Carbery eyes potential acquisitions to fuel further growth

West Cork dairy processor Carbery has said it will be keeping its eyes open for potential acquisition opportunities in the years ahead that would add value to the group’s balance sheet.

Speaking to the Irish Farmers Journal, Carbery CEO Jason Hawkins said the co-op was now well invested from a primary processing perspective but would continue to seek out acquisition opportunities that could add value to its flavours and nutrition businesses.

“The business is now very well invested from a capital expenditure perspective with enough processing capacity to get us through this decade. We won’t be adding to our net debt level with further capital investments but the one caveat is acquisitions. We’ll continue to look for opportunities in the nutrition or flavours sector to try and leverage our low debt level. However, any acquisitions would have to add value to the overall balance sheet,” said Hawkins.

Since the end of quotas, Carbery has invested just under €157m in capital projects across the group, including the expansion of processing capacity of its Ballineen site.

Carbery’s net debt at year-end 2020 stood at €58m

Carbery recently completed a €78m investment in a new mozzarella facility that will allow the business to diversify into new markets away from the UK.

Carbery’s net debt at year-end 2020 stood at €58m. And while this is the highest level of borrowings the co-op has had in years, Carbery remains very modestly leveraged at just 1.3 times’ earnings.

Given this room on its balance sheet, the co-op feels it is poised to take advantage if the right opportunity in the higher margin flavours or nutrition space presents itself.

On top of this, higher feed costs means global milk supply growth is modest at the moment

Aside from future growth opportunities, Hawkins is relatively optimistic in his outlook for farmgate milk prices in 2021, at least for the first half of the year.

“Right now, the demand picture for dairy looks decent. In China, dairy demand is very strong.

“On top of this, higher feed costs means global milk supply growth is modest at the moment. I would say the outlook for milk prices in May and June is firm,” said Hawkins.

Commodity prices

While commodity prices for butter and skimmed milk powder (SMP) have seen a big improvement so far this year, Hawkins said the growth in cheddar prices is actually lagging slightly behind due to the continued closure of most food service channels.

However, Carbery does anticipate improved prices for cheddar and mozzarella as the food service sector reopens alongside the rollout of the COVID-19 vaccine.

The Carbery boss did warn, however, that the US dairy market has been fuelled by a number of stimulus programmes, which have underpinned prices in the last year.

Hawkins said it was difficult to gauge what might happen when these support programmes were ended in the US later in the year.