Lakeland sees possible opportunity in hard Brexit

Lakeland Dairies, the State's largest cross-Border dairy business, believes it could steal a march on rivals in the event of a hard Brexit.

Chief executive Michael Hanley said the co-op's significant business footprint in the North gave it a natural hedge against the prospect of the UK falling behind a tariff wall.

"In a hard Border scenario and reversion to WTO (World Trade Organisation) tariffs we'd be locked into one of the highest returning markets in the world while the rest of Europe would be locked out," Mr Hanley said. "So we can maximise the equation for our farmers in the event of high tariffs," he said.

However, he acknowledged the farmer-owned co-op’s business model was currently predicated on a seamless Border with product and raw material moving daily between its operations, North and South. “And obviously we’d like that to continue,” Mr Hanley said, while noting the group was scenario planning for both eventualities.

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He was speaking as the Cavan-based co-op, the State’s second largest, posted a strong set of financial results for 2017 driven by an unprecedented surge in butter prices globally, one of the group’s principal commodities, which rose to a record €7,000 a tonne last year.

This drove group revenue to a record €769.8 million, up 28 per cent on the previous year, yielding an operating profit of €16.8 million, compared to €7.2 million in 2016.

Milk volumes

The co-op, which exports to more than 80 countries, said milk volumes processed at its various facilities rose to a record 1.2 billion litres, although part of the increase came from the acquisition of the neighbouring Fane Valley co-op's dairy business in 2016.

Lakeland recently finished building a third milk powder processing facility, the biggest in the State, at its main Bailieboro campus in Co Cavan.

And together with its new €10 million global logistics centre at Newtownards in Co Down, Mr Hanley said it was ideally placed to minimise the impact of Brexit and maximise the dairy opportunity in Asia and elsewhere.

The group’s latest annual results show its principal food ingredients business, which produces mainly butter and milk powder for export, generated revenues of nearly €469 million last year, up 32 per cent on 2016, on foot of what Lakeland described as “favourable market conditions”.

As part of this, its Bailieboro plant produced a record 200,000 tonnes of milk powders and butters.

The group’s foodservice business division, which produces a line of dairy products for retail, saw revenue rise 23 per cent to nearly €240 million, while its smaller argibusiness section saw revenue increase 16 per cent to €61.7 million.

“In 2017, Lakeland Dairies achieved performance improvements across all divisions of the business. Trading conditions were helped by a reduction in global milk supplies and product availability,” Mr Hanley said.

“ We were able to take advantage of these conditions through our efficient processing capabilities and worldwide market presence, achieving satisfactory results,” he added..