The cover page of Tirlán’s annual report is taken up with three words – “Here For Good”, with the “Good” underlined to make sure you get the double-meaning in the co-operative’s first report as a fully farmer-owned dairy processor.
From a financial point of view, the ‘good’ is easy to see, with turnover rising 36% to €3.06bn and operating profit at €71.9m, while profit after tax (PAT) was at €44.6m. It is notable that the PAT was at 1.45% of turnover.
When Tirlán was Glanbia Co-op, there was a requirement for PAT of 3.2%. Speaking to the Irish Farmers Journal in November 2021, Jim Bergin said that the profit requirement would no longer apply, and that financial policy post-independence would be “in tune with co-op models globally.”
It is notable that a mixture of prudent financial planning and fortunate timing is paying off for Tirlán, with the interest rate on the €250m bond raised in early 2022 a very low 1.875%.
This means total interest payments over the five-year life of the bond will be €23.5m. With today’s corporate bond rates closer to 5%, raising that five-year bond now would incur lifetime interest costs of over €60m.
On payments to suppliers, the vast-majority of the €2bn spent went to milk producers, with just over €100m going to farmers for grain. The geographic breakdown of the milk cheques show Tirlán’s footprint remains concentrated in its traditional Kilkenny hinterland
Bergin’s view
When the Irish Farmers Journal sat down with Tirlán CEO Jim Bergin this week, the issue of milk cheques was very much front and centre. The €1.9bn question for farmers is when the milk price will stop falling, and when it might start to rise again.
“Our hope is that it is bottoming out,” Bergin said on the milk price. “Ornua is giving indications of another 4c off a base price of 41c. We wouldn’t disagree with that.
“The question is whether there will be any uptick during the year. Indications at the moment are that any uptick would be in quarter four. That said, we have to see how the summer plays out.
“Tirlán milk supply this year is running about 1.5% behind where it was last year, but depending on how production is in the back end of the year, we might end fairly flat. Farm production in September, October and November has been notably higher in recent years.
“In the longer term, we are still not sure what the impact of the nitrates changes will be. Once the picture becomes clearer, farmers will be better positioned to make decisions on production.”
The co-op says it had 54 entrants and 36 supplier exits (outside the retirement scheme) in 2022 and expects 73 new entrants this year. The average herd size of new entrants in year one will be 75 cows.
The mention of further production switches the conversation to investment and a look at what Tirlán’s ambitions in that space are.
Bergin doesn’t give any definitive answer, but it is clear Tirlán is looking for the right kind of deal.
“An investment fund can be created from the sale of [up to 12 million Glanbia] shares. However, as those shares pay a dividend, the return on any investment would have to be better than that.
“Frank Tobin, formerly CFO of Glanbia Ireland, has a small group, and they are looking at a pipeline of investments. Someday or other when we see something of interest, we’ll move. We’re active, but I wouldn’t say we are on the cusp of doing something.
“To be clear, this investment fund is separate to the day-to-day operations, so it would not be used to put a new machine into Ballyragget. An ideal investment for us would be one that is complementary to the skillset that already exists within Tirlán.”
Sustainability, diversity
Tirlán launched their “Living Proof” sustainability strategy in 2021, a move which was recommitted to in 2022 with the creation of the Environmental and Social Governance function within the co-op.
Last year Dr Lisa Koep was appointed to the executive leadership position of Chief ESG Officer. She took the Irish Farmers Journal through some of the key priorities and goals of the co-operative’s strategy.
On carbon, the longer-term goal is to be net zero by no later than 2050. On the way to that target, there is a 30% absolute reduction in carbon emissions from processing sites by 2030 and a 30% reduction in carbon intensity from dairy suppliers by 2030.
Like all other processors, the lion’s share of Tirlán’s carbon footprint can be attributed to its scope 3 emissions. That’s shorthand for saying Tirlán needs its dairy suppliers to produce less carbon for each litre of milk they supply.
While there has been progress made, the 7% improvement since 2018 will have to be accelerated with 2030 less than seven years away.
Last year also saw the launch of the Sustainability Action payment, a 0.5c/l payment which is part of the 63c/l milk price paid in 2022. Farmers need to sign up to a selection of climate measures to receive the payment.
The FarmGen renewable energy programme saw 115 PV Solar packages installed on farms.
Koep said that the popularity of the trees and hedgerow planting programme meant that Tirlán upped the original target from 150,000 plants to 450,000.
The co-op has ambitious targets for diversity and inclusion among its employees in order to better represent the communities with which it engages every day.
Key among those targets is the achievement of 50/50 male/female representation in leadership roles by 2030. Currently that ration stands at 26%. Last year’s gender pay gap report showed an average gap of more than 18%.