Published: Wednesday, 21st April, 2010 5:00pm

Lakeland strong in a tough year

Lakeland Dairies chief executive Michael Hanley.

Last year was tough but the business performed well at a time when dairy markets were at a 30-year, Lakeland Dairies chief executive Michael Hanley told The Anglo-Celt on Monday.

The co-op is reporting impressive figures for 2009 - operating profit of €1.4m on turnover of €325.7m - and Mr. Hanley thought that the worst of the downturn was probably over and market conditions would gradually improve through 2010.

"I'm cautiously optimistic about a gradual improvement in dairy market conditions as the year progresses," he said. "Consumption of dairy products will improve gradually as the EU and its global trading partners emerge slowly from the recession, however it is also the case that severe price swings will still take place in the years ahead given the unpredictable state of the markets."

He pointed to the increases in world butter and milk powder prices, driven by demand in India, China and the Middle East, as well as concerns about declining output from the EU and modest growth in the US. Dairy output from Australia, New Zealand and South America is expected to be higher this year.

One of the concerns Mr. Hanley pointed to was the 250,000 tonnes of skim milk powder in intervention in the EU. Those who watch the dairy market closely believe some of this will be released under a deprived persons scheme and the worry is that action will affect the milk price.

Mr. Hanley said Agriculture Minister Brendan Smith and his colleagues across the EU are working on a campaign to remind the European Commission of the effect dropping the intervention product on the market would have on prices.

While that is going on, Lakeland is pleased it has delivered a strong business performance in the most challenging conditions.

Further achievements in organisational efficiency and the continued implementation of a least-cost dairy processing model underpin the performance, its press briefing points out.

The €20m investment in the new milk powder processing facility at Bailieboro is complete and the new site is being commissioned. Lakeland has also transformed its technology systems and reduced costs across the group, while it continues to export the products of its food service and food ingredients divisions to more than 70 countries.

Lakeland closed 2009 with a strong balance sheet and shareholder funds of €71m.

"By restructuring our organisation and operations successfully to date, by taking hard decisions when they were necessary and by implementing a strategic approach to our future growth and development, Lakeland Dairies has boosted it competitiveness," said Mr. Hanley.

"We're achieving success based on high standards of operational efficiency and business excellence. With strong performance as our only benchmark, we will continue to be an engine of growth and development in the interests of our shareholder, stakeholders and milk producers in the northern half of Ireland."

Lakeland operates in 15 counties on both sides of the Border and processes 800m litres of milk a year.

"We encourage everybody to be as efficient as possible and we lead by example. Farmers have responded and shown they're up for the game. They're reasonably confident (a recent Lakeland survey showed - it was published in The Anglo-Celt on April 8) despite the two tough years. We're confident there is a future in dairy farming," Mr. Hanley concluded.