Difficult market conditions fail to blunt revenue growth at Lakeland Dairies

Dairy co-operative Lakeland Dairies has posted strong financial results for the financial year ending December 31, 2016.

In spite of difficult dairy market conditions, the co-op turned in a very robust performance with revenues up by 2% to €601m.

This yielded an operating profit of €7.2m before exceptional costs, and Earnings Before Interest, Taxes, and Amortisation (EBITA) of €18.9m.

But, the co-op’s operating profit fell by more than 50% on year-earlier levels due to milk price supports.

Lakeland Dairies said it has strongly supported the milk price that it pays to its dairy farmers throughput the year.

In addition, it says, it has ensured an appropriate level of reinvestment 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, the co-op said in a statement.

The co-op also closed the year with a strong balance sheet and shareholders’ funds of €102m.

Lakeland Dairies operates across 15 counties on a cross-border basis, processing milk into a wide range of value-added dairy food-service products and food ingredients.

The co-operative has a portfolio of 240 different dairy products, which it exports to 80 countries worldwide.

In May 2016 it acquired Fane Valley Dairies, which increased milk intake by 22%.

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 1.2 billion litres of milk.

Key results

Food Ingredients

According to Lakeland Dairies, 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 demand for a wide range of dairy food ingredients.

Bailieboro dryer number three (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 arm.

The co-op says it has 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 160,000t of milk powders per year and over 50,000t of butter on a single site.

Food-service revenues

Food-service revenues of €194.1m 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, it says.

The co-operative’s major new Global Logistics Centre in Newtownards played an important role in meeting customer demand in key market segments – including hospitality, catering and convenience.

This centre uses highly-automated systems with maximum effectiveness and efficiency.


In addition, Lakeland Dairies reported that Agribusiness revenues fell by 14% to €53.3m.

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.

Lakeland manufactured over 160,000t of animal feeds and sold 20,000t of fertilisers.


Commenting on the results, Group Chief Executive, Michael Hanley, said: “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.

“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,” he added.

In addition, Hanley said: “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.

“We have a strong presence in international markets, exporting nearly 100% of our output, and have built a name for quality and reliability across over 80 countries worldwide.

“That can justifiably provide our milk producers with a high level of confidence in their long-term future and success,” he said.

Michael Hanley, Chief Executive, Lakeland Dairies

Alo Duffy, Chairman of Lakeland Dairies said: “To prosper, we need a business with large-scale processing capacity, lowest-cost manufacturing and the best routes to market for our dairy products.

Lakeland now has all of that. It is a lean, stable, growing and well-organised processor, and a leading supplier of some of the best dairy products that customers can buy anywhere across the globe today.

“To get to this stage has needed careful planning, investment, new product innovations and growth through acquisitions, which have been integrated successfully.

“Lakeland Dairies will continue to grow and to stand out as a leading dairy provider on world markets,” he claimed.