.0% – 1.5% which implies that volatility is likely to be supply driven. Subdued EU milk supply in the first quarter of 2019 and solid export demand should help support commodity prices and, outside any significant changes to the trading environment, Ornua expects that average farm-gate milk prices are likely to remain at 30-32 cent (including VAT) per litre.