2010 Full Year Results

April 06, 2011

Transitional year for the IDB

Kerrygold reports record year Core dairy sales targets surpassed

Financial Highlights –

  • Irish Dairy Board (IDB) sales up 6% in 2010 to €1.9bn.
  • Record sales of Kerrygold with branded sales up by 18% in value and 7% in volume. (See consumer foods section)
  • Operating surplus (ebita) for the year of €26.9m.
  • Payout to members of €11.7m (€7.7m redeemable loan stock and €4m year end cash bonus) and a further €2m has been allocated to the annual bonus fund.
  • Net Assets up €18.5m to €402.9m at the year end.
  • 40% reduction in pension deficit to €6.9m.

Other Highlights –

  • Significant progress in right sizing the business and driving operational efficiencies
  • Lean manufacturing programme commenced across our European operations.
  • British Consumer Foods businesses consolidated under Adams Foods Ltd.
  • Re-organisation of DPI Specialty Foods (US)

Investment in growth:

  • New Product launches Kerrygold Extra (Germany) and BeoMilk (in Africa).
  • €19.8m invested in capital development programme.

Market recognition:

‘Exporter of the Year 2010’ (Ireland), ‘Gold Medal Award’ (World Cheese championship, U.S.A) and three awards for Kerrygold Extra in Germany.

Strategic review process is now completed and the repositioning of the IDB has begun.

IDB CEO Kevin Lane said:

"2010 was a transitional year for the business and one which saw the IDB develop its strategic growth plans to re-position the business for the future. Against the background of a weak global economy our brands business achieved a record performance. Overall the business reported a satisfactory performance in 2010, with the exception of our US speciality distribution business, DPI, where margins, in common with the broader market, contracted sharply. "IDB’s strategy for the future is to drive growth by leveraging our brands and building new routes to market and to value. This will require continued investment in new product development and marketing and a relentless focus on efficiency and tight cost management. In 2010 we have taken major steps on our journey to transform the business. We are committed to having a world class business in place that will deliver excellent results to all our stakeholders."

Overview of Business Performance

The IDB reported a satisfactory performance in 2010, against the backdrop of a challenging global economy. Overall, the IDB reported international sales exceeding €1.9billion, an increase of 6% on 2009.

In dairy markets supply side constraints rather than inherent demand growth was the key price driver with prices firming at the year end. While dairy markets recovered as the year progressed, trading conditions remained tough and consumer sentiment remained fragile.

Despite this the IDB reported encouraging sales growth during the year and the group’s branded consumer foods business performed well, benefiting from new product extensions and a brand investment programme that achieved excellent results with brand sales up 18% in value and 7% in volume.

A challenging year in the US market saw the group’s speciality distribution business, DPI report a contraction in margins and reduced profits. The group’s operating surplus declined 33% to €26.9m driven primarily by reduced profits in the US distribution business. 

Other contributory factors included margin contraction - due to increased raw material prices - and increased investment in marketing in some markets to support the global marketing programme.

The Ingredients division delivered a good performance in the year, with results inline with expectations.

Despite challenging conditions in the UK, the Kerrygold brand continued to enhance its premium market position and delivered a strong out-turn for the year. In Germany, our new brand - Kerrygold Extra - delivered sales of over €20m in its first full year, making it a major highlight of IDB’s activities in 2010. Also encouraging, was the successful launch of BeoMilk, a fat filled milk powder, in Sub-equatorial Africa.

In DPI, the USA speciality foods distribution business, the challenging and competitive trading conditions that emerged in 2009 continued into 2010. Against this background the division reported a slight reduction in sales while intense competition in the sector saw margins reduced. The business addressed its cost base during the year and restructured its operations which will better position the business in the market this year.

Shareholders Funds of the IDB at the year end were up €18.5m on the previous year end to €402.9m.
In 2010, the IDB paid out €7.7m in redeemable loan stock and declared a year end cash bonus to members of €4m. In addition a further €2m was allocated to the annual bonus fund for redemption in 2015, which is paid out to all members.

Strategic Review

In quarter two 2010, management undertook a strategic review of the group’s activities and this lead to the IDB embarking on its three year strategic growth plan.

Management are pleased with the progress made, to date, and over the next three years are committed to the implementation of this plan.

