Good results at Moyvalley Meats

Beef and lamb processor Moyvalley Meats is now trading healthily and has just reported a satisfactory profit for 2006. The company has had a busy few years that brought it a change of owners, a change of directors, a change of name and a change in its fortunes.

The company was previously named Michael J Bergin and Sons and was controlled by members of the Bergin family, while industry figures Roger McCarrick and Padraig Melvin were also involved. However, it became loss-making in 2003, and in February 2004 merged with Moyvalley Meats Limited, in which well known live cattle exporters, Ger and Alan Dillon, were shareholders. The Bergins, McCarrick and Melvin became shareholders in this company too.

In 2004, Melvin relinquished his shareholding and in 2005, the Bergins and McCarrick did likewise. In January, 2006, the company changed its name to Moyvalley Meats (Ireland ) Limited. It is now controlled by the two Dillon brothers.

Those losses in 2003 amounted to €362,079 before tax. The following year, 2004, was more difficult again, with losses doubling to €626,990 before tax. Things took a somewhat better turn in 2005 with losses before tax halving to €345,999. Last year, 2006, the company got its head well above water and turned in a profit before tax of €794,355.

This was some turnaround and an extraordinary journey by the Dillons.

They, of course, spent most of their working lives successfully exporting live cattle to the Middle East - until the cutting of EU export refunds effectively wound down this trade.

They have now made a successful transition to processing beef and lamb.

The past few years have seen a big lift in throughput and efficiency at the company under general manager Sean Sean McNamara. It completed a new boning hall last year at a total cost of €2m. Prior to that, boning was carried out on contract. The operation buys most types of cattle, as well as ewes and lambs. It is now mostly involved in export of beef to the Continent, particularly to Sweden and Holland, with some wholesale in Ireland. It kills up to 3,500 ewes and lambs per week.

Moyvalley showed as good payers for cattle last year in the Department of Agriculture's official prices, as published weekly in the Farmers Journal - the company has been working to build up turnover and is located in what is a competitive area for cattle supplies.

The Dillons, meanwhile, operate a number of feedlots and the accounts show that they supplied cattle to a value of €2.9m to the plant in 2006, up from €1.3m in 2005.

Operating profit

Recent accounts show that Moyvalley has lifted turnover sharply while keeping a tight control of its operating costs and it is this that has allowed the company return to profit. In 2004, turnover was €23.7m and the company was loss making. Last year, 2006 turnover, was €73.8m and the company made a pretax profit of €794,355 (see table).

Turnover rose by €6.7m in 2006, while spending on raw materials (mostly livestock) rose by €6.1m. Gross profit rose by €0.6m, while gross profit margin rose to 3.7%, up from 3.1%. The company cut operating costs in 2006. The total of distribution and administration was €1.6m, down from €2.1m in 2005. As a result it had an operating profit in 2006 of just over €1m. This put it on a net profit margin of 1.5% which - while slim - is not untypical for the sector. Interest charges fell back to €261,788. After tax, the company had €716,084 to add to its balance sheet.

Liquidity lift

The return to profit in 2006 clearly means that all important liquidity has improved on the balance sheet. Short-term financial debt stood at €4.8m at year end, down from €5.7m the year before.

The bulk of this is accounted for by a bank overdraft and a debtor financing facility, both required to fund the high cash flow and working capital involved in a slaughter company. EBIT earnings covered interest payments 4.0 times.

Longer-term debt halved in 2006 and stood at €0.5m at year end, down from €1.1m. This total includes €200,000 of lending from the company's directors, down from €600,000 at the end of 2005. The then directors - the Dillons and Roger McCarrick - put in the loan in 2005 when the company was loss making and at the same time carrying out capital expenditure. McCarrick has now been repaid the €200,000 he lent the company.

Net current assets stood at €0.9m, up from €0.2m the year before. Shareholders' funds stood at €4.9m, up from €4.2m in the previous period.

The company employed a total of 85 in 2006, down from 91 in 2005. As a result total staff costs fell to €2.4m, down from €2.6m. The company has two subsidiaries, Moyvalley Meats Ltd and Moyvalley Meats Enterprises Ltd, both non-trading. In their report to the accounts, the directors state they are optimistic that the company will sustain the improvement in profitability and will trade profitably for the foreseeable future. "Generating productivity and efficiency improvements are ongoing objectives. The company will continue to improve its processes and cost management.'' A new office complex and staff canteen is now under construction.

Moyvalley Meat (Ireland) Ltd Profit and Loss Account

	2006	2005
Turnover	73,854,713	67,119,451
Cost of sales	(71,171,128)	(65,055,033)
Gross profit	2,683,585	2,064,418
Distribution	(1,088,691)	(1,486,532)
Administration	(538,751)	(628,272)
Operating profit (loss)	1,056,143	(50,386)
Interest	(261,788)	(295,613)
Pre tax profit	794,355	(345,999)
Tax	(78,271)	100,498
Retained profit	716,084	(245,501)