DAIRYGOLD, the Cork based co-op, has continued the trend of strong 1995 results from the food sector with a 9 per cent rise in profits to £13.8 million. "Last year was a record year in virtually every area of our business," said Dairygold's chief executive, Mr Denis Lucey.
But Mr Lucey sounded a cautionary note when he said that trading conditions in the first quarter of 1996 had been "tough". "Dairy markets have come back considerably and that has been reflected in butter and skimmed milk prices, the barometers of the industry. The prices paid by the Irish Dairy Board have come back sharply from last year's peak," he said.
Turnover at Dairygold was up 5 per cent to £635.2 million, while operating profits increased from £16.6 million to £18.1 million, with a resulting increase in operating margins. Sales were up across all areas of activity with dairy products sales up £14.6 million to £324.5 million. Meat product sales were up £12.1 million to £169.4 million and agri-trading sales up £3.5 million to £141.2 million.
Dairygold has also significantly improved its balance sheet after the heavy expenditure in 1994 with cash inflows of £9.5 million, all owing gearing to fall to 20 per cent. Despite remaining a co-op and shunning the plc route, Dairygold has the capacity to make significant acquisitions, with net debt of no more than £38.4 million.
Within the dairy product sector, the volume of milk processed fell slightly to 190.6 million gallons. This was over quota and resulted in Dairygold milk suppliers incurring a super levy bill of just over £2 million.
Despite suggestions that Dairygold wants to increase its milk pool, Mr Lucey said the group's plants were already operating and close to full capacity. Referring to possible movements of milk supplies from one company to another, Mr Lucey stressed the "harmonious relationship" that Dairygold has with neighbouring companies.
On the future direction of milk prices Mr Lucey would not be drawn on what Dairygold will pay for April milk. He said, however, "at the end of 1995 our suppliers were happy. At the end of 1996 we think they will be no less happier. We'll give them a square deal."
In the meat division, the number of pigs killed was down slightly to 445,000 mainly due to a Europe wide shortage which was a major boon to pig producers. Pig prices have soared in recent months because of aggressive bidding for pigs from Unigate in Northern Ireland. Mr Lucey said he did not foresee a significant fall in pig prices until the second half of this year.
The crisis over BSE in Britain will make it difficult for Dairygold in the short term, he said. "We are in an over reaction stage now, there will be a downside. We have had some slowdown but we're still operating on a reasonably even keel."
Dairygold has two beef processing plants in Kilbeggan and Tallaght but the vast bulk of the meat from the 136,000 cattle processed goes to Continental Europe.
