Tipperary co-op has reported pre-tax profits of €2.33m for its 2016 financial year, which is almost double (+89%) compared to the previous year’s profits. Sales for the year were back 2% to €171.5m, reflecting weaker prices for dairy commodities.

The dairy co-op based in Tipperary town reported operating profits of €3.3m, which was a 67% increase over the previous year. Profit margins in the business improved 80 basis points to 1.9% following cost reduction over previous years and strategic investment in new markets last year.

Tipperary co-op paid an average milk price of 26.8c/litre in 2016 as well as paying out a year-end bonus of 0.6c/l to farmer suppliers at a total cost of close to €1m.

Milk collections from the 390 dairy farmers supplying Tipperary increased 7% in 2016 to more than 151m litres. The total volume of milk processed by Tipperary co-op, which includes milk processed on behalf of neighbouring processors including Kerry and Glanbia, actually declined 4% to less than 295m litres as less milk was brought in from outside for further processing.

Tipperary chief executive John Daly, who took over from the retiring Ted O’Connor in January 2017, said the co-op had invested in additional capacity to allow farmer suppliers expand post-quotas. However, despite recent investments, Daly said the co-op will be looking towards further capacity expansion as early as 2019.

Capital expenditure by Tipperary for 2016 exceeded €7m as the co-op finalised the expansion and modernisation of its Tippagral site in Dijon, France, which cost a total of €4m. According to Daly, the Tippagral business had another “exceptional” year and continues to perform strongly for the co-op.

Tipperary increased butter production by 6% in 2016 to 13,250t, all of which is sold through Ornua. The co-op produced more than 8,000t of cheese, while milk powder production was flat at 13,815t. On the current price of butter, Daly described the market as unsustainable.

“You could get over €6,000/t for butter today which is not sustainable. Those sort of prices are not real. We sell our butter through Ornua and its branded sales of Kerrygold will generate a more sustainable return over the longer term,” said Daly.