2013 was another successful year for Carbery with the group reporting profit before tax of €13m, up 23% on 2012. This was achieved against a backdrop of 12% growth in revenues to €318.3m. Turnover growth was underpinned by growth in the cheese and ingredients division.

Carbery Group CEO Dan MacSweeney said all dairy-related activities recorded solid performance, driven by improved markets alongside organic growth in the Synergy business. Earnings before interest, tax, depreciation and amortization (EBITDA) increased by 2.3% to €25.9m last year. The performance was recorded after declaring a year-end bonus of 0.5c per litre on all milk supplied.

The contribution from profits in joint ventures reduced due to set-up costs that are still in development mode in relation to the JV with BRF in Brazil.

The group’s net debt position at year end reduced by €2.6m to €40.3m. Net debt to EBITDA for the year was 1.6 times. The group spent €12.7m on capital expenditure covering projects in Ireland and in the Synergy activities in the Americas, UK and SEA.

Carbery dairy

With exclusive rights to produce the Dubliner brand, cheese accounts for 90% of its milk supply pool. The group is investing €6m in cheese-making facilities at its West Cork facility.

This division was challenged during the first half of 2013, where cheese is always slower to react to price changes compared with other dairy commodities. This is mainly due to the longer-term nature of the contracts. Dan MacSweeney said this situation improved, particularly in the third quarter.

Despite the challenge posed by the poorer cheese market for much of the year, Carbery and its four shareholder co-ops, Bandon, Barryroe, Drinagh and Lisavaird, continued to pay Ireland’s leading milk price during 2013.

Commenting on how much extra milk will be produced post-quotas, he said that although it is difficult to predict as farmers fine-tune their expansion plans, the group expects farmers to increase supply by between 30-40% over the next few years.

Carbery food ingredients

Its Irish based nutritional ingredients business had another strong year, with products including whey, functional ingredients and sports foods. Investment in R&D around hydrolysis technology resulted in new products targeting infant formula and clinical nutrition being brought to market.

Flavours business Synergy had another robust year, with business continuing to see strong organic growth and delivering good margins. The leading manufacturer of flavours, yeast extracts and seasoning opened its new flavours facility in Illinois, USA. This facility was commissioned in late 2013 and integrates three of the existing Synergy sites in the US.

The group, with growth ambitions in the Asian market, commissioned a new flavour production facility in Thailand during the year. MacSweeney said: “The investment is part of our strategy to further expand our presence and capabilities in South East Asia, which has tremendous potential because of its rapidly expanding population and increasing wealth.”

Carbery, along with its partner Brazil Foods, has invested €40m to process whey in Brazil and will commission this facility in 2014. MacSweeney said: “This joint venture gives us access to large volumes of fresh whey which we will convert into valuable nutritional ingredients, using Carbery’s expertise, for the rapidly expanding Latin American market.”

Carbery sports nutrition brand, Kinetica continues its growth in the Irish market and gained market share in Britain.

Milk price outlook:

Commenting on the milk price for the coming year, Dan MacSweeney said: “Dairy markets have come off quite a bit in the past month. Prices for product have reduced in Europe and on the GDT. Strong milk flows in most of the milk producing regions across the world have started to build stock and this has put pressure on prices.” He concludes that the continuation of the strong demand from China is key to the health of the dairy market.

COMMENT

Carbery is well-positioned for a smooth-transition post-quota with infrastructure in place to process the extra volume. Carbery’s dairy and nutritional ingredients businesses continue to benefit from having very modern and efficient manufacturing facilities at Ballineen. With a €6m investment in new cheese vats currently under way, this will ensure the group remains highly efficient.

Carbery continues to work with the IDB and this allows the group focus on adding value to all operating activities while driving efficiencies at processing level.

The Synergy business has now grown to be a significant part of the overall group, and the most recent acquisitions are bedding in well. The focus now will be on growing the enlarged business.