Acquisitions drove strong turnover growth at Lakeland Dairies last year, but exceptional costs dented profits at the co-op, it reported yesterday, writes Barry O'Halloran
Lakeland, based in Cavan, said that turnover grew by 22 per cent to €410.5 million in 2003 from €336.8 million the previous year. Acquisitions added €29 million to total sales figures.
This reflected full-year contributions from the Bailieboro Foods and the Nestlé dairy processing businesses that the co-op bought in 2002, and a five-month contribution from last year's purchase, dairy service operator LE Pritchitt and Co.
The Pritchitt acquisition resulted in an exceptional charge of €2 million against operating profits of €5.2 million, cutting them to €3.2 million for the year, compared with €5.9 million in 2002.
Chief executive Mr Ed Prendergast said that the charge related to the lay-off of around 50 Pritchitt employees and the closure of its head office in Britain. He said that Pritchitt's first full-year contribution would increase turnover to over €450 million.
Profit before tax was €2.3 million, compared with €28.2 million in 2002. The sharp difference is accounted for by the fact that Lakeland earned a once-off profit of €24.2 million in 2002 from the sale of shares in IAWS plc.
The co-op also took a foreign-currency translation charge of €525,000 against its profit-and-loss account for the year, which related mainly to dollar transactions.
The company benefited from the euro's advance against sterling last year as it bought 250 million litres of the 700 million litres of milk it processed from Northern Ireland. However, Mr Prendergast said that the dollar's fall against the euro blunted the full impact of Lakeside's US joint venture, BL Ingredients. However the business still added €807,000 to operating profit, compared with €294,000 in 2002.
Lakeland spent €24 million on acquisitions and capital investment during the year. The €19.6 million Pritchitt purchase accounted for most of this. The assets acquired were valued at €13.8 million, net of cash.
Mr Prendergast said yesterday that Lakeland now has 50 per cent of the dairy food service market in Ireland and Britain. It processed over 700 million litres of milk. It paid its suppliers, who are its shareholders, an average of 27.93 cent per litre, leaving it with a bill of around €200 million.
He signalled that this price would have to come down this year as a result of EU agricultural reforms that he said would lead to a 22 per cent drop in real commodity prices over the next four years.
Initially, these will result in a 5 per cent cut in the price of skim-milk products and a 7 per cent fall in the price of butter from July 1st. "The milk price will have to adjusted to reflect that," he said.
