Irish dairy co-op Aurivo recorded a steady performance in 2019.

Operating profits (excluding exceptional charges) increased 7% last year to €3.2m, as profit margins were maintained at a slender 0.7%. The northwest-based co-op saw its earnings (EBITDA) rise 9% last year close to €9m.

Aurivo’s sales increased 1% last year to €447m thanks to a strong performance from its dairy ingredients business, where sales were up 10% year on year to €169m.

Sales in Aurivo’s agribusiness division were down 5% last year to €115m

Sales in Aurivo’s consumer foods business were down 4% to €95m last year, while turnover in its marts business was back 5% to €68m. Sales in Aurivo’s agribusiness division were down 5% last year to €115m due to sales of feed and fertiliser normalising following the drought in 2018.

While Aurivo’s underlying business performed well, the co-op was forced to take a number of exceptional charges, including a €6m write-down on the value of its sports nutrition brand For Goodness Shakes.

Speaking to the Irish Farmers Journal, Aurivo CEO Donal Tierney said the co-op decided to take the write-down on the value of the brand due to weaker profits in the business last year because of increased competition as well as the loss of a key customer.

In 2015, Aurivo paid €40m to acquire For Goodness Shakes, which is the leading ready to drink sports nutrition product in the UK and is mostly sold through retailers.

Despite the lower profitability of the business, Tierney says For Goodness Shakes saw higher sales volumes last year

Tierney said the For Goodness Shakes brand is seeing increased competition from other sports nutrition brands, with price promotions lowering margins. Despite the lower profitability of the business, Tierney says For Goodness Shakes saw higher sales volumes last year and remains the most profitable Aurivo brand by any measure.

On top of this write-down, Aurivo also booked €1.3m in restructuring costs for 2019. The combination of these charges saw the value of the co-op’s balance sheet reduce below €60m at year-end.

Milk supply

Overall, Aurivo processed 459m litres of milk last year, which was up almost 5% on the previous year. In the year to date, Tierney says Aurivo’s milk supply in Ireland is running 2% ahead of last year.

Last year, the co-op completed a €26m investment in a new dryer at its Ballaghaderreen plant, while also investing €6m to double processing capacity at its Killygordan liquid milk plant. Pat Duffy, chair of Aurivo, said the heavy lifting was now done by the co-op to ensure the processing capacity was in place for any future milk expansion from farmers.

Tierney said retail sales of liquid milk shot up 20% in the early weeks of the lockdown

While most other co-ops cut their April price, Aurivo this week held its base milk price at 28.5c/litre ex VAT. Tierney said April was a decent month for the co-op thanks to exceptionally strong growth in its consumer foods business as a result of the COVID-19 lockdown. The co-op had also forward sold product.

Tierney said retail sales of liquid milk shot up 20% in the early weeks of the lockdown and are currently 4% to 5% ahead of normal. Retail sales of butter have also been very strong.

World market prices for fat-filled milk powder and other milk powders are currently a lot lower than where they were back in February

The co-op also has very little exposure to the food service market.

However, Tierney did warn that milk powder prices are now 20% below where the co-op would have budgeted for 2020.

World market prices for fat-filled milk powder and other milk powders are currently a lot lower than where they were back in February, with the collapse in oil prices weakening the buying power of some major dairy importers.