Dairygold Co-Operative brought in an operating profit of €26 million during a challenging 2020, the co-op society has revealed.
This is down 27.4% on 2019 levels, the company said.
Revealing its financial results for 2020 today (Wednesday, April 7), the co-op delivered an EBITDA (earnings before interest, taxation, depreciation and amortisation) of €53.8 million and an operating profit of €26.0 million for the year.
It also reduced its net bank debt by €38.7 million. These results, Dairygold says, reflect “improved performances by its core dairy and agri businesses, despite the challenges of the Covid-19 pandemic”.
Turnover and profit
Dairygold recorded turnover for the year of €1.017 billion, generally in line with 2019’s turnover of €1.020 billion. EBITDA was €53.8 million, with the Core Business performing ahead of 2019.
Overall, there was an EBITDA reduction of €2.8 million (4.9%) on 2019, as a result of 2019 benefitting significantly from non-core property activities.
The society recorded an operating profit of €26.0 million for the year, a reduction of €9.8 million (27.4%) on the 2019 level.
The reduction, the co-op says, is primarily due to the reduction in EBITDA and an increase in the depreciation, impairment and amortisation charge of circa €7.0 million in 2020, following the completion of the significant capital investment programme.
Following a decade of significant capital investment, Dairygold substantially reduced its bank debt to €119.2 million in 2020, a 24.5% decrease on the previous year’s level of €157.9 million.
This has resulted in a manageable Net Debt to EBITDA ratio of 2.2 : 1. At the end of 2020, the net asset value of the society stood at €387.7 million, an increase of €14.7 million (3.9%) on 2019.
Dairygold processing
Dairygold collected and processed 1.43 billion litres of milk from its members in 2020, an increase of 2.7% on 2019.
A five-year Milk Planning Census carried out in Q1 2020, forecasted that milk production from Dairygold’s milk suppliers will grow at a modest level, about 2.6% per annum, up to 2025, the co-op said, adding:
“Milk growth into the future is expected to be delivered from increased output per cow, through improving genetics and herd management, rather than through an increase in herd size.
Dairygold now has the weekly peak processing capacity in place, to process the forecasted milk growth, by its member suppliers, to 2025.
Over the past decade, €425 million has been invested by Dairygold and its partners across its four processing sites.
2020 saw the completion of three strategically important dairy processing projects, including the infrastructure to support the new Jarlsberg Cheese Manufacturing Complex, in Mogeely, in partnership with Norwegian dairy co-operative TINE SA.
In addition, the Castlefarm Dairy Complex oversaw a redevelopment of its Demineralised Whey production facility, while another new milk evaporator and dryer was established at the Mallow Nutritionals Campus.
In 2020, Dairygold conducted an End-2-End review of its dairy business and support functions.
“The rapid and significant milk expansion of recent years had resulted in a greater number of customers and associated product specifications,” the firm added.
This transformation programme has “reduced complexities and costs by reorganising the business into primary processing and higher margin business units, to enhance efficiency and maximise returns from Dairygold’s dairy product portfolio and providing clear direction and focus to the newly created higher margin Health & Nutrition business”.
Dairy markets
Lockdowns across the globe during the first half of the year led to a sharp fall in dairy prices, Dairygold said in its financial statement.
“However, as government supports were rolled out, the huge collapse in demand in foodservice channels, which were largely closed, was mitigated by a surge in retail channel demand and prices recovered somewhat from mid-year,” the statement added.
Looking ahead, the expectation is that global milk supply will grow more modestly in 2021 at about 1%, with increased feed costs in the US and EU expected to impact production.
The positive demand outlook hinges on the appetite of governments to provide continued supports, while the impact of the pandemic continues. It is reasonable to expect more positive returns from dairy markets in 2021, the co-op says.