Carbery Group, the manufacturer of cheese, flavours and value-added ingredients owned by Bandon, Barryroe, Drinagh and Lisavaird co-operatives reported revenue of €700.8 million and operating profit of €26.4 million.
While turnover was substantially higher than previous years, operating profit was in line with the very steady level it has held for the past five years.
Ten million euro was added to the group’s milk stability fund in 2022, bringing the fund to support milk prices during adverse price movement periods to €19.86 million by the end of December.
This was achieved despite a 2% drop in milk volume to 598 million litres.
Carbery’s dairy business had a very strong year driven by soaring market prices amid strong global demand. It produced 63,000 tonnes of cheese during the year, with 12,000 tonnes of that being mozzarella.
Sports and infant nutrition continued to be growth areas for the group, along with an increased focus on the clinical nutrition sector.
The Taste division, Carbery’s non-dairy business, saw further expansion as the integration of Innova, which was acquired in 2021, with Synergy, was completed. Investments in research and development facilities and innovation programmes are showing a return, while the end of COVID-19 allowed for a major increase in customer visits.
On the environmental side, Carbery launched the FutureProof bonus for farmers who help meet the 25% emissions reduction target. In 2022, there was a 0.5 c/l bonus paid to suppliers who agreed to an Agricultural Sustainability Support and Advisory Programme water quality assessment.
This year, that bonus will rise to 1 c/l if farmers achieve an agreed Economic Breeding Index metric, complete four milk recordings and use protected urea.
The group continued to support research at Shinagh farm where emissions have been cut to 0.66 kg CO2 equivalent per Kg of fat and protein corrected milk, down from 0.84 in 2018. A visitor centre at Shinagh was opened in 2022.
There is an unusual one-time entry on Carbery’s books this year, which CEO Jason Hawkins puts down more to a mixture of planning and good luck than any great insight.
The group entered 2022 with a significant gas-price hedge (where they enter agreements to buy or sell gas at a certain level at a certain date in the future to avoid market volatility).
With the price of gas soaring and falling during the year, Carbery were in a position to make a fair value adjustment to the value of their gas hedging contracts of €12.4 million.
This writeback allowed for a healthier year-end financial position and meant the €10 million could be added to the milk stability fund without letting operating profit drop out of the very narrow band it has occupied for the past five years.
Interview with Jason Hawkins
When the Irish Farmers Journal sat down with Carbery CEO Jason Hawkins this week, he had just returned from a trip to Singapore where the group marked the official opening of the Carbery Group Asia Business and Innovation Centre in the city.
Jason is quick to point out that while the new Singapore office is mainly part of Carbery’s Taste division, it will also be there to support the broader business ambitions in the region.
“We’re in the middle of doing a new strategy this year, and where the business might evolve is selling nutrition and flavours as complementary products to offer customers a couple of solutions.”
Moving the focus back to Ireland, the burning question for every dairy farmer is where the milk price is going.
“I think [the price of milk] is trying to find a bottom right now. I think there is some downside from where the published prices are. But it’s week to week at the moment as we’re trying to find that bottom. In the last couple of weeks, we are just starting to see buyers come back in the market.
“I am optimistic about the longer term, towards the end of the year. Because supply and demand is so finely balanced, a reduction in supply or increase in demand can have a major effect. Right now, supply is increasing 1% globally, but that is probably not sustainable.
“I don’t see farmers here making long term decisions on production based around current milk prices. Historically, it is the larger production regions like US and Europe that react more quickly when margins become compressed.”
Carbery, however, is no longer expecting its own milk supply to increase by 2%-3% over the next five years.
“This year so far we are running around 1% behind where we were last year. We see supply holding flat at around 600 million litres. This slight change in forecast is seeing 60 million litres less than might previously have been seen by 2027. That’s not a material amount for the business.
“We, like most of the processors in the country now, are happy where we are with processing capacity. When it comes to investments at Ballineen, the next few years will concentrate on increasing energy efficiency.”
The comments on energy efficiency turned the conversation to environmental factors. Carbery’s annual report puts 75% of its emission inside the farm gate, through Scope 3.
“The Shinagh farm is our biggest bet in terms of working with our farmers to reach climate goals. The farm was originally set up to show that dairy farming can be profitable. In trying to reach climate goals it is important that profitability is maintained, which makes Shinagh a perfect test bed for ideas.
“We also support “early adopter” farmer suppliers who are learning from what we are doing at Shinagh with the idea being that they will bring it to a broader farmer set.
“The other side to our climate plan is the FutureProof. We have talked about a sustainability bonus for some years and selected four measures farmers can sign up to. Already this year 70% of our farmers have signed up to those four measures, which is very positive. On a group level, Carbery will announce science-based targets for its climate goals.
“Looking at the longer-term, I can see more of the milk price being paid to reward sustainable practices.”