Carbery
Despite processing 13% more milk (450m litres), operating profits fell 39% to €25.5m. This business made 5.7c/l profit last year. Turnover increased 10% to €349.5m driven by its international ingredients and flavours business. Margins increased from 5.8% to 7.3%.
It also reduced year-end net debt by 20% (€6.7m) to €27.8m and created a €5m stability fund during the year. A further €20m was invested in bringing the total capital expenditure to €70m over the last five years. Even though the net debt level is 6.2c/l, it is driven by its non-processing investments (Synergy). Net debt is low at less than one year’s earnings (0.8 times).
Given where the west Cork co-ops are placed with milk price, this is an excellent performance in 2015. Debt was paid down, high margins maintained, and significant capital investment made (albeit in non-processing) which will help drive performance in the future.
GII
Operating profits increased 10.4% to €38.6m as GII processed 18% more milk (2,030m litres) in 2015. Turnover decreased 3.2% to €870.9m, while margins increased from 3.9% to a respectable 4.5%, giving an operating profit per litre of 1.9c.
The business has invested €235m to handle the extra milk. Due to the unique Glanbia model, farmers have not been required to share up or fund this. Net debt is high at 11.3c/l and increased 33% (€56.8m) to €228.7m, mainly because of increased working capital. A further €58m was spent on capital during the year. Earnings will need to be maintained given this debt level, where net debt to earnings is 4.5 times.
Overall, GII has performed well – it is very well invested, the milk price paid (1.7c/l supported by the co-op) places it high in the rankings and innovative measures such as fixed milk prices schemes, flexible capital finance (MilkFlex) and advanced payments to farmers (GAP) add to the overall package – assuming farmers require them. Not to mention other dividends and co-op shareholder value increases.
Tipperary
Operating profits fell 22% to €1.95m at Tipperary, despite processing 24% more milk (304m litres). Turnover decreased 8% to €175.7m, which saw operating margins reduce from 1.3% to 1.1%. Based on milk processed, operating profits were a low 0.4c/l as the co-op supported prices and invested in capital.
It had capital expenditure of €6.3m in 2015, which saw net debt at year end increase to €14m. Net debt is high at 3.2 times earnings but manageable when looked on a cents per litre of milk basis (3.1c/l).
Its French business is boosting performance and last year resulted in suppliers receiving a year-end bonus of 0.6c/l. The 50% of supply coming from other processors also drives efficiencies. The relatively low debt levels allow it to keep margins tight in favour of milk price in times of weak markets.
Dairygold
Operating profits decreased 33% to €19.2m (1.7c/l) which saw operating margins reduce from 3.4% but still remain solid at 2.5%. Turnover was down 8% to €784.9m.
Last year it had capital expenditure of €50.9m. Net debt at year end was 8c/l and increased 34% (€24.6m) to €96.2m as a result of increased working capital and the investment in stainless steel. This had the effect where the net debt to earnings at year end rose to 2.3 times, which while manageable must be seen in the context of the facilities now in place.
With one of the highest growth rates at 19% or 182m extra litres processed last year, Dairygold’s performance has been solid considering its disproportionately high €214m investment programme to ready for this expansion in supply. No doubt expansion and supports burn cash and, while funding from farmers has helped, debt levels have increased, but the co-op now has a highly invested processing facility in place for the long term.
Arrabawn
Arrabawn processed 15% more milk (353m litres) in 2015. Operating profits decreased 52% to €2.1m and, based on volume of milk processed, were a thin 0.6c/l. Turnover was down 4% to €205.1m, which led to operating margins falling from 2.1% to 1%.
The co-op invested a further €9m in capital last year, which led to an increase in net debt at year end of €6.5m to €15.8m. Even though net debt at year end per litre is low (4c/l), net debt to earnings is relatively high, but manageable, at 2.5 times.
Even though liquid milk coupled with strong butter markets helped boost performance last year, this remains a very tight business. However, it is now well invested with plenty of spare capacity. This may not help debt levels when compared to earnings and the challenge will be to sweat the assets, increase margins and add value to move the milk price up.
Aurivo
Operating profits reduced 55% to €3.03m at Aurivo, as turnover dropped 6% to €419.9m. Operating margins reduced from 1.4% to 0.7%, giving it an operating profit level of 0.7c/l based on the 411m litres processed, up 12% on 2014.
€2.7m was invested in capital during the year. Net debt at year end increased €7m to €8.6m, giving a low net debt to earnings ratio of 0.9 times.
However, with the acquisitions of the sports nutrition brand My Goodness last year for €40m (€23m deferred until 2016), net debt will increase. Given that this is a high growth business with high earnings, even though debt will go up, net debt should increase to only around three times earnings at year end.
In summary, farmers need to focus on the long term at Aurivo as My Goodness has the potential to be transformative. As capacity is not an immediate concern, the debt this business brings should not be an issue as it has strong earnings potential which in the future could lead to higher prices at the co-op.
