Boosted figures as Lakeland merger is completed

Seamus Enright

Lakeland Dairies has turned in what has been described as an “excellent business performance” for last year, with record revenues and profitability.

The financial update came ahead of the major cross border dairy processing co-operative completing its “historic” merger with former rival LacPatrick.
A transitional board has been established to cover the initial 12-month period post-merger.

 

Merger

At the first board meeting of the new society, Alo Duffy from Ballybay was appointed Chairman, together with two vice chairs- Colin Kelso from Omagh, and Alan McCay from Dunamanagh, Tyrone.
The new society, to be called Lakeland Dairies Co-Operative Society Limited, will be the second largest dairy processor on the island, with a cross-border milk pool of 1.8bn litres produced by 3,200 farms across a catchment area including 16 counties. It will also have a combined annual turnover in excess of €1bn.
Commenting on the merger completion, Mr Duffy said: “The fruits of the merger will be realised as we continue to grow and develop our co-operative for the long term benefit, sustainability and livlihood of dairy farmers.”
He added, in his statement to shareholders: “Our mutual progress will be underpinned by the confidence that comes from working together to create a strong and secure future for our dairy farming families.”

 

Profitability

The record revenues reported last week meanwhile, Lakeland say, have been “underpinned” by targeted business development activity, relative stability in global dairy markets, and growth in volumes shipped.
In 2018 group revenues increased by 5.3% from €769.8m to €810.5m, yielding an operating profit of €17.5m, up from €16.8m in 2017.
This, Lakeland has explained, was driven by “strong returns” from their three main business divisions and an ability to capitalise on “significant economies of scale” through investment in technology, automation and lean operation across the business’ processing footprint.
Lakeland concluded 2018 with a “strong balance sheet” and shareholders’ funds of €130m, an increase of €12.4m for the year. Earnings before interest, taxes, depreciation and amortisation amounted to €33.65m, an increase of €1.05m from €32.6m in 2017.
Helping the level of profitability is revenue growth of 4.6% to €489.9m within Lakeland’s Food Ingredients Division, with profits in the Foodservice Division up 3% to €246.9m, and by 19% to €73.7m in the business’ Agri-Trading Division.

 

Market conditions

Remarking on the latter, CEO Micheal Hanley said that profits in the Agri-Trading Division had been driven by organic growth where customers required higher volumes of feed during the year, mainly due to radically variable weather conditions ranging from blizzards to drought.
Looking ahead, Mr Hanley noted that market conditions for 2019 will be “contingent” on a series of factors including the “still uncertain impacts” of Brexit and the “overall balance” of global supply and demand across the company’s product portfolio.
“We will meet any potential headwinds by continuing to ensure complete efficiency and flexibility across all of our operations, while at all times paying the highest possible milk price in line with market conditions.”
He added: “We will always support milk producers to the maximum possible extent. This will continue to be our commitment in the months and years ahead.”