The bad news keeps on coming for troubled dairy co-operative First Milk and its 1,200 or so suppliers that own 100% of the co-op.

Last week, the company’s newly appointed chief executive Mike Gallacher confirmed the business had accumulated losses of £22m (€31m) for the 2014/15 financial year.

Gallacher said the losses reflect the difficult market conditions coupled with a poor operational performance from the business in a year that First Milk paid out a higher milk price to farmers than was received in commercial returns

As a result, Gallacher announced a turnaround programme for First Milk and held farmer member meetings all across the UK to outline his plan.

The turnaround plan includes cost reductions, a much smaller central team, the establishment of a business unit structure and a refocus on the core businesses.

Gallacher said that he had shared a “frank assessment” of the business during his meetings with farmer members.

“Member milk prices must be consistent with our commercial income. We will only pay out what we get in,” said Gallacher.

The first phase of Gallacher’s turnaround plan was unveiled this week as First Milk announced a 1p per litre reduction in the milk price from the 1st July. This will come as a blow to many British farmers as it means many suppliers of First Milk will receive well under 20p/litre once capital contributions are taken off.

At the same time, the company announced that Sir Jim Paice will be stepping down as chairman of the board. In a letter to suppliers, Paice said the company needs board members with “real commercial and business skills.”

Paice, a previous Minister for State at the Department of Environment, Food and Rural Affairs, had been criticised for taking a £90,000 a year salary for 50 days work sitting on the board as chairman of First Milk, particularly as the business was going through such difficult times.