The Irish Dairy Board reported an increase of 25% in earnings to €25.8 for 2013. Turnover increased 5% to €2.12bn. Profit before tax was up a solid 87% to €22.8m, an increase of over €10m. Ireland’s largest dairy exporter ended the year debt free, with €51.9m cash on hand.

The stronger balance sheet showed net assets increased by €12m to €417m. The group made a €2m contribution to the fodder crisis and the member bonus increased by 16% to €11m.

Overall volumes were marginally behind 2012, but when the Yoko cheese business (which was sold in 2012) is excluded, volumes increased 4.9%.

IDB also announced that it is to build a new €30m fully integrated butter production and packing facility with 50,000 tonnes capacity in Mitchelstown in Cork.

This dedicated plant, along with a new innovation centre, will drive cost efficiencies, product consistency and allow for flexibility in products and pack size. The IDB already runs one of the largest and most efficient butter plants in Germany. The project, with a lead time of about 18 months, will create 50 manufacturing jobs.

Commenting on the results, Kevin Lane, CEO of IDB said: “The results showed solid earnings growth across all divisions and enhanced product returns to our members.”

“During the year, four price increases were implemented in the Kerrygold brand in Germany. This shows the resilience of the brand to hold and grow market share while increasing prices,” he added.

The Kerrygold brand, with retail sales of €0.5bn globally, sold a record 350m packets worldwide. It remains the number one brand in Germany with a 17% market share and 55% branded share. In the UK, it had its highest market share in 20 years and held the number three position.

IDB had another year of strong cashflow, with net cash inflows of €41.8m, due to the strong management of working capital.

Between 2013 and 2014, the IDB will invest €70m in capital expenditure, including €21m in the UK and €13m in Germany.

Consumer foods

The group’s largest division, consumer foods, reported an increase in turnover of 6% to €806.7m. This was set against a backdrop of high input prices. Volumes increased 5%, with record volumes and market share achieved in Germany and the US.

This was on the back of significant investment of €36m in the brands in recent years, with €7m invested in 2013 alone.

The group brought over 80 new products to market during the year.

The group has also grown its presence on the ground in new markets, with new offices in Africa, Russia and China, and the Middle East.

Dairy trading and ingredients

Turnover in the dairy trading and ingredients division rose by 4% to €646.9m. This was driven by strong volume growth. Ireland and the US performed well, while the UK market remained challenged.

During the year, IDB’s subsidiary, Adams Foods, entered into a long-term partnership with First Milk, strengthening its position in cheese in the UK.

In 2013, IDB invested €20m in Saudi Arabia, which included the acquisition of a 75% interest in Al Wazeen Trading and the development of a new state-of-the-art cheese manufacturing plant.

This will be an important route to market post 2015.

DPI specialty foods

Turnover in the US speciality food distribution division was €670.5m, an increase of 4.2%. A significant amount of restructuring and cost reduction has occurred in recent years. Lane commented that as a non-core business, they would consider offloading it in the future, but are in no rush or no financial pressure to sell it.

Kevin Lane sees Africa as a big bet, with continued growth in sub Saharan Africa saying that “for us, Africa is Fonterra’s China”. However, he also commented that there is still growth in developed core markets, such as Germany and the US.

Commenting on the significant brand investment, Kevin Lane said “while brands chase the market on the up, when prices are rising, they lag it on the way down and this is when the real power of a brand comes into play”. He noted that even though there is a temptation for members to sell outside IDB when markets are high, purchases for the first three months of 2014 are up 30%.

He is very optimistic about 2014, saying “the company should have the ability to give superior return to members on the journey back down to more sustainable dairy prices due to the brand strength”.

Refinancing, which was completed post year end, extended the maturity to five years and increased the size of the reverse invoice discounting. This will allow for greater operational flexibility and strengthen the capital structure.

Built around lean and efficient operations, with a focus on driving added value, while expanding into new markets, the IDB strategy is very clear. The business, with no debt and significant cash to hand, coupled with a healthy balance sheet has the ability to continue to build a strong stable of brands and drive innovation.