Brexit concerns to the fore for Ornua bosses

Ornua bosses are monitoring developments regarding the Brexit discussions very closely, given the potential impacts it has for Irish exports.

Last week, Ornua – Ireland’s largest exporter of Irish dairy products – published its operating and financial results for 2017.

It announced that its turnover increased by 18% to €2.1 billion last year compared to 2016.

Despite volatile market conditions and Brexit uncertainties, Ornua remains on track to deliver its 2021 vision of a €3 billion revenue business with a sustainable EBITA (Earnings before Interest, Taxes, Depreciation, and Amortisation) margin of 3%, Ornua CEO Kevin Lane explained.

But, the outcome of Brexit has the potential to have a significant impact on these targets.

Commenting on the matter, Lane said: “The best scenario is no change; that’s not going to happen.

“The worst scenario is a hard border and WTO (World Trade Organisation) tariffs. To give you some scale for that, if full EU tariffs were brought in, the penalty or levy on cheddar would be over €1,670/t and no consumer in Britain – or anywhere else – is going to stomach or eat that extra cost.

So it will be a wipe-out scenario for the majority of your exports into Britain. Butter is even worse; it would be closer to €1,900/t if you had full EU tariffs in a very hard border scenario.

“We’re already feeling the effects of Brexit today in something called sterling currency, in that our sales into Britain and our profitability returns back are affected by 12-15%.

“So Brexit is not a good news story,” he said.

Lane added that Ornua has a team working “incredibly hard” to protect its business and to mitigate the effects of Brexit.

“It is a very stark scenario for not just Irish dairy, but for Irish food, if a hard border is the end outcome of this Brexit discussion,” he added.

Cost of living

Meanwhile, a hard Brexit would increase the cost of living for all households in Ireland by 2% to 3.1% – an annual increase of €892 to €1,360 per household, according to a report by the Economic and Social Research Institute (ESRI).

Costs would rise the most for lower-income households, the report found.

These households spend a greater share of household expenditure on food products – many of which are imported from the UK and would be subject to tariffs, it added.

Households with the lowest incomes would face a 4% price increase in the highest-impact scenario, while households in the highest-income group would face a 2.4% price increase.

The percentage increase faced by the poorest households would be 70% more than the percentage increase faced by the wealthiest households, the report explained.