Lakeland
Lakeland processed 13% more milk last year, and saw operating profits increase 22% to €15.5m driven by its food service and ingredients businesses. Despite turnover falling 6% to €588.5m, operating margins increased from 2% to 2.6%. This delivered a solid operating profit level of 1.7c/l based on 900m litres processed.
The co-op has invested €100m in the past five years which included a new drier and a logistics centre. Last year, Lakeland had capital expenditure of €43m. Despite net debt increasing €10m to €48m at year end, it is manageable at 1.9 times earnings. It has a net debt level of 5.4c/l.
The overall investment to date has been significant and must be taken into account when considering the milk price. It is also important to recognise that it did not ask its suppliers to share-up or fund growth. With the acquisition of the Fane Valley dairy business, this will bring the milk pool close to 1.2bn litres and will see an increasing supply of milk coming from the North.
LacPatrick
LacPatrick was formed in September 2015 as the merger of two separate co-ops, Town of Monaghan and Ballyrashane Creamery, so there is no individual financial annual data for Town of Monaghan for 2015. To try give some context relative to other processors, we have combined the figures (as if the merger was in place for the period). As the annual report for LacPatrick is not yet released, the below are draft.
LacPatrick processed 23% more milk in 2015 at 571.6m litres. Turnover decreased 18% to €254.3m. Net debt at year end for LacPatrick was €10.9m, while the net asset value was €82.8m. The co-op is currently investing €40m spray drying plant at Artigarvan.
Kerry Group plc
As the processing arm of Kerry is part of the Kerry Group, no individual numbers are made public around the milk processing division of Kerry. Milk supplies increased 8.9% to 1.08bn litres.
Kerry Group plc reported a 10% increase in trading profits to €700m for its 2015 financial year. This was driven by lower raw material prices along with greater efficiencies, an improved product mix and a repositioned consumer foods business.
Trading margins increased 40 basis points to 11.5%. Kerry’s operating profit for the year grew by 10.5% to more than €672m, while pre-tax profits increased 8.5% to almost €603m.
Revenues for the 12 months grew by more than 6% to €6.1bn, while adjusted earnings (EPS) grew by 8.2% to 301.9c.
At year end, Kerry Group’s net debt stood at more than €1.65bn, a jump of almost 38% year-on-year, reflecting a year of significant spending from the group. Kerry spent almost €1bn on acquisitions last year with €650m alone spent on three US companies in the autumn.
Kerry is to pay a final dividend per share of 35c, while the total dividend for the year rose by 11.1% to 50c.
Read more
Milk price review: what it means
Milk price review: the share-ups
Milk solids the key driver for farmers
Carbery
Despite processing 13% more milk (450m litres), operating profits fell 39% to €25.5m. This business made 5.7c/l profit last year. Turnover increased 10% to €349.5m driven by its international ingredients and flavours business. Margins increased from 5.8% to 7.3%.
It also reduced year-end net debt by 20% (€6.7m) to €27.8m and created a €5m stability fund during the year. A further €20m was invested in bringing the total capital expenditure to €70m over the last five years. Even though the net debt level is 6.2c/l, it is driven by its non-processing investments (Synergy). Net debt is low at less than one year’s earnings (0.8 times).
Given where the west Cork co-ops are placed with milk price, this is an excellent performance in 2015. Debt was paid down, high margins maintained, and significant capital investment made (albeit in non-processing) which will help drive performance in the future.
GII
Operating profits increased 10.4% to €38.6m as GII processed 18% more milk (2,030m litres) in 2015. Turnover decreased 3.2% to €870.9m, while margins increased from 3.9% to a respectable 4.5%, giving an operating profit per litre of 1.9c.
The business has invested €235m to handle the extra milk. Due to the unique Glanbia model, farmers have not been required to share up or fund this. Net debt is high at 11.3c/l and increased 33% (€56.8m) to €228.7m, mainly because of increased working capital. A further €58m was spent on capital during the year. Earnings will need to be maintained given this debt level, where net debt to earnings is 4.5 times.
Overall, GII has performed well – it is very well invested, the milk price paid (1.7c/l supported by the co-op) places it high in the rankings and innovative measures such as fixed milk prices schemes, flexible capital finance (MilkFlex) and advanced payments to farmers (GAP) add to the overall package – assuming farmers require them. Not to mention other dividends and co-op shareholder value increases.
Tipperary
Operating profits fell 22% to €1.95m at Tipperary, despite processing 24% more milk (304m litres). Turnover decreased 8% to €175.7m, which saw operating margins reduce from 1.3% to 1.1%. Based on milk processed, operating profits were a low 0.4c/l as the co-op supported prices and invested in capital.
It had capital expenditure of €6.3m in 2015, which saw net debt at year end increase to €14m. Net debt is high at 3.2 times earnings but manageable when looked on a cents per litre of milk basis (3.1c/l).
Its French business is boosting performance and last year resulted in suppliers receiving a year-end bonus of 0.6c/l. The 50% of supply coming from other processors also drives efficiencies. The relatively low debt levels allow it to keep margins tight in favour of milk price in times of weak markets.
