Ornua – The Home of Irish Dairy – Reports Profit Before Tax Up 23%

April 21, 2015

Strong Year Underlines Readiness for ‘Post Quota’ Market

Ireland’s largest exporter of Irish dairy products, Ornua Co-operative Limited (“Ornua”), today, Tuesday 21 April 2015, published a review of its 2014 operational and financial performance.  In the last full year before the abolition of EU milk quotas, Ornua delivered a very strong performance, characterised by excellent revenue growth and investment in the development of new routes to market for Irish dairy products.

Ornua owns the iconic Kerrygold brand which is synonymous the world over for quality butter, cheese and milk powders, selling hundreds millions of packets of butter each year.  Currently supplying dairy branded products and ingredients into over 110 markets around the world, Ornua’s mission is to open and develop valuable global markets for dairy products and in doing so, deliver strong returns to the farmers it represents.

Highlights

>Key Performance Indicators	2014  € million	2013 € million	Year-on-Year change
>Turnover	2,339.8	2,124.1	10%
Operating Surplus (EBIT)	30.3	25.8	17%
Profit Before Tax	28.1	22.8	23%
Members Bonus Declared	12.0	11.0	9%
Net Assets	436.0	417.4	4%

 

To view the annual report please visit www.ornua.annualreport14.com.

Commenting, Kevin Lane, Ornua CEO said:

“In addition to an excellent financial performance, 2014 was a year in which we significantly increased the capacity of our business through brand growth, innovation and in-market investment. We enter into this new era for Irish dairying in an excellent position, with a strongly performing organisation, geared for growth.”

Financial Overview

2014 saw a strong performance by the Group, delivering growth both in Turnover and Profitability.  Turnover rose by 10% to €2.34 billion, helping to drive a Group Operating Surplus of €30.3 million. This was achieved alongside considerable investment across the business including a €36 million spend in brand development and market support.  In addition, purchases from members were up 41,000 tonnes on 2013, an increase of 16%.  Profit Before Tax rose to €28.1 million, up 23% year-on-year.  On the back of this outturn, a €12 million bonus was declared to members, including a cash bonus of €7.5 million, up 15% on 2013.

A substantial increase in investment in M&A and Capital Expenditure activity in 2014, in preparation for the increased Irish dairy volumes post quota, saw Ornua end the year with €99.3 million of debt.  The Group Balance Sheet is very strong with net assets of €436 million.  In 2014 the Group successfully secured new five-year syndicated bank facilities totalling €420 million.  These new increased facilities provide Ornua and the Irish dairy industry with significant funds to meet domestic expansion and international growth requirements.

Market Comment

Despite the pronounced weakening of dairy markets from early in 2014, the Ornua Purchase Price Index, a monthly indicator of market returns, returned an average value of 118 for the year.  This was five points ahead of the three-year average for the period 2011-13 and a strong performance when compared to EU and world market prices in 2014.  The end of 2014 and early 2015 has brought some welcome stability to markets.  Ornua’s role in the market is to deliver the best possible return for Irish farmers.  As part of doing so, delivering premium products to global markets offers the best opportunity to increase the value of Irish milk and to mitigate against the challenges caused by the cyclical nature of commodity prices.

Business Growth Strategy

Over the past number of years Ornua has been developing a global commercial infrastructure to take advantage of the post EU milk quota era.  The last year saw a continuation of the already substantial investment which has been made in recent years in growing brands, New Product Development, in-market expansion, acquisitions, operational efficiency and people development.  A culmination of this work was marked with the unveiling of a new global corporate identity.  On 31 March 2015, the eve of quota removal, the Irish Dairy Board became Ornua – The Home of Irish Dairy, marking the latest step in its exciting journey of growth.

Key operational highlights from 2014 include:

• Increased in-market presence with 35 new people placed in-market in the past 18 months
• Significant in-market investments in Africa, Germany, Spain, the US and the UK including:
  • Opening of a new facility at Hilbert, Wisconsin marked the completion of a $80 million expansion programme in Ornua Ingredients North America
  • Acquisition of assets and business of FoodTec, a UK specialist ingredients business
  • Acquisition of a Spanish cheese business
  • €14 million investment in packing and New Product Development facilities in Neukirchen-Vluyn, to meet the increased demand for Kerrygold products in Germany
  • Completion of a long-term, strategic cheese supply partnership between Ornua’s UK subsidiary, Adams Foods Limited, and First Milk, the UK dairy co-operative
• Approval for the construction of a €36 million Centre of Excellence for Kerrygold Production & Butter Packing in Co. Cork.  This new development will ensure a world-class supply chain to support the growth and development of the iconic Kerrygold brand.

Outlook

Ornua is confident, recognising the challenging market conditions that exist, that in 2015 our business will continue its excellent record of growth.  All of Ornua’s investments are being made with a view to ensuring that high quality Irish dairy products are in the right international markets.  This enables the business to continue to deliver a strong, sustainable return to the Irish dairy farmers we represent.

2014 Business Review

Ornua Foods

The Ornua Foods division has responsibility for the international marketing and sales of its consumer product portfolio. The division reported a solid result for 2014, with Turnover up over 7% and with all markets contributing well.  Continued investments in branding and New Product Development have strengthened the position and offering of Kerrygold and other brands such as Dubliner, Pilgrims Choice, MU, Beo and Shannongold.  Extensions of the Kerrygold label to new products such as spreadable butter and continental style cheeses have contributed to growth in Germany, where the brand is the market leader.  One of the year’s most exciting launches was into a completely new category with Kerrygold Irish Cream Liqueur.

Ornua Ingredients

The Ornua Ingredients division is responsible for the procurement of Irish and non-Irish dairy products and for the sale of dairy ingredients to food manufacturers and foodservice customers.   Key activities include dairy commodity trading, cheese grading, and the development and supply of innovative and functional food solutions through a range of subsidiaries in the UK, the US, Spain and Saudi Arabia. The division reported a solid trading performance for 2014, with Turnover up over 14% and strong growth in volume and Operating Surplus.  Both Ornua Ingredients Ireland and Ornua Ingredients North America continued to perform strongly.  The Ornua Ingredients’ UK businesses returned an overall solid performance, despite what was a challenging year for that particular market.  The year’s highlights included the opening of a new facility at the Hilbert site in Wisconsin, the acquisitions of a cheese business in Spain and a specialist ingredient business in the UK.  The division is currently constructing a cheese manufacturing facility in Riyadh, Saudi