Dairygold Co-Operative Society says it delivered very strong financial results in 2022, and looking at the numbers it is easy to see why.

Operating profit jumped by almost €10m to €40.2m on turnover that surged €478m to €1.65bn.

That huge jump in the value of product was almost entirely driven by the rapid upwards moves in global prices in 2022.

In fact, milk volumes from Dairygold milk suppliers, at 1.48 billion litres were very slightly lower than 2021’s 1.49bn litres. That small drop was the first since the abolition of milk quotas in 2015. The peak week for milk supply in 2022 was 45.7 million litres, 1.4 million lower than 2021. Fine weather and strong prices towards the end of the year helped volumes, which otherwise would have come in much lower than 2021.

The society says it paid “a leading milk price” last year, with the average quoted milk price of 54.9c/l, up more than 50% from 2021’s average of 36.0c/l. Average prices paid were 62.4c/l.

Average quoted milk prices over the past decade were 34.5c/l.

The co-op also purchased 107,000t of grain in 2022.

On the cost side, energy was a major factor, with the bill rising from €10m in 2020 to €60m in 2022 – putting energy alone as a 4c/l cost to the business, up from less than 1c/l.

Dairygold had net cash investments of €40m in capital expenditure during the year, while net debt grew by €24.1m.

The new evaporator on the Mallow Nutritionals Campus is now fully operational for 2023 and should lead to less downtime, and therefore greater efficiency there.

The significant redevelopment of the Casein facility at the Castlefarm dairy processing complex is on track to be completed for the 2025 processing season.

The society’s agribusiness division’s turnover jumped to €388m, a €112m increase on the previous year. Again, this surge was mostly driven by the considerably higher prices seen last year.

Dairygold said it recognises the impact price volatility had on farmers in 2022 and expects this to continue to be a challenge in 2023.

On costs, the increase both for Dairygold and its farm suppliers has been a shock, and continues to be a significant problem.

Throughout the last year every input they had increased in price, with production of many of the compounds and agents used in the industry being very energy intensive, Dairygold CEO Conor Galvin said.

Opportunity

While dairy demand in China remains disappointing, with the hoped-for rebound in activity following the pandemic failing to materialise, the co-op is optimistic about the prospects for its premium branded fortified skim milk powder sold under the Aerabo brand.

The first of the products will be introduced this year after much of 2022 was spent building a distributor network.

The three new instant milk products targeting the adult nutrition market in China which will be launched in the first half of this year will carry Bord Bia Grass Fed accreditation.

The focus on premium products in China is part of the society’s longer-term strategy to build a business that will deliver incremental growth and higher margins, Galvin said.

Buying (and selling)

Dairygold said its strong financial performance over the last number of years ensures net bank debt remains at sustainable levels. That debt stood at €132.3m at the end of 2022.

Since the end of last year, the society completed refinancing deals and now has €360m of banking facilities in place. This will provide the firepower to support Dairygold’s growth plans as the co-op explores acquisition opportunities.

Galvin said that the co-op was looking for high-margin businesses in western Europe which would align with the society’s strategic growth plans.

As well as the bank debt facilities, Dairygold also has non-core assets for sale which, if successfully offloaded, would add even more to the society’s acquisition war chest. Specifically, the co-op held €50m of non-core property assets. In 2022 planning permission was achieved for the Creamfields site in Cork for 606 apartments, a primary care centre, and ancillary facilities. Dairygold said it is seeking to divest the asset “at the appropriate time.”

Environment

While legislation and regulation is putting ever-increasing focus on environmental matters, Dairygold is seeing that the biggest pressure on the subject is coming from the private sector.

“We are seeing our customers setting very ambitious targets for their emissions,” Galvin told the Irish Farmers Journal.

For the society, environmental concerns are front and centre on any new investment they are making. “As we invest in the future we are looking at doing so in a way that has no carbon load or a lower carbon load,” Galvin said.

“On a customer side, the plan is there to deliver in line with what the customers expect,” Galvin added. “But there is a long road to travel on this.”

He said that Dairygold will have science-based targets which it will commit to before the end of this year, but the minimum will be to deliver on the climate action plan both at processor and farm level.

“For example, we are installing solar panels on a mill at Lombardstown at the moment and that’s the first phase of something we are going to do more of where we can generate our own energy.

“We’re already generating energy from our anaerobic digestor here.

“Separately, there is the Grassroots Milk Supplier Scheme, where we help farmers decarbonise, increase water quality and biodiversity.”

Diversity

Dairygold’s board, along with those of most other Irish dairy co-ops, is predominantly male. Much of this is a legacy of how the society is structured through shareholders only being farmer suppliers and only shareholders allowed sit on general and regional committees.

Seán O’Brien, chair of Dairygold, said there has to be improvements in the makeup of committees.

“One of the ideas we are looking at is shareholders where, if we had joint shareholding between the farmer and their partner, rather than the current farmer-only shareholding, then that partner could get involved and make it on to committees.”

Ann Fogarty, group company secretary, added that the society has in recent years broadened some of its member programmes to include partners and children of shareholders, which has increased diversity in those programmes.

Galvin said: “We constantly need to challenge ourselves on diversity in the organisation because diversity means more ideas, probably means better ways of doing things and it means a more interesting place to work. It will take time, but we need to have the stated objectives that mean we will continue on the journey.”

Dairygold reported a mean gender pay gap in 2022 of 12.3%.