Profits up 10% at Lakeland Dairies despite revenue fall

Lakeland Dairies has reported a profit before tax increase of 10% to €12.8m, in the co-operative’s annual report for 2015.

This is despite group revenues of €588.5m reflecting a 6% reduction due to what it describes as global conditions where there is continuing pressure on the returns from the markets. Lakeland’s Food ingredients business was hit worst by global conditions with revenues down by some 14%.

Lakeland this week also announced that it will be acquiring the dairies business of Fane Valley increasing its milk pool to over 1 billion litres making it Ireland’s third largest milk processor.

Lakeland says the Society concluded 2015 with a strong balance sheet and shareholders’ funds of €109m.

During the year, Lakeland Dairies acquired Taste Trends Ltd., the leading UK based maker of Coolicious branded frozen yogurts.

Lakeland Dairies also commenced the expansion of milk powder processing operations at Bailieboro, Co. Cavan, which proceeded on schedule throughout the year.

The co-operative opened a new Global Logistics Centre at its dairy foodservice manufacturing site in Newtownards, Co. Down, and other dairy processing sites, including Killeshandra, Co. Cavan, were also upgraded.

Milk supplies

Milk supply volumes (currently 900m litres of milk per annum) increased by 13% which contributed to overall efficiencies across all dairy processing operations.

Performance by Division

Foodservice Division revenues increased by 6% to €201.7m, bolstered by continuing business development initiatives and consistently strong demand for the innovative products that Lakeland Dairies sells across the hospitality, catering and convenience market segments.

LAKELAND DAIRIES Milk Stick Opening Pack 1

Lakeland is the dairy foodservice market leader in Ireland and the UK. The foodservice market continues to benefit from gradually improving consumer sentiment, with strong interest for Lakeland Dairies products and a consequent increase in volumes shipped.

Food Ingredients revenues of €324.4m reduced by 14% reflecting lower market prices where there is an oversupply of dairy products on world markets due to an increase in global milk production which is particularly evident in Europe. Lakeland Dairies Food Ingredients produced record volumes with 107,000t of milk powders exported last year, including caseins, and over 31,000t of butter.

Agribusiness Division revenues increased by 8% to €62.4m, based primarily on sales of 162,000t of high quality animal feeds and over 25,000t of fertilisers. Growth in feed volumes was supported by incremental new business and some increases in feed use following the abolition of milk quota.

Comment

Michael Hanley, Group CEO of Lakeland Dairies said:

“Lakeland Dairies continues to make strong progress. As well as strategic developments, we have achieved positive business results in spite of volatile dairy market conditions.

“We are focused on maximum efficiency across all operations. The balance within our business has enabled us to support milk price for our producers throughout the year.

Michael Hanley, Chief Executive, Lakeland Dairies
Michael Hanley, Chief Executive, Lakeland Dairies

“These are difficult times for dairy farmers. Our priority is to achieve all future growth on a long term and sustainable basis, to maximise milk price and to minimise future market volatility for all of our milk producers. We have invested considerably to ensure that we have globally competitive operations.

“We have the customers, product portfolio and economies of scale required to add market value to every litre of milk processed.”

Lakeland Dairies’ Chairman, Alo Duffy said:

“Following from the abolition of quotas and the ongoing imbalance in global dairy markets, 2015 was a challenging year for milk producers and the dairy industry. The goal of all our developments is to underpin and maximise milk price while retaining our capacity to re-invest in the business.

“This will be achieved through a sustainable business model including appropriate economies of scale with in-built efficiencies, cost effectiveness and a focus on quality, innovation and growth.”