Dairygold
Operating profits decreased 33% to €19.2m (1.7c/l) which saw operating margins reduce from 3.4% but still remain solid at 2.5%. Turnover was down 8% to €784.9m.
Last year it had capital expenditure of €50.9m. Net debt at year end was 8c/l and increased 34% (€24.6m) to €96.2m as a result of increased working capital and the investment in stainless steel. This had the effect where the net debt to earnings at year end rose to 2.3 times, which while manageable must be seen in the context of the facilities now in place.
With one of the highest growth rates at 19% or 182m extra litres processed last year, Dairygold’s performance has been solid considering its disproportionately high €214m investment programme to ready for this expansion in supply. No doubt expansion and supports burn cash and, while funding from farmers has helped, debt levels have increased, but the co-op now has a highly invested processing facility in place for the long term.
Arrabawn
Arrabawn processed 15% more milk (353m litres) in 2015. Operating profits decreased 52% to €2.1m and, based on volume of milk processed, were a thin 0.6c/l. Turnover was down 4% to €205.1m, which led to operating margins falling from 2.1% to 1%.
The co-op invested a further €9m in capital last year, which led to an increase in net debt at year end of €6.5m to €15.8m. Even though net debt at year end per litre is low (4c/l), net debt to earnings is relatively high, but manageable, at 2.5 times.
Even though liquid milk coupled with strong butter markets helped boost performance last year, this remains a very tight business. However, it is now well invested with plenty of spare capacity. This may not help debt levels when compared to earnings and the challenge will be to sweat the assets, increase margins and add value to move the milk price up.
Aurivo
Operating profits reduced 55% to €3.03m at Aurivo, as turnover dropped 6% to €419.9m. Operating margins reduced from 1.4% to 0.7%, giving it an operating profit level of 0.7c/l based on the 411m litres processed, up 12% on 2014.
€2.7m was invested in capital during the year. Net debt at year end increased €7m to €8.6m, giving a low net debt to earnings ratio of 0.9 times.
However, with the acquisitions of the sports nutrition brand My Goodness last year for €40m (€23m deferred until 2016), net debt will increase. Given that this is a high growth business with high earnings, even though debt will go up, net debt should increase to only around three times earnings at year end.
In summary, farmers need to focus on the long term at Aurivo as My Goodness has the potential to be transformative. As capacity is not an immediate concern, the debt this business brings should not be an issue as it has strong earnings potential which in the future could lead to higher prices at the co-op.
Lakeland
Lakeland processed 13% more milk last year, and saw operating profits increase 22% to €15.5m driven by its food service and ingredients businesses. Despite turnover falling 6% to €588.5m, operating margins increased from 2% to 2.6%. This delivered a solid operating profit level of 1.7c/l based on 900m litres processed.
The co-op has invested €100m in the past five years which included a new drier and a logistics centre. Last year, Lakeland had capital expenditure of €43m. Despite net debt increasing €10m to €48m at year end, it is manageable at 1.9 times earnings. It has a net debt level of 5.4c/l.
The overall investment to date has been significant and must be taken into account when considering the milk price. It is also important to recognise that it did not ask its suppliers to share-up or fund growth. With the acquisition of the Fane Valley dairy business, this will bring the milk pool close to 1.2bn litres and will see an increasing supply of milk coming from the North.
LacPatrick
LacPatrick was formed in September 2015 as the merger of two separate co-ops, Town of Monaghan and Ballyrashane Creamery, so there is no individual financial annual data for Town of Monaghan for 2015. To try give some context relative to other processors, we have combined the figures (as if the merger was in place for the period). As the annual report for LacPatrick is not yet released, the below are draft.
LacPatrick processed 23% more milk in 2015 at 571.6m litres. Turnover decreased 18% to €254.3m. Net debt at year end for LacPatrick was €10.9m, while the net asset value was €82.8m. The co-op is currently investing €40m spray drying plant at Artigarvan.
Kerry Group plc
As the processing arm of Kerry is part of the Kerry Group, no individual numbers are made public around the milk processing division of Kerry. Milk supplies increased 8.9% to 1.08bn litres.
Kerry Group plc reported a 10% increase in trading profits to €700m for its 2015 financial year. This was driven by lower raw material prices along with greater efficiencies, an improved product mix and a repositioned consumer foods business.
Trading margins increased 40 basis points to 11.5%. Kerry’s operating profit for the year grew by 10.5% to more than €672m, while pre-tax profits increased 8.5% to almost €603m.
Revenues for the 12 months grew by more than 6% to €6.1bn, while adjusted earnings (EPS) grew by 8.2% to 301.9c.
At year end, Kerry Group’s net debt stood at more than €1.65bn, a jump of almost 38% year-on-year, reflecting a year of significant spending from the group. Kerry spent almost €1bn on acquisitions last year with €650m alone spent on three US companies in the autumn.
Kerry is to pay a final dividend per share of 35c, while the total dividend for the year rose by 11.1% to 50c.
Read more
Milk price review: what it means
Milk price review: the share-ups
Milk solids the key driver for farmers
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