Dairygold reports record €1.65bn turnover on back of surging dairy prices

Cork-based Dairygold has reported record revenue and profits on the back of what it described as “an extraordinary year for dairy prices”. It also noted that the double-digit food price inflation being faced by consumers here reflected “the lagged effect” of higher energy prices which, it said, will take time to work through the system.

The State’s third-largest milk processor said turnover rose by 41 per cent to €1.65 billion in 2022 while operating profits rose by 33 per cent to €40 million.

“Several factors on the supply side, including weaker output in the major global milk producing regions, post pandemic supply bottlenecks and the war in Ukraine, combined with stable demand, significantly strengthened dairy market returns,” it said.

Dairygold said it reflected “this market dynamic” by paying suppliers a historically high milk price of 62.4 cent per litre, a 52 per cent hike on the 2021 milk price. The group processed a record 1.48 billion litres of milk in 2022.

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However, it warned that dairy market prices have weakened significantly in recent months with slower economic growth and the impact of high product prices reducing demand.

Dairygold chief executive Conor Galvin said the performance “was driven by maximising the unprecedented high market returns, achieving enhanced operational efficiencies, while managing volatility and significant inflationary pressures”.

“This enabled the society to pay very strong and extremely competitive prices to members for their produce,” Mr Galvin said.

“The dairy industry and the volatile conditions within which it operates, continues to go through a period of significant uncertainty, with huge challenges to be faced, including sustainability, geopolitical tensions and ongoing market volatility.”

Mr Galvin said high levels of inflation in the food sector reflected the lagged impact of higher energy prices. He said Dairygold’s energy costs last year were more than €60 million, up from just over €10 million back in 2020, mirroring the movement in international gas prices.

“Consumer-price inflation is delayed relative to commodity-price inflation because of the length of the supply chain,” Mr Galvin said. “With the exception of fresh milk, you’re seeing that delay.” He said that food inflation was still very elevated at 13-14 per cent, “putting the consumer under pressure”.

“Since 2013 until very recently we’ve actually had food deflation,” Mr Galvin said, while noting the recent surge in food prices have had a serious effect on demand, which has now led to a milk-price correction.

On climate change and the current high levels of dairy production, Mr Galvin said the Government’s Climate Action Plan placed some “pretty stretching targets” on the industry, both at a farming level and at a processing level, “but the reality is we do need to manage the environmental impact of producing food”.

“Dairygold is continuing to work with its milk suppliers to identify actions that can be taken in the short and long term, to deliver a significant reduction in emissions and help achieve the goals set out in the Climate Action Plan,” the company said.