Global food giant Nestlé continues to reap significant cash dividends from its Irish infant formula subsidiary, known as Wyeth Nutritionals Ireland. Accounts seen by the Irish Farmers Journal show Nestlé has extracted close to €1.3bn in dividends from Wyeth Nutritionals Ireland since it first acquired the business in 2012 (Figure 1).
The latest accounts for Wyeth Ireland show the company paid a dividend of almost €67m to its parent company, Nestlé SA, for 2019, which was an increase on the €35m dividend paid a year previous. By far the most significant dividend transfer took place in 2017, when Wyeth Ireland paid its parent company a dividend of almost €1bn.
As widely reported by the Irish Farmers Journal in recent years, infant formula giants like Nestlé (Wyeth) and Danone have made huge profits over the last decade from the lucrative infant formula sector with eye-watering profit margins reaching as high as 40% at times.
In recent years, both Nestlé and Danone have taken steps to reduce visibility into their Irish operations.
Contract manufacturing
The accounts filed by Wyeth Nutritionals Ireland show the company made operating profits of close to €22m last year, which equates to a profit margin of just 6.5%. However, the reality is that Wyeth Ireland has effectively become a contract manufacturing business for Nestlé and earns a fixed profit margin to conceal the true earnings of the business.
Overall, the accounts for Wyeth Nutritionals Ireland show the company reported a 22% fall in sales last year to just under €333m.
The company said sales volumes to China had actually increased and attributed the fall in turnover to changes in the financial and supply flows within the Nestlé group.
Wyeth Nutritionals Ireland manufactures more than 40,000t of high-grade infant formula powders and ready-to-feed liquids every year at its Askeaton plant in Co Limerick, including its flagship Illuma brand of baby formula.
Most of the infant formula made and packaged in Askeaton is destined for lucrative markets in the Middle East and Asia, including China, which is the world’s largest baby formula market valued at more than €20bn last year.
The Askeaton facility is believed to use between 15,000t and 20,000t of dairy ingredients every year and is an important customer for the Irish dairy industry sourcing ingredients from a number of Irish dairy co-ops including Dairygold, Glanbia, Tipperary Co-op and Arrabawn.
Earlier this year, Wyeth Nutritionals announced it was seeking redundancies at its infant formula plant in Askeaton, Co Limerick.
The company employs around 650 people at the Askeaton plant but said it plans to reorganise operations at the facility. The accounts for Wyeth Ireland show the average salary in the plant is over €100,000.