Dairygold has reported a slump of €254.7 million in turnover for 2023.
The co-op recorded a turnover of €1.4 billion for last year compared to €1.6 billion in 2022.
The Cork based co-op, which is owned by 7,000 shareholder members, also reported a €16.3 million drop in operating profit for 2023 to €23.9 million.
According to Dairygold’s interim chief executive, Michael Harte, the financial results for 2023 reflect both the significant falls in market returns last year and the co-op’s board’s decision to reduce profitability to “increase milk prices and grain prices” for its members.
Harte told Agriland that 2023 had been a “challenging year” with reduced milk volumes, weather and “sustainability” issues all playing a part.
Dairygold
The latest annual report show’s Dairygold’s milk production declined in 2023, with the co-op collecting and processing 1.41 billion litres of milk a decrease of 70 million litres compared to 2022.
According to the co-op it’s average quoted milk price of 38.4c/L – including maximum quality and sustainability bonuses plus VAT in 2023 – “reflected a reduction of 16.5c/L on 2022”.
Overall Harte described last year’s performance as “satisfactory” and said all businesses had delivered “to expectations”.
The latest annual results show that fundamentally Dairygold was one of the casualties of the global slump in demand for dairy products in 2023.
This was primarily driven by a decline in Chinese demand and a reduction in consumer spend on dairy products.
Dairygold’s EBITDA (earnings before interest, taxes, depreciation, and amortization) fell by 19.7% to €55 million.
The co-op’s year end net bank debt was €144.5 million, an increase of €12.2 million on the 2022 figure which resulted in a net bank debt to EBITDA ratio of 2.6:1.
The increase in net bank debt also facilitated Dairygold’s ongoing capital expenditure programme which totalled €51.1 million last year.
This included the phased redevelopment of its Casein facility at the Castlefarm Dairy Processing Complex and ongoing milk intake upgrade works at the Clonmel Road Cheddar Cheese Plant and the approval for the redevelopment of the Central Laboratory Facility in Mitchelstown.
It was also utilised for the acquisition of a 59% shareholding in Vita Actives Limited by the co-op last year – reflecting Dairygold’s ongoing strategy to diversify its earnings and “growing a life stage nutrition business”.
The latest financial report also shows that the co-op’s net asset value increased by €1.2 million in 2023 to €459 million.
Annual report
The 2023 annual report also details that Dairygold’s agri-business “faced a number of challenges”.
These were primarily driven by a “reduction in on farm margins and volatility in key input prices” and at the same time the retail business was impacted by a drop in consumer confidence.
“Despite these challenges, which saw a decline in feed and fertiliser volumes, the agri
business delivered a solid performance,” the co-op stated.
Meanwhile its non-core activities turnover increased by €26.6 million to €39.6 million, primarily due to share trading activity in 2023
According to Harte “environmental sustainability” remains one of the dairy sector’s biggest challenges which he claimed Dairygold is “facing head on”.
He also outlined that the co-op is “implementing a detailed decarbonisation plan across our factory operations, to deliver a 42% reduction in carbon emissions.”
According to Harte more than 90% of Dairygold’s milk suppliers are now participating in its Grassroots Milk Supplier Sustainability Bonus Programme – this pays farmers a bonus for undertaking “actions on their farm designed to improve sustainability, including reducing emissions, protecting water quality and improving soil health”.
But he also warned today that one of the most significant challenges facing the dairy sector at this time is the “potential imminent removal of the nitrates derogation, due to water quality, or the failure to achieve the emissions target under the Climate Action Plan”.
Harte said that either of these “could significantly reduce milk supply impacting the viability of the industry” which would not only have a major impact on Dairygold’s suppliers but also Ireland’s rural economy.