New Kerry faces old Kerry challenges

The purchase of Kerry Group’s Irish dairy operations by Kerry Co-op at the end of last year has not meant the end of arguments over how much Kerry suppliers are being paid for their milk.

James Doyle, chair of the Munster Dairy Producers Organisation, told the Irish Farmers Journal that farmers are owed 1.45c/l for milk supplied in 2024 under the leading milk price payment.

He called on the board of Kerry Co-op and Kerry Dairy Ireland to fully honour the contract. He also said that it would be “unacceptable” if a payment wasn’t made on all milk supplied in 2024.

As part of the settlement of outstanding arbitration payments agreed during the purchase of Kerry Dairy Ireland, a payment was made on contracted milk supplied to the processor.

Many farmers had supplied far above their contracted levels over the years covered by the agreement and those extra supplies did not attract an arbitration payment.

Doyle said that “cast-iron guarantees” were given by the Co-op board at information meetings held prior to the vote to buy the processor that a 13th payment would be made to suppliers for 2024.

He said, “if the whole joint venture process is to have any shred of credibility it is now the duty of the Co-op to ensure that the assurance they gave three months ago is not reneged upon and that the 1.45c/l that is due to milk suppliers is paid in full.”

Arbitration payment

Under the terms of the joint-venture, Kerry Group paid €50m “for the resolution of the ongoing dispute and related claims” pursuant to the milk supply agreement which remains in place until 2026.

As part of the takeover, the parties agreed that Kerry Group will have “no liability for any existing or future claims from milk suppliers under the milk supply agreement”.

That €50m was distributed to suppliers in February, but the MDPO expressed disappointment that the €50m was paid inclusive of VAT, meaning the net payments received totalled €47.57m.

Speaking on Radio Kerry in the wake of the payment, James Tangney, chair of Kerry Co-op and Kerry Dairy Ireland said that there was no precedent for making payments exclusive of VAT. “All the top-ups were always inclusive of VAT,” he said.

As the €50m payment settled any outstanding or future liabilities for Kerry Group from the milk supply contract, it is unclear which company would make the 1.45c/l payment to top-up the 2024 milk price – if any payment is to be made at all.

Milk supplied in 2024 was paid for by Kerry Dairy Ireland, which was part of Kerry Group.

Arbitration and leading milk price arguments aside, the CEO of Kerry Diary Ireland, Pat Murphy said in a radio interview that the transfer of ownership has run very smoothly from a business standpoint.

As part of the agreement, the management who were already in place at Kerry Dairy Ireland stayed on in the joint venture.

He said the aim for the company is to add value to the milk which is supplied for processing, with a focus on the dairy consumer foods business and the nutritional ingredients business which will allow the payment of a much stronger milk price in future.

He said, that 2025 “has got off to a very good start”.

He also said that Kerry Dairy Ireland’s EBITDA (earnings before interest, taxes, depreciation and amortisation) was €80.8m in 2024, a much higher figure than the EBITDA for the division in Kerry Group’s financial results for 2024 which put it at €62.8m.

The number in the financial report had caused some controversy as Kerry Co-op shareholders had been led to believe that the EBITDA number would be close to the €80m which Murphy said was the final outrun.

‘The Kerry Group annual report which was published on Wednesday of this week only served to confirm that lower €62.8m figure.

There was no indication given as to why the CEO of Kerry Dairy Ireland put the number €18m higher at €80.8m. Messages sent to Kerry seeking an explanation for the difference had not been answered by the time the Irish Farmers Journal went to press.