Published accounts for the year ended 30 September 2015 for companies owned by Fane Valley Co-operative Society Limited highlight the extent to which the downturn in dairy markets has impacted the overall business.

Turnover at Fane Valley’s Armaghdown Creameries in Banbridge fell from £106.28m in 2014 to £67.67m in 2015, with the company reporting that milk powder sales fell dramatically in the fourth quarter of the year, forcing it to write down the value of stock. That resulted in an operating loss for the year recorded at £8.49m, compared to a loss of £1.45m in the year previously. In 2013 and 2012 the company had operating profits of around £1m.

To support Armaghdown during the year, Fane Valley put in an intercompany loan. In September 2015 the decision was taken to waive repayment of this loan (a balance of just over £8m), resulting in a gain to the profit and loss account, and an overall pre-tax loss of just £443,094.

In the accounts to September 2015 the directors note that the financial position at the year-end was “disappointing”. At the time the company was also engaged in talks with Lakeland Dairies Co-op to form a joint venture across their respective dairy businesses. However, by May 2016 this joint venture had turned into an outright sale of the Armaghdown business to Lakeland.

Compared to the dairy business, other Fane Valley operations performed more strongly to September 2015. The co-op is the major shareholder in Linden Foods Ltd, which has a meat processing site in Dungannon, an operation in England, and a joint venture with Slaney Foods in the Republic of Ireland.

Total turnover to September 2015 was £308.2m (including the joint venture), down from £336.4m in 2014. However, pre-tax profit was up from £6,000 in 2014 to £2.2m to September 2015, although net debt increased from £18.88m to £20.07m in 2015.

The directors report that financial results continue to be affected by a difficult economic climate within the meat industry. “The continued weaker consumer confidence in meat products along with a shortage of supermarket specified livestock caused gross margins to be squeezed during the year,” states the report.

Lower prices also impacted on the Fane Valley Feeds business to 30 September 2015, with turnover down from £65.87m to £57.75m, however, gross profit margin remained steady at 10%, resulting in a pre-tax profit of £1.95m, up from £1.56m in 2014.

The store business is also profitable, with turnover down slightly to £22.94m, but pre-tax profit more than doubling to £869,707. However, performance at the Fane Valley oats processing business (Whites Speedicook Ltd) remains more challenging. While turnover increased slightly to just over £10m, the business recorded a pre-tax loss of £526,755 to the end of September 2015 compared to a pre-tax profit of £158,381 in the previous year.