Lakeland reports return to profitability

Lakeland Dairies published its financial results for 2024, which showed an increase in revenue and return to profitability for the cross-border co-op after a disappointing 2023.

Profit after tax came in at €18.37m for the year, up from a loss after tax of €8.1m in the previous 12 months. Revenue increased by €150m to €1.75bn. Milk payments to farmers increased by €203m to €998m. The amount of milk processed was only marginally higher at 2bn litres.

Colin Kelly, CEO of Lakeland told the Irish Famers Journal that the improved financial performance came from better dairy markets when compared to 2023.

He said that the co-op had much more “value added” sales coming through during the year, which had an impact from a revenue perspective, but crucially had an impact from a profitability perspective.

“We are a more efficient business in 2024 than we were in 2023, our strategy is working, and our rationalisation of our operating footprint is starting to have an impact,” he said, adding that “internationalisation through [the purchase of] De Brandt is adding value to us from a revenue and a margin perspective, as well as some of the synergies we can pick up from that business”.

Kelly also said that Lakeland continues to invest in innovation, which is starting to deliver value.

On the rationalisation programme, which was agreed by the Lakeland board in November 2023, he confirmed that the transfer of Lakeland’s liquid milk production from the Monaghan town facility to Killeshandra had been completed.

The plant in Monaghan was closed at the end of March 2025. Kelly confirmed that the site in Monaghan is on the market in the wake of the closure.

The sale of the Banbridge site, which was also shuttered under the 2023 plan, was completed before the end of 2024.

In the Lakeland accounts for 2024 there were impairments of property, plant and equipment totalling €17m.

Changes

Kelly said the drive for adding value across the processor means that “there are certain things we are doing in 2024 that we will no longer do, and there are certain pieces of kit across our network of five dairy sites and our agri mill that we will no longer use. We have taken the decision to write those down”.

He said among the things driving that write down is the decision to stop making hard ice-cream (hard ice-cream is the ice-cream that comes in blocks, traditionally picked up in the supermarket and kept in the freezer). Lakeland will continue to manufacture soft-serve ice-cream in Killeshandra.

The other product of note which is being stopped is Regato cheese which is manufactured in Ballyroshane. Kelly said production of that cheese “will cease in the coming months”.

The move is part of an overall reduction in Lakeland’s product range.

“We will only do things that make enough money to justify the investment in them,” Kelly said.

Overall, on investment by Lakeland, Kelly had a very simple message: “The days of building capacity are behind us. We have zero vanity around volume. If we’re at 2bn litres, the only way it would excite me to be at 2.5bn litres would be if it was to add half a cent or one cent extra in milk price.

“Our growth will be around being ruthlessly efficient in terms of what we do from a factory perspective, getting as much value as we can from the core of the business, buying value through the internationalisation of the business and building value through innovation.”

He said that in the wake of the De Brandt purchase the co-op has an investment fund of around €70m and it has ambitions for further investment on the acquisition side, but that there are no plans for any moves over the short term.

On mergers, Kelly said: “We’re always open to merger talks provided that they would deliver the right amount of value. We’re not interested in it for the sake of doing a merger, for the sake of growing our volume.

“If it would deliver sustainable prosperity for our farm families and for whoever we are speaking to, then absolutely we’re open to it.”

Kelly added that “it is inevitable that there has to be consolidation on the island and that there will be consolidation. We’ll be part of the discussions where it makes sense for our 3,200 farm families to be part of them.

“If costs continue to rise and if milk is reasonably flat as we all expect for the next period of time, it is only inevitable that there will be fewer co-ops. I think it is incumbent on all of us in the industry to make sure those type of things happen before they need to happen. The history has been that they tend to happen when there is no other option.”

Lakeland’s position as a cross-border co-op means that it may have the potential to avoid the extra tariffs placed on the EU above what the UK is facing. Kelly said that it is not that simple.

“If we look at exporting through Northern Ireland, the first thing we have to be sure of is that the customer is happy. Our customers have audits of all our factories and they also have to be sure they are happy with the origin of the product.

"We would have to make sure we are within the law, and absolutely we would always stay within the law. It is not a zero-sum game of tariff versus tariff. If we take butter out of factories and start moving that production around to other factories, you could end up with spare capacity in one place and too little in another.”

He said that Lakeland would need to see what the reaction from the EU is to the tariffs and after having discussions with stakeholders, the co-op would make a balanced call on those kind of decisions over the coming weeks and months.

Kelly said that the products currently made in Northern Ireland are mainly for the Chinese market. That market is also not without its difficulties at the moment.

“The big challenge we see in China is consumer confidence. Ultimately, the amount of disposable income people have has been impacted as the economy has been under pressure and that has naturally led to an impact from a demand perspective.”

He added that Lakeland was starting to see something of a rebound in consumer confidence in China at the start of the year. It is obviously too early to tell what impact the rapidly worsening trade dispute between China and the US will have on demand in the Asian economy.

It is clear from the annual report and from talking to CEO Colin Kelly that Lakeland’s cost-cutting drive over the last 16 months is starting to pay dividends.

Following the closure of the Monaghan site the number of dairy processing facilities at the co-op has dropped to five, from the eight that it had in the wake of the merger with LacPatrick in 2018.

Looking back at that merger, and to some extent the more recent merger of Arrabawn and Tipperary, it is clear that the amalgamation of the co-ops had more in common with a takeover or a bailout than a merger.

Throughout the history of co-ops in the country it often seems to be that mergers only happen under such circumstances where one struggling entity is effectively kept afloat by its neighbour.

The more recent history of Lakeland shows that such “mergers” can have a long tail of costs from consolidation and retrenchments needed in order to get the operation to a position where it is running as efficiently as possible.

In theory, this period of less-efficient operation could be avoided by having co-ops merge when both sides of the deal are in a relatively strong position.

Given his experience, it is worth listening to Kelly when he says it is important for the industry as a whole that any further consolidation happens before individual co-ops are forced into talks by financial misfortune.