Sales at farmer-owned milk processor Lakeland Daries surged 45 per cent last year to €1.9 billion as demand and prices grew, the co-op’s annual report shows.
Operating profit rose 15 per cent to €32.5 million last year from €28.2 million the previous year, while its pretax surplus increased more than 6 per cent to €29 million.
Colin Kelly, appointed Lakeland chief executive in January, conceded that margins were tight but pointed out that the co-op paid its 3,200 farmer members competitive prices for milk.
Lakeland’s figures show it paid farmers across 16 counties, north and south of the Border, €1.1 billion last year. “We pay as much as we can for our raw material,” stressed Mr Kelly.
How does VAT in Ireland compare with countries across Europe? A guide to a contentious tax
‘I was a cleaner in my dad’s office, which makes me a nepo baby. I got €50 a shift’
Will we have a tax liability if Dad gives us his home while he is alive?
Finding a solution for a tenant who can’t meet rent after splitting with partner
However, he noted that falling prices prompted it to cut payments by about 12 cent a litre so far in 2023.
Growing supplies and tightening demand mean that analysts believe the “squeeze is on”, according to the Lakeland chief.
“There will be further reductions in the coming months, we’re getting very close to the point where farmers will struggle,” he warned.
Mr Kelly explained that a recovery in prices required a fall in global supplies and revived Chinese demand.
About 7 per cent of the world’s milk production is traded globally. China normally takes between a quarter and a third of this, but the country’s current consumption is about 10 per cent to 12 per cent.
Farmers expected business to normalise in 2022 following two years of Covid-related disruption, Mr Kelly said.
However, the war sparked by Russia’s invasion of Ukraine created new problems, driving up fertiliser and energy prices, hitting Lakeland’s own costs as well as those of its members.
Increased working capital needs left Lakeland with net debt grew of €160 million last year. Mr Kelly expects this liability to fall in 2023 as cost pressures ease. The co-op ended 2022 with shareholders’ funds of €273 million.
Lakeland is Ireland’s biggest cross-Border dairy processor. Its chief executive agreed that the Windsor Accord should end problems stemming from the post-Brexit deal struck by the UK government, which created a customs frontier between the North and Britain.
“It gives us everything that we wanted: unfettered access to the British market and single market, the administrative burden does not look to be huge, and ease of transfer between the North and the Republic of Ireland,” he said.
Mr Kelly also called for more guidance for farmers from the Department of Agriculture and Teagasc on cutting greenhouse gas emissions by 25 per cent over the next seven years.
He added that not everyone fully appreciated that Irish farms are among the most sustainable in the world.
Revenues in Lakeland’s biggest division, ingredients, grew 43 per cent to €1.19 billion with the co-op processing extra milk to meet high demand.
Food service sales, which include revenues from a large business supplying milk and other products to airlines for in-flight service, rose 39 per cent to €311 million.
Mr Kelly noted that demand from this part of the business was still short of pre-pandemic rates last year. The division continued to face challenges including disrupted supplies and fears of a recession.
Consumer food sales rose 60 per cent to €273 million, while agribusiness was up 45 per cent at €125 million.
Niall Matthews, Lakeland chairman, dubbed 2022 an exceptional year “with strong market returns, increased revenues and high milk prices”.
Lakeland’s eight manufacturing sites make 240 different products that the co-op sells to 100 countries around the world.
