Lakelands acquisition ‘prudent’ in face of looming Brexit

Lakeland Dairies acquisition of Country Down-based Fane Valley Dairies was a prudent move in light of a potential Brexit in June.

That’s according to the Chairperson of ICMSA’s dairy committee, Gerald Quain, who added that the announcement demonstrated a commitment to the dairy sector at a time when the pressures on dairy-milk suppliers were immense.

The purchase will mean Lakeland Dairies will increase its milk pool to over 1 billion litres making it Ireland’s third largest milk processor.

“It was prudent of Lakelands because the end value is on the other side of the border, whereas presently all their milk base is in the Republic,” Quain said.

“We had a meeting with Lakelands just last week but we didn’t know they had been working with Fane Valley towards this.”

This acquisition is considered to be a better option than the originally proposed strategic joint venture, announced in August 2015, which would have involved both the dairy and agri-business interests of the respective businesses.

“If a Brexit did come, with the currency exchange impact it’s important  to have this deal as there is so much trading over the economic border [with Northern Ireland].

“To have a foot on both sides of that border, with processing capabilities on either sides, would be frightfully useful.”

Quain added that the ICMSA would always judge the performance of any co-op  by the milk price it returned to the farmers supplying the milk.

Earlier this week Lakeland Dairies reported a profit before a 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%.