Glanbia Ireland made an operating profit margin of 4.3% last year, delivering operating profits of €60m. A 1c increase in the milk price over the year would cost the processor over €25m, or 42% of profits. On average, Glanbia Ireland made an operating profit of 2c/l per year over the last five years. Over the same time period, it has processed 40% more milk or 740m litres more than in 2013. The Glanbia model has always been based on providing a fixed return to its parent shareholders. The new Glanbia Ireland slightly evolves this model, where 4% of profit before tax is returned.
Net debt is high at €287m, or 3.4 times earnings, but it did give off €85m in cash last year. Alongside this, the business has invested €353m in milk processing assets over the last five years. As the largest processor in the country and with the most invested, it should have the capacity to deliver.
Dairygold made operating profit margins of 3.4% last year and delivered operating profits of €32m. Every 1c increase in milk price costs the co-op €13m, or 40% of profits. On average, Dairygold made an operating profit of 2.3c/l per year over the last five years. This is at a time of significant expansion and investment to process 36% more milk.
Dairygold is now well invested and not overly borrowed. Its net debt at year end was €80m (similar to the amount recently invested in the Mallow campus). This leaves a debt:earnings ratio of 1.5 times. This is low, especially considering that €226m has been invested in the last five years. A further €17m was funded by farmers, which extends the net debt to earnings ratio to 1.8 times. This is still manageable given that the co-op generated €53m in cash last year. The Tina joint venture is an interesting model that does not tie up significant capital.
Lakeland made an operating profit margin of 2.2% last year, delivering an operating profit of €17m. A 1c milk price hike would cost the co-op €12m or 70% of profits. Based on 2017, this would leave the business with a thin €5m operating profit. On average, the co-op made an operating profit 1.4c/l each year over the last five years. Last year, Lakeland processed 66% more milk than five years ago – 25% up if Fane Valley (240m litres) acquisition is excluded. Lakeland had net debt at year end of almost €60m with a debt to earnings ratio of 1.8 times. It does not have any farmer funded debt. In the last five years it has invested €132m including €13m for Fane Valley. The LacPatrick deal would bring another 600m litres of milk, well invested processing facilities along with additional debt of some €35m. Lakeland looks in a good position to fund this based on cash generated last year of €33m.
Carbery made an operating profit margin of 6.1% last year, which delivered operating profits of €25.5m for the year. A 1c increase in milk price would cost the co-op €5m, or 20% of profits. Last year, the business also put aside €10m or 2c/l to support prices in the future. On average, the co-op made an operating profit of 4c/l each year over the last five years. Last year, Carbery processed 31% more milk than five years ago at its Ballineen factory.
Carbery had net debt at year end of almost €13m. This leaves the co-op quite lowly borrowed, with a net debt to earnings ratio of only 0.3 times. Carbery has invested €80m over the last five years across its global operations including its US flavours and ingredients business – Synergy. Carbery has plenty of capacity to invest – whether value add or future-proofing its cheese business given the Brexit threat.
Aurivo made an operating profit margin of 0.1% last year which delivered operating profits of almost €4m. A 1c increase in milk price would cost €4m or 100% of profits.
While margins are low, marts and agribusiness account for almost half of turnover. Despite contributing to the bottom line and a valuable service to farmers, they drag overall performance. On average, the co-op made an operating profit of 1.2c each year over the last five years. Last year, Aurivo processed 16% more milk than in 2013.
Year-end net debt was a low €5.7m or 0.6 times earnings. It has invested €56m over the last five years, with €40m relating to the acquisition of sports nutrition business – My Goodness Shakes. As there is no visibility of underlying performance in this business, it is difficult to see the return on capital. Aurivo will also need to invest in capacity in the near future.
Arrabawn made an operating profit margin of 1.9% last year, which delivered profits of €4.7m for the year.
A 1c increase in the milk price would cost €3.8m, or 80% of profits.
The co-op made an average operating profit of 1.1c each year over the last five years. Last year, Arrabawn processed 33% more milk than in 2013.
Year-end net debt was €16.4m but around €3m of this related to stocks. This has increased net debt to (a still manageable) 1.6 times earnings following a €31m investment in the business in the last five years. While it has a well-invested liquid milk business, it does need to invest in its Nenagh site as it is at capacity.
There is strength in the balance sheet to borrow but profit margins are thin and the return would be need to be adding to the milk price.
Tipperary co-op made an operating profit margin of 1.4% last year, which delivered operating profits of €3m. A 1c increase in the milk price would cost almost €3m, or 100% of profits. The co-op made an average operating profit of 0.9c/l each year over the last five years. Last year, Tipperary processed 31% more milk than in 2013.
Year-end net debt was €17m and was 2.3 times earnings. While this appears high, it all relates to working capital as the co-op has no long-term debt. The co-op has invested €20.5m over the last five years including investing in its French subsidiary, Tippagral. It is now investing a significant €30m in a new dryer in Tipperary. While it has the balance sheet strength, with no long-term borrowings, this is a thin-margin business that is throwing off around €7m per year in cash.
LacPatrick is omitted due to no financial figures for 2017 and it was only formed in the last quarter of 2015.Kerry Group is omitted as it does not segment the financials for its milk processing business. Read more
Empire fate building: Ireland's dairy industry
Milk price review: Lisavaird holds top spot for 2017
Milk price review: ranking tweaked when compared on milk solids
Milk price review: share-up differs between processors
Milk price review: big jump in milk prices for 2017
Glanbia Ireland made an operating profit margin of 4.3% last year, delivering operating profits of €60m. A 1c increase in the milk price over the year would cost the processor over €25m, or 42% of profits. On average, Glanbia Ireland made an operating profit of 2c/l per year over the last five years. Over the same time period, it has processed 40% more milk or 740m litres more than in 2013. The Glanbia model has always been based on providing a fixed return to its parent shareholders. The new Glanbia Ireland slightly evolves this model, where 4% of profit before tax is returned.
Net debt is high at €287m, or 3.4 times earnings, but it did give off €85m in cash last year. Alongside this, the business has invested €353m in milk processing assets over the last five years. As the largest processor in the country and with the most invested, it should have the capacity to deliver.
Dairygold made operating profit margins of 3.4% last year and delivered operating profits of €32m. Every 1c increase in milk price costs the co-op €13m, or 40% of profits. On average, Dairygold made an operating profit of 2.3c/l per year over the last five years. This is at a time of significant expansion and investment to process 36% more milk.
Dairygold is now well invested and not overly borrowed. Its net debt at year end was €80m (similar to the amount recently invested in the Mallow campus). This leaves a debt:earnings ratio of 1.5 times. This is low, especially considering that €226m has been invested in the last five years. A further €17m was funded by farmers, which extends the net debt to earnings ratio to 1.8 times. This is still manageable given that the co-op generated €53m in cash last year. The Tina joint venture is an interesting model that does not tie up significant capital.
Lakeland made an operating profit margin of 2.2% last year, delivering an operating profit of €17m. A 1c milk price hike would cost the co-op €12m or 70% of profits. Based on 2017, this would leave the business with a thin €5m operating profit. On average, the co-op made an operating profit 1.4c/l each year over the last five years. Last year, Lakeland processed 66% more milk than five years ago – 25% up if Fane Valley (240m litres) acquisition is excluded. Lakeland had net debt at year end of almost €60m with a debt to earnings ratio of 1.8 times. It does not have any farmer funded debt. In the last five years it has invested €132m including €13m for Fane Valley. The LacPatrick deal would bring another 600m litres of milk, well invested processing facilities along with additional debt of some €35m. Lakeland looks in a good position to fund this based on cash generated last year of €33m.
Carbery made an operating profit margin of 6.1% last year, which delivered operating profits of €25.5m for the year. A 1c increase in milk price would cost the co-op €5m, or 20% of profits. Last year, the business also put aside €10m or 2c/l to support prices in the future. On average, the co-op made an operating profit of 4c/l each year over the last five years. Last year, Carbery processed 31% more milk than five years ago at its Ballineen factory.
Carbery had net debt at year end of almost €13m. This leaves the co-op quite lowly borrowed, with a net debt to earnings ratio of only 0.3 times. Carbery has invested €80m over the last five years across its global operations including its US flavours and ingredients business – Synergy. Carbery has plenty of capacity to invest – whether value add or future-proofing its cheese business given the Brexit threat.
Aurivo made an operating profit margin of 0.1% last year which delivered operating profits of almost €4m. A 1c increase in milk price would cost €4m or 100% of profits.
While margins are low, marts and agribusiness account for almost half of turnover. Despite contributing to the bottom line and a valuable service to farmers, they drag overall performance. On average, the co-op made an operating profit of 1.2c each year over the last five years. Last year, Aurivo processed 16% more milk than in 2013.
Year-end net debt was a low €5.7m or 0.6 times earnings. It has invested €56m over the last five years, with €40m relating to the acquisition of sports nutrition business – My Goodness Shakes. As there is no visibility of underlying performance in this business, it is difficult to see the return on capital. Aurivo will also need to invest in capacity in the near future.
Arrabawn made an operating profit margin of 1.9% last year, which delivered profits of €4.7m for the year.
A 1c increase in the milk price would cost €3.8m, or 80% of profits.
The co-op made an average operating profit of 1.1c each year over the last five years. Last year, Arrabawn processed 33% more milk than in 2013.
Year-end net debt was €16.4m but around €3m of this related to stocks. This has increased net debt to (a still manageable) 1.6 times earnings following a €31m investment in the business in the last five years. While it has a well-invested liquid milk business, it does need to invest in its Nenagh site as it is at capacity.
There is strength in the balance sheet to borrow but profit margins are thin and the return would be need to be adding to the milk price.
Tipperary co-op made an operating profit margin of 1.4% last year, which delivered operating profits of €3m. A 1c increase in the milk price would cost almost €3m, or 100% of profits. The co-op made an average operating profit of 0.9c/l each year over the last five years. Last year, Tipperary processed 31% more milk than in 2013.
Year-end net debt was €17m and was 2.3 times earnings. While this appears high, it all relates to working capital as the co-op has no long-term debt. The co-op has invested €20.5m over the last five years including investing in its French subsidiary, Tippagral. It is now investing a significant €30m in a new dryer in Tipperary. While it has the balance sheet strength, with no long-term borrowings, this is a thin-margin business that is throwing off around €7m per year in cash.
LacPatrick is omitted due to no financial figures for 2017 and it was only formed in the last quarter of 2015.Kerry Group is omitted as it does not segment the financials for its milk processing business. Read more
Empire fate building: Ireland's dairy industry
Milk price review: Lisavaird holds top spot for 2017
Milk price review: ranking tweaked when compared on milk solids
Milk price review: share-up differs between processors
Milk price review: big jump in milk prices for 2017
This is a subscriber-only article
SHARING OPTIONS: