Turnover increases 23% to €401 million at Lakeland Dairies with profit of €4.5 million
Ireland’s second largest dairy processing co-operative Lakeland Dairies has reported a 23% increase in revenues to €401 million and operating profit of €4.5 million for the year ended 31st December 2010.
“2010 was a broadly positive year for Lakeland Dairies”, said Chief Executive, Michael Hanley. “Internationally, there was a return to growth in our key markets as the global recession slowed. This continuing and gradual recovery has helped to sustain a rise in demand for dairy products globally, raising market prices to improved levels.”
Lakeland Dairies exports to over 70 countries offering some 170 branded dairy products to customers throughout the world. In 2010, Lakeland processed over 700 million litres of milk into a range of value added dairy foodservice products and food ingredients. The co-operative has a strong balance sheet and finished the year with shareholders funds of €76.7 million.
Foodservice Division
Foodservice operations performed strongly with a 14% increase in revenues to €130 million accounting for 32% of Lakeland Dairies’ total revenues.
“Our overall approach in foodservice is guided by market research into evolving consumer trends,” said Mr. Hanley. “We built further on the progress of recent years with new product developments and the targeting of new opportunities. The initial launch of our newly developed Modern Milk flavoured product range, into specific segments of the UK market, has proven successful in its first phase and will continue to be progressed in the current year following an encouraging response from consumers.”
Food Ingredients
Food Ingredients revenues of €232 million increased by 31% on the prior year. There was increased global demand buoyed up by developing markets such as Russia, China, India and the Middle East, leading to higher prices and enhanced revenue streams.
European Intervention stocks were sold at close to market prices throughout 2010 which also had a stabilising effect on market conditions.
The opening of a new €20 million technologically advanced milk powder plant in Bailieboro enabled a major consolidation of processing operations. As the largest non-whey milk powder plant in Europe, the new plant is capable of producing 70,000 tonnes of high quality milk powders a year, while adjoining facilities can also produce 25,000 tonnes of butter annually on the same site. Overall this development is yielding reduced processing costs and better economies of scale for the entire business.
“Given global food trends and the proposed growth in Ireland’s dairy output, this is a strategically important facility which will serve the processing needs of all our milk producers long into the future,” said Mr. Hanley.
“In the years ahead, we will continue to work in close partnership with our customers to deliver perfectly formulated milk powders and dairy ingredients that match their specific food manufacturing requirements across multiple product categories. We will also continue to pursue every possible efficiency to ensure that we yield maximum value from the markets for every litre of milk processed in our facilities.”
Agri-Trading Division
The Agri-Trading Division reported a 15% increase in revenues to €39 million for the year, producing over 150,000 tonnes of high quality ruminant feeds from its mills and supplying a range of farm inputs to customers throughout Lakeland’s fifteen county catchment area. The division continued its focus on providing scientifically based nutritional advice and information designed to optimise herd performance, fertility and milk output.
Overall feed demand was good throughout the year and strengthened further as milk prices increased. In line with general commodity price increases, raw material prices also increased leading to higher feed prices for farmers in the final quarter. Lakeland Dairies made every effort to support milk producers with competitive pricing across its entire agribusiness product range.
Outlook
Mr. Hanley said that the Irish dairy industry is highly dependent on global market circumstances. “Prospects for world dairy markets look reasonably good for the current year and we as an exporter will benefit from this,” he said.
“European markets have recovered and there is strong demand for dairy products in developing markets and particularly Asia. These factors will tend to support dairy market prices for the medium term.
“There continues to be a risk of milk price swings such as those experienced in recent years. Markets have tightened in the past month and market returns have come under some pressure. Currently increasing oil prices may well push up our operating costs in terms of transport and energy.
“The further release of intervention powder stocks in Europe may have a softening effect on world dairy product prices and sterling and dollar currency exchange rates will also influence our returns from the markets.
“Europe continues to work towards CAP reform, quota abolition, and a reduction in subsidies. Current international trade negotiations are also geared towards the further removal of barriers to trade and this will ultimately create more competition for Irish dairy exporters in the years ahead. This is why we need to focus relentlessly on competitiveness across all our operations and business activities.
“We should look forward with self belief towards the future. Our high quality milk pool, our enhanced processing capability, the skills of our people and our capacity to deliver world class dairy products have placed us in a good position to weather the economic crisis and to take advantage of future growth opportunities,” Mr. Hanley concluded.