A Satisfactory Year for the Irish Dairy Board in 2009

April 15, 2010

2009 was a satisfactory year for the Irish Dairy Board (IDB) which benefited from the strength of the Group’s consumer product portfolio, in particular its Kerrygold brand, its extensive market reach and strong overseas subsidiary network.

IDB turnover for 2009 came in at €1.82 billion, down 12.8% on the previous year. This reflected the lower value of dairy product sales and the reduced sales volumes achieved by the US distribution business during the year. The Group’s profitability for 2009, at €37.7 million, was the result of improved performance by its Commercial & Food Ingredients business and the positive trading environment that prevailed during the second half of 2009 helping the Consumer Foods division increase volumes and margins.

In 2009, the IDB’s net assets increased by €25.6 million to €384 million, assuring the IDB’s expansion capability for the future. Group debt to equity ratio was 7%, with bank borrowings, net of cash, reduced significantly to €27 million (€207 million in 2008). A three year syndicated funding agreement for €250 million was secured during the year and this will provide a stable financial base for the IDB in what is likely to be a continuingly difficult credit environment in the medium term.

€7.5 million, in the form of redeemable loan stock, was paid to members and a year-end cash bonus of €6 million was declared. This combined payout, totaling €13.5 million, is a 21% increase over that paid in 2008. The Board also allocated a further €6 million to the Annual Bonus Fund for member cooperatives, which can be redeemed from 2014 onward.

The Board’s Kerrygold brand performed particularly well in 2009 and delivered record sales through its operations in Dublin and its wholly owned subsidiaries in Germany and the USA. 2009 also saw the Board develop and market a new consumer product for Germany, Kerrygold Extra, which will expand the sale of Irish butterfat in what is a very important consumer market for the Kerrygold brand.

Other subsidiaries within the Consumer Foods division, in particular, the Kerrygold Company in the UK, IDB Benelux, and IDB Inc. in the USA, all performed well. Both the Kerrygold Company (UK), and IDB Benelux, benefited from margin growth and the successful implementation of a number of cost saving initiatives. The Kerrygold Company’s eco-friendly facility in Leek has strengthened that subsidiary’s position as the largest supplier of cheese to the UK retail market and the Genk based Yoko Fresh Foods is now the largest cheese pre-packer in Belgium.

The IDB’s Commercial & Food Ingredients division performed strongly. One of its UK subsidiaries, Meadow Cheese Limited, returned to positive growth following a poor performance the previous year. Adams Food Ingredients (AFI), also in the UK, operated strongly and its plans to build new ingredients facility in Leek are already under way. This new premises will enable the company to access more UK market opportunities for Irish based milk powder ingredient products. Meadow Ingredients LLC (USA), based in Minnesota, successfully completed its first full year of operations.

The IDB’s US based division, DPI Specialty Foods, operated in a particularly tough trading environment throughout 2009. Sales across its extensive product portfolio were affected by the continuing recession there. However, targeted action was successfully taken within the division to reduce operating costs and compensate for lost margin arising from the lower sales volumes.

Looking forward, recently appointed IDB Chief Executive, Kevin Lane, commented that strategic planning would be integral to the management and growth of the business. "Over the years, the Irish Dairy Board has built its reputation on the knowledge, relationships, entrepreneurship and passion of its staff and this will be our springboard to set the organisation on its next phase of development. We will focus in on the sectors that can grow the fastest and prioritise our time and future investments accordingly. I have every confidence that this business has both the capability and the opportunity to achieve significant growth into the future", Mr. Lane said.