Operating profits slumped 22% to €670,044 due to an enhanced trading bonus of €1.1m paid to its farmers.

Lisavaird Co-op generated record sales of €60.7m for the year ending 31 December 2012, but core operating profits fell 22% last year, reflecting higher energy and input costs which lead to margin erosion across the group.

However, when Lisavaird’s share of Carbery’s profits are included, overall group profits increased by 25% to €3.3m.

While Carbery’s profits are reflected on the co-op’s profit and loss account and balance sheet, these profits are retained by Carbery as they develop their respective business, therefore, such paper profits should not be mistaken for cash.

Carbery had a very good year in 2012, as previously reported in the Irish Farmers Journal.

However, Lisavaird CEO Pat Moriarty explained 2013 will be a more challenging year for Carbery and the four associated west Cork co-ops, which process 90% of its milk into cheese, as dairy commodities prices have surged ahead this year compared to cheese prices, which traditionally are slower to reflect price movements.

The vast majority of the co-op’s debt of approximately €4m relates to their property investments in Germany (Frankfurt).

According to Pat Moriarty: “The rental income from these properties are fully servicing these debts.”

Otherwise, the co-op’s core activities and divisions are lowly geared. With a 40% surge in milk supplies predicted post-2015, Lisavaird are fortunate that Carbery, which processes all their milk, have spare processing capacity.

Therefore, additional co-op/farmer funding will not be required in the near future. Instead, the co-op is now focused on supporting their 279 milk suppliers to plan and finance this impending on-farm expansion, e.g. credit availability towards bulk tanks, meal bins etc., and reduce the co-op’s debtor levels which are 35% higher this year compared to the same time last year.

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Lisavaird milk suppliers will be obliged to increase their shareholding in Carbery to 16 shares per 1,000 litres of milk and any milk supplied over and above one’s existing quote will be required to have 25 shares per 1,000 litres for this ‘new milk’.

Divisions:

Dairy products: This division recorded a 5% decrease in turnover last year to €27.1m, reflecting the decline in global dairy markets last year from April/May onwards.

Cheese prices came under pressure last year. Such price declines were more severe across other dairy commodities. Pat Moriarty explains how 2013 is the converse of 2012 in many ways, with other dairy commodity prices spiking significantly in the early part of 2013, compared with 2012 prices and to 2013 cheese prices.

He predicts milk prices will remain at current levels for the remainder of the year

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Agri and trading: Reflecting the severe weather conditions last year, feed sales were up 17% to over 40,000 tonnes to their dairy, pig and beef shareholders, but margins per tonne fell due to higher input and production costs, in particular, diesel and energy prices, Moriarty outlined.

Fertilizer sales were down last year. Overall, agri trading sales increased by 12% last year to €25m.

Feed prices look set to fall in the second half of 2013, due to falling grain prices, however, Moriarty pointed out that the price of soya will also have a big bearing on any such price fall later this year.

Lisavarid have seven stores, three of which are performing well, while three others are at a break-even scenario.

Cooked meats: Turnover from within this division increased by 20% last year to €5.1m and according to Pat Moriarty generated a small profit during 2012.

This division has recovered from the fire in December 2010 which completely destroyed their Glen Aine Foods plant in Limerick.

Moriarty remains cautiously optimistic for 2013, as this division continues to focus on the wholesale market where a number of other competitors have dropped out in recent times.

This plant currently employs 24 staff and this division is achieving its 2013 sales targets so far, according to Moriarty.

Piggeries: While turnover from their pig farms (Kippagh and Derryduff) was up 7.8% last year, reflecting the higher sales of pigs, this division managed to only break even, which Moriarty outlined was a good performance when one considers the significant increase in feed prices last year.

Joint Ventures

Clona Dairies: This west Cork-based dairy, which is 16.67% owned by Lisavaird and processes close on 35m litres of milk, made a welcome return to profits during 2012.

2013 remains a very difficult year for the liquid milk sector. Clona Dairies, along with all other dairies, have moved to an A+B-C milk price method, breaking the link for the first time between what they pay for milk and what they in turn get paid from retailers.

Despite the significant increase in farm gate milk prices, some of the major retailers have yet to increase their retail prices (Dunnes and Aldi) and Moriarty outlines that Northern Milk supplies still remains “the issue”.

Windfarm: Lisavaird’s 50% stake in a 10MW farm in Co Tyrone with Bord Gais had a “poor year” with sales down in 2012 due to less wind. Lisavaird also made a significant capital investment in this wind farm last year, upgrading the older section of the farm which also reduced returns last year.