First Milk has confirmed pre-tax losses of approximately £22m for 2014/15. The farmer-owned dairy co-op has processing operations in England, Wales and Scotland.

The announcement follows the recent appointment of Mike Gallacher as new CEO of the co-op. Since his arrival, the business has embarked on a turnaround programme and is concurrently engaged in a full strategic review.

“The year to March 31, 2015, was clearly an extremely difficult one for First Milk,” said Gallacher.

“The 2014 losses we are announcing today reflect the market context, but also poor operational performance that impacted at the same time as the business paid out higher milk prices to our famers in 2014 than was received in commercial returns.

“In face-to-face meetings with our farmer members in recent weeks I have shared a frank assessment of the business, explained the performance issues and outlined our plan to stabilise the financial position.

“I was very open and direct about the challenges and that member milk prices must be consistent with our commercial income. We will only pay out what we get in.

“In early May, a few weeks after my arrival, I announced significant changes in how we run the business, including cost reductions, a much smaller central team, the establishment of a Business Unit structure and a refocus on our core businesses.

“At the same time, we initiated a full Board review of our strategy. The turnaround actions that we have taken over the last two months have started to address core business issues and have improved our trading position.”

According to AHDB Dairy, formerly DairyCo, First Milk will have been hard hit by the 43% drop in the value of skim milk powders, recorded over the past 12 months.

The business processed almost one-fifth of its milk through the Westbury powder plant in the south west of England during 2014/15. Higher than anticipated production by its members was also a contributory factor, leading to this increased reliance on powder.