11 April 2024
By Elaine Murphy
elaine@TheCork.ie

Dairygold Co-Operative Society Limited has announced its financial results for 2023. Two particular highlights, in the delivery of ‘Our Strategy, Our Future 2030’, were the acquisition of a majority shareholding in Vita Actives Limited and the rollout of the Dairygold Grassroots Milk Supplier Sustainability Bonus Programme which confirms the deep commitment of our Milk Suppliers to sustainability and the future of milk production in our region.

Caption for image: Pictured at the announcement of the Dairygold 2023 annual results were Dairygold Interim Chief Executive Michael Harte, Group Company Secretary Ann Fogarty and Chairman Seán O’Brien.

In 2023, Dairygold recorded a Turnover of €1.4 billion, a decrease of €254.7 million versus 2022, primarily reflecting the significant fall in market returns over the course of 2023. The Profitability delivered was also lower than 2022, with an EBITDA of €55.0 million and an Operating Profit of €23.9 million, a decrease of €13.5 million and €16.3 million respectively, a reflection of the Board’s decision to pay strong milk and grain prices, minimising the impact of reduced on farm margins.

Commenting on the results, Dairygold Interim Chief Executive, Michael Harte said: “2023 was a difficult year for the dairy and tillage sectors, as market returns declined significantly from the unprecedented highs of 2022. Unfavourable weather conditions, combined with continued high input and processing costs, created a perfect storm for farmers and processors alike. As a farmer owned co-operative, Dairygold responded by paying strong milk and grain prices to Suppliers. Overall, the Society delivered a satisfactory financial performance in 2023, with all Businesses delivering to expectations.

Dairygold continued to deliver on the growth ambitions set out in our Strategy. A significant landmark on our journey was the successful acquisition of a 59% shareholding in Vita Actives Limited in June 2023, delivering a key objective of our Health and Nutrition business of growing a life stage nutrition business across key selected geographies, enhancing margin for the Business and diversifying earnings.

Sustainability continues to be a huge challenge for the dairy industry and one Dairygold is facing head on. Over 90% of Dairygold’s milk supply is participating in our new Grassroots Milk Supplier Sustainability Bonus Programme, which is a significant achievement. In addition, we are implementing a detailed decarbonisation plan across our factory operations, to deliver a 42% reduction in carbon emissions.” 

2023 Financial Year – Key Figures

Dairy Business

The Dairy Ireland Business operated in a very challenging environment, in 2023, with significantly lower dairy market returns, reduced milk volumes and inflationary pressures. During the year, Dairygold processed 1.41 billion litres of milk, a 4.7% decrease (70 million litres) year-on-year.

At farm level, milk production was challenging with a significant decline in milk price of c. 30% and input costs remaining relatively high. In addition, adverse weather and sustainability concerns impacted milk production volumes. The level of future milk volumes will largely depend on how the sustainability challenges are addressed by the dairy industry and this is a critical focus for the Society.

In a very challenging market, Dairygold focused on maximising commercial returns and paying a competitive milk price. As milk volumes stabilise, a key strategic focus is now on delivering higher margin and adding value to the litre of milk, in a sustainable manner.

The Society’s ongoing capital investment programme saw significant progress in 2023, including the phased redevelopment of the Casein facility at the Castlefarm Dairy Processing Complex.

Agri Business

Dairygold Agri Business faced a number of challenges in 2023, with the sale of Feed and Fertiliser being negatively impacted by reduced on farm margins and sustainability concerns, while Retail sales, despite negative consumer sentiment, were generally in line with 2022. Dairygold’s Grain Growers, despite difficult weather conditions, successfully delivered over 106,000 tonnes of quality grain and beans to Dairygold and received a strong grain price from Dairygold.

In 2023, the Agri Business continued to encourage and support Member customers to become more sustainable in their farming businesses, including by maintaining focus on improving soil health, through our Green Grow Soil Health Programme.

Dairygold Health and Nutrition

In June 2023, Dairygold Health and Nutrition acquired a 59% shareholding in Vita Actives Limited, a supplier of high value nutrition and nutraceutical ingredients to global customers, for the functional foods, human nutrition, sports nutrition, health, wellness and cosmetic industries. The acquisition is strategically important, allowing Dairygold to enter the fast-growing life stage nutrition sector, delivering higher margin for the Society and diversifying earnings. It is the ideal platform for Dairygold to build higher margin growth opportunities.

Dairygold Health and Nutrition also continued to build and expand its distributor networks in China for Aerabo™ and building from this base, we were delighted to extend our Bord Bia Grass Fed accredited product range with the launch of Aerabo™ Light, Boost and Vitality, with Aerabo™ Grow being launched in Q2 2024.

Dairygold UK and Europe

Dairygold’s subsidiary businesses in the UK and Germany provide a strategically important route to market for Dairygold’s cheese. Despite the significant inflationary pressures and the cost-of-living crisis, sales volumes did increase. The delivery of new business opportunities together with market diversification which will be a consistent theme into 2024.

Sustainability

Sustainability is a key pillar of Dairygold’s strategy and is critical to the long-term success of the business and its Members. Since it began in 2023, our Grassroots Milk Supplier Sustainability Bonus Programme has seen participation grow rapidly with more than 90% of Dairygold Milk Supply signed up to the programme. At processor level, we have developed a decarbonisation roadmap to reduce carbon emissions by 42% by 2030, with core elements of the programme including energy efficiency, heat recovery, efficient energy generation and renewables.

In March 2024, Dairygold became the first dairy processor in Ireland to enter into a Corporate Power Purchase Agreement (CPPA) with a Farmer Member, having signed an agreement with Michael and Rose Quirk of Lurrig Solar Farm, to purchase 5,000 MWh of solar energy from the farm to power Dairygold’s processing operations. In another first, Dairygold also became the first dairy processor to add an electric milk truck to its fleet, another step forward on the decarbonisation journey.

Dairygold Chairman, Seán O’Brien, commenting on the 2023 results, said: “2023 saw the Society deliver a strong performance, despite the numerous challenges, including weather, high input costs, the reduction in the nitrates derogation and addressing the sustainability challenges. These challenges were met head on by our Members and the Business and Dairygold is in a strong operational and financial position to continue to sustainably grow both the Business and Members’ enterprises.   

The significant challenge for the dairy industry is the uncertainty surrounding the future of Ireland’s Nitrates derogation, which is being provided by the EU Commission, in recognition of Ireland’s unique pasture-based milk production system. The removal of the derogation would significantly curtail milk production, impacting the viability of the entire industry. Strong leadership, including in-person engagement with EU Commission personnel, is needed now, to address industry uncertainty and allow farmers to plan for the future. For its part, Dairygold will continue to engage at Member level to understand their position and at political level to seek clarity and certainty on this critical issue.”