Armagh-based Fane Valley Co-op has reported a pre-tax profit of £6.8m (down by £1.9m) on group turnover of £553m (up by 4%) for the year ended 30 September 2014.

Much of that 12 months saw high prices for milk and dairy products, resulting in a record turnover of £106m in Fane Valley Dairies (up by 15%) where the direct supply milk pool had risen to an estimated annual total of 240m litres by the end of September.

Work started on a three-year investment programme at the Banbridge dairy, with a new effluent treatment facility due to be commissioned this spring. The next phase of investment will focus on new evaporation and packaging technology aimed at further enhancing the quality and functionality of the products manufactured by Fane Valley.

On the meat side of the business, sales within the Linden Food Group (including the Slaney Foods joint venture) were largely unchanged at £336m. But there was reduced profit according to Fane Valley chief executive Trevor Lockhart, who said that 2014 had been a particularly challenging year.

Margins were depressed in primary beef processing as cattle prices rose in the aftermath of the horsemeat scandal, while demand for manufacturing meat declined significantly across Europe.

Branded and added value beef and lamb activities were positive but were overshadowed by pressures in primary beef processing according to Lockhart. It’s understood that this pressure is continuing despite lower cattle prices.

Tonnage sold by Fane Valley Feeds was up by 4% but revenues dropped by 6% due to lower prices, linked to lower costs of raw materials. Capacity has been increased in the Newry Mill following a significant refurbishment in 2014. But the operation has taken a recent hit on sales of feed into the Republic due to the weakening exchange rate of the euro against sterling.

Fane Valley Stores achieved a further 8% growth in sales, underpinned by a programme of store upgrades and new store openings. This included the acquisition and revamp of the three stores formerly trading as McCaughan Animal Health and further development of the stores at Omagh and Augher. This growth has continued into 2015, with the acquisition of McCauley agricultural and dairy supplies business near Rathfriland.

Fane Valley’s food division delivered improved sales and profitability in 2014. This includes Hilton Meat Products (red offal), Duncrue Food Processors (beef dripping and protein products) and Whites (oat milling). According to Lockhart, these businesses made a significant contribution to group performance.

He described the 2013-14 performance as ‘‘a solid set of results achieved in a challenging market environment’’. The co-op’s net asset position strengthened by 5% to £73.6m and net debt fell by 9% to around £46m at year end. A new head office, warehousing and distribution centre was acquired near Moira in July 2014.