Dairygold's operating profits fell by more than 80 per cent last year as the co-op said it had supported its members through "a challenging period for Irish farming".

Dairygold's profits fell by €5.4 million in 2006 to €1.2 million, while turnover increased marginally from €533 million in 2005 to €543 million last year.

The co-op society said it had declared an additional milk bonus of 2.35 cents per gallon and a grain bonus of €4 per tonne, which amounted to €4.4 million. The co-op said it had not passed on falling dairy commodity prices by cutting milk prices and it had also taken reduced margins on feedstuffs and other farm inputs.

Dairygold said it had paid consistent share interest to members of €2.2 million, the same amount as in 2005, despite the difficult market conditions.

It also made an additional share interest payment of €1.5 million relating to the demerger of Reox Holdings, the spin-off company that holds its non-farming property, consumer foods and DIY retail businesses.

Shareholder funds in Dairygold remained strong despite the demerger of Reox, the co-op said, with funds standing at €234.6 million, down just €8.9 million on 2005.

The firm reduced its net debt significantly last year, from €122.6 million to €42.2 million.

The co-op's chairman John Walsh said its challenge was to support its farmer members to help them sustain a viable livelihood from farming.

"Dairygold will continue to maintain farm gate prices at the highest sustainable level," Mr Walsh said.

Chief executive Jerry Henchy said the spinning off of Reox had resulted in the successful ring-fencing of the company's milk processing operations.

Dairygold members have the choice of realising the value of their Reox shares at any time of their choosing, he added.

The co-op's share holdings in IAWS, One51, FBD and Reox enjoyed combined appreciation of 40 per cent in 2006.

Moreover, its holdings had a market valuation of more than €125 million.