LAKELAND DAIRIES, Ireland's second largest dairy co-operative, bounced back into profit last year, recording an operating profit of €5.5 million in 2007 - a complete reversal of the €7.2 million the co-op lost in 2006.

The turnaround was the result of the implementation of a cost-saving restructuring plan, soaring dairy prices on global markets, the introduction of new products and an aggressive marketing drive.

Chief executive Michael Hanley said 2007 had been a transformative year for Lakeland Dairies, during which the co-op had started to reap the financial benefits of its restructuring programme.

The Cavan-based co-op, which has 5,000 shareholders and pro-cesses milk produced by farmers in 15 counties, enjoyed a €43 million increase in its turnover, which rose to €455 million. Net debt was more than halved to €27.2 million.

Lakeland is now investing in the consolidation of its milk powder drying operations on its site at Bailieboro, Co Cavan. The co-op, which currently employs 619 people, cut 48 jobs last year and a further 60 jobs are due to be cut.

Mr Hanley said the co-op was committed to having a minimal manufacturing footprint and improving the efficiency of its milk drying plants, which he said allowed Lakeland to improve direct returns to producers.

Dairy and other food commodity prices spiked last summer, resulting in higher prices being paid to Irish farmers. But prices started to soften near the end of 2007. "The credit crunch, financial market uncertainty and the strength of the euro against the dollar and sterling are also having a serious impact, particularly on our export returns," he said.

Lakeland can partially offset the negative effects of a weak sterling because it buys a third of its milk in Northern Ireland.

Lakeland's aim is to drive more of its milk into the Prichitts' food service business, which it bought in 2003. This business includes a contract to manufacture tubs and bricks of HB ice-cream as well as mini-pack butters and coffee creamers. Sales of flavoured milks made by Prichitts are expected to increase as they find a market in British schools. Lakeland has also recently launched an extended shelf-life cream in Germany, under the Kerrygold label.