The strategic growth plan in 2010 has concentrated on:

  • The development of a clear, focused vision for the future.
  • The establishment of an innovation and product development plan.
  • The selection of our international growth markets.
  • The creation of a new acquisition programme and team to implement our expansion plans.
  • The commencement of a refinancing programme to fund future development.
  • The reconfiguration of our business model and right sizing some of our business structures to support our growth plans.

Operational Review

During the year significant progress was made. The main achievements included:

The appointment of a Chief Operating Officer, Anthony Proctor, to oversee the group’s ongoing focus on driving efficiencies to deliver sustainable growth in the years ahead.

 Consolidation of British consumer foods businesses North Downs Dairy Company and the Kerrygold Company under Adams Foods Ltd. The new business provides a strong platform for growth and is better positioned to service the retail sector with the two strong IDB brands Kerrygold and Pilgrims Choice.

The commencement of a strategic manufacturing efficiency programme at the group’s European operations in Britain, Germany and Belgium. The programme will continue in 2011.

Consolidation of IDB’s media procurement requirements with one agency to deliver a significant increase in media visibility on a like-for-like marketing spend. This will be further underpinned by an increase in the overall budget to support IDB’s global marketing strategy.

Re-organisation of DPI Specialty Foods (IDB’s US Distribution business) and merging its Northwest and Rocky Mountain divisions into a newly created Intermountain West Division.

Ongoing investment programme in Information Technology:

Conversion of US distribution business to Oracle ERP to enhance operational efficiencies and allow the business to better service its customers needs going forward.

Development of the capability for fully automated transactions throughout the supply chain. This follows the successful implementation of an ERP system for trading product.

In addition to the foregoing, IDB’s strategic investment programme included: Construction of the new state-of-the-art Adams Food Ingredients (AFI) plant:

Expected to be commissioned in Autumn 2011, this facility will further enhance the range of ingredients offered by the business and will position AFI as the leading British player in the formulation of powdered dairy solutions.

Expansion of international sales and distribution infrastructure:

The business continued to develop its global marketing footprint in the year, establishing a sales office in Beijing, China and a market distribution presence in Algeria.

Business Reviews

Consumer Foods

The division reported a strong performance in the year against the backdrop of a weak but recovering global economy, although some markets remain challenging. Consumer confidence remained fragile as austerity measures impacted on consumer spending patterns. Consumers remain focused on value propositions and the quest for value and shopping on-promotion has continued into 2011. 

The division reported sales of €747.3m or 38% of the IDB’s total sales, up 11.4%. Combined branded sales exceeded prior year by 18% in value and 7% in volume due to like-for-like sales growth and the opening up of new, strategically important, markets. Most of our key markets posted improved sales and market share and this was further underpinned by brand award wins, including an All Ireland Marketing Award (International Marketing Category) for Kerrygold Extra.

Market Overview


Our British operations delivered a solid performance despite challenging market conditions including: a reduction in retail private label demand, margin compression due to higher raw material prices, and aggressive discounting in the branded sector.

Total volume sales ended the year 2% below the previous year. The business completed its first full financial year of trading from its state-of-the-art packing facility in Leek, Staffordshire. Pilgrims Choice finished the year as the number two British cheddar brand in value and volume, as measured by TNS. This was driven by promotional activity, increased retailer distribution and new product launches.



IDB Deutschland, reported a 15% uplift in sales in the year boosted by brand extensions. Following a very successful 2009 the Kerrygold brand achieved record sales in 2010, mainly driven by Kerrygold Extra, a blend of Irish butter and rapeseed oil, which was successfully launched in October 2009 and outperformed its financial targets for the year. All objectives in terms of sales volume, reaching a younger demographic profile and creating additional volume without affecting the original butter business, were achieved.   

Kerrygold also received a number of awards in Germany, including: ‘Top Brand 2010’ (Lebensmittelzeitung), ‘Hit 2010’ (Lebenensmittelpraxis) and ‘Product of the Year 2011’ (Lebensmittelpraxis).


IDB Inc. reported an excellent performance in the American market. The Kerrygold branded range of dairy products bucked the recessionary environment there and posted double-digit growth in both volume and value sales in the year. 

Total volume sales grew by 19% and in value terms sales were up 16% making it Kerrygold’s most successful financial year ever in the USA

Other Markets: 

Overall the IDB performed well in its other markets with double digit volume growth reported in butter, up 15% and milk powders up 35%, on the back of successful product innovation and market development initiatives. Cheese volumes delivered on target despite difficult trading conditions.

In Sub-Saharan Africa, the IDB successfully launched BeoMilk, a new brand of fat filled milk powder, which showed encouraging growth. The IDB also saw good volume growth in its first full year of trading in Zambia and the Democratic Republic of Congo, supported by strong brand development investment.

In North Africa the IDB posted a positive performance. Kerrygold milk powder continued to show significant growth in Algeria. In 2010 the IDB boosted its in-market presence in Algeria with the appointment of an in-market national sales manager, the establishment of a distribution network and enhanced sales structures. This provides a platform for further development in 2011.

Kerrygold butter growth continues to outpace strong market demand across the African Continent and in 2010 increased its leading position in the premium butter category in South Africa.

Within emerging markets Russia continued to show encouraging incremental growth in sales and increased retail listings. The business exceeded its targets for 2010 and is well positioned for growth this year.

Commercial & Ingredients

The Commercial and Food Ingredients Division is responsible for the procurement of Irish dairy products and for the sale of dairy ingredients to end users. Operating out of Ireland the division exports Irish dairy ingredients to over 80 international markets and is supported by key subsidiaries in the UK and USA.

The division reported a satisfactory outturn for the year, posting sales of €468m, up 7.7%. The division accounts for 25% of IDB’s total sales.

Overall market demand for dairy ingredients in 2010 was strong and although volatile, prices generally improved as the year progressed as product supply side issues dominated sentiment.

Irish milk production for the year ending 31 December 2010 was up 8%, and the volume of traded purchases from member co-ops rose by 6%.

A number of market lead initiatives in 2010 centred around increasing supply chain efficiency and adding value to ingredients through product differentiation. The sales base was also extended into new market segments for butter, powder and cheese.

On the cheese side, output picked up in the latter part of the year and offset a reduction in production in the first half; this resulted in purchases coming in ahead of targets for the year. Members’ cheese quality was exceptional in 2010 and was recognised by high profile winning entries in the Nantwich and Frome cheese competitions.

The highlight was undoubtedly winning "Best in Class" for cheddar aged one to two years at the 2010 World Cheese Championship in Wisconsin.

The cheese business continues to work closely with both customers and manufacturers to develop cheese products and profiles which answer customers’ requirements for both indulgence and health.

DPI Speciality Foods

2010 proved to be a difficult trading year for the US subsidiary, DPI Specialty Foods.

The economic recession severely constrained consumers’ discretionary spending in the period under review. While a broad view of the speciality foods category showed slight growth, a more in depth analysis shows this was driven largely by the expansion of private label brands into specialty categories and the continued development of the natural and organic categories.

The competitive landscape for distributors within the specialty food category changed significantly in 2010 with two of the four largest national players merging. This consolidation, along with the increased bidding activity by the largest specialty distributor, resulted in substantial margin compression across all specialty food categories.

Despite this intense competition, sales for the year came in at €710.7m, in line with expectations, but at the expense of margin.

The business responded to this margin pressure by reorganising its structure. By flattening its organisational composition it eliminated unnecessary cost, increased direct accountability, and created a model more suited for the competitive challenges of the future.

This new structure, combined with an increase in value-added initiatives by manufacturers has positioned DPI to be more aggressive in expanding its customer revenue on a sustainable basis through continued penetration of its existing relationships and development of new customers seeking value.

Financial Review

Financial Position As at 1 January 2011 the group’s net debt stood at €123.3m, an increase of €97.1m. The increase funded the seasonal investment in working capital and is primarily derived from increased product prices at the year end.

In April 2009 the group entered into a three year syndicated financing agreement with facilities available of €250m. At the year end the group remained comfortably within its debt covenants.

Finance costs The net finance cost rose in the year by 5% to €4.9m due to the higher level of borrowings during the year.

Taxation The taxation charge for the year fell by €1.96m to €4.8m due to reduced profits.

Capital Development During the year €19.8m was spent on the group’s capital development programme. This was up 26% on the previous year. The main capital projects were in the group’s German and British operations.

Retirement Benefits At the year end, the net deficit on the group’s defined benefit pension schemes had improved to €6.9m from €11.6m in 2009. 

Once off costs As part of the strategic review process the following planned once off costs were incurred during the year:-
In Britain, the IDB merged its consumer foods business under Adams Foods Ltd at a cost of €0.8m.

In December 2010 the IDB disposed of its French subsidiary Loyez Woessen S.A- a butter packaging facility located in Northern France- through a management buy out. The net loss on the disposal was €2.2m.