FDBusiness.com

Ornua, Ireland’s largest exporter of dairy products, delivered a very strong trading performance in 2019 with group turnover up by 11.5%, reaching €2.3 billion, group EBITDA of €71.8 million up 18.7% and operating profit of €49.1 million up 21.5%. This performance was achieved against a backdrop of significant external challenges and places Ornua in a strong financial position to manage the unprecedented challenges presented by COVID-19.

Commenting on the 2019 results, John Jordan, CEO Ornua, said: “We are pleased to report a strong trading performance for 2019, despite a challenging global environment characterised by economic uncertainty due to US tariffs, Brexit and market volatility. Post year-end this trading complexity has increased significantly due to the impact of the global COVID-19 pandemic.

“Kerrygold had a stand-out year in 2019, becoming the first billion-euro Irish food brand. The strength and impressive growth of Kerrygold allowed Ornua to pay a brand premium of €18.5 million to our Member Co-ops for Kerrygold butter, cheese and milk powders. 2019 was a special year for our ingredients business too, as it marked the rebuild and opening of our €30 million state-of-the-art pizza cheese facility in Ávila, Spain.”

Commenting on post-year-end trading and the impact of COVID-19, John Jordan added: “Our key focus for 2020 is to support our 2,400 strong team, our customers, our Member Co-ops and farmers as we face the challenges of COVID-19 together. We are firmly focussed on protecting the health and safety of our people, keeping our factories running safely to serve our customers and ensuring markets for Irish dairy remain open.

“Despite the expected drop in global dairy demand, Ornua will continue to purchase product from Member Co-ops in line with 2020 agreements – over €1 billion in dairy product purchases. This will see Ornua carry the risk and cost of stockholding on behalf of our Members, going some way towards providing a level of security in these uncertain times. We are also working hard to maximise Kerrygold premium returns to enable us to continue to deliver strong product prices to our Members, and in turn Irish dairy farmers.”

Ornua is firmly committed to creating value for Irish dairy farming families through the delivery of strong product price returns. In 2019, Ornua purchased 340,000 MT of Irish dairy products from Irish co-ops. It paid a total Members’ Bonus of €26 million, up 36.8% year-on-year. 400 million litres of milk equivalent were purchased by Ornua under fixed price contracts, helping protect Members against volatility. In supporting its Member Co-ops financing requirements, Ornua provided €350 million in working capital facilities via a Reverse Invoice Discounting facility, which is supported by Ornua’s international banking syndicate.

Brand & Ingredients’ Performance

2019 was a momentous year for Kerrygold with the brand exceeding €1 billion in annual retail sales, becoming Ireland’s most successful food brand. In 2019, the brand grew market share in its key strategic markets of the US and Germany. This success has allowed Ornua to pay a brand premium of €18.5 million to Member Co-ops for Kerrygold butter, cheese and milk powders in 2019.

2019 was a special year for Ornua Ingredients as it saw the rebuild and opening of its €30 million mozzarella and pizza cheese production facility in Ávila, Spain. The factory was opened two years to the day after it was destroyed by a devastating fire.

COVID-19

As with most businesses, Ornua expects COVID-19 to negatively impact on its business. The business uncertainty and disruption it is causing is severely impacting market sentiment. Consumer usage occasions have changed overnight with people at home cooking and baking. As a result, in retail, Ornua is seeing an increase in demand for its branded and private label cheese and butter. Meanwhile, demand for Ornua’s foodservice products have fallen sharply caused by the temporary shutdown of the foodservice and hospitality sectors in Europe and the US.

The net impact of COVID-19 is a decrease in consumption of dairy products worldwide.

Operationally, Ornua’s biggest challenge is to keep its supply chain operating to ensure markets for Irish dairy remain open at a time of great uncertainty. A huge COVID-19 response effort is underway to mitigate risk, keep markets open and serve customers.

Looking Ahead

Ornua has successfully diversified its product portfolio and geographical spread in recent years which will offset against some risk factors associated with the fallout of COVID-19. While the fundamentals of our business are strong, our outlook remains cautious until such time as the full scale and impact of this pandemic is known. Ornua is focused on continuing to protect our people, serve our customers and create value for Irish farming families through this uncertain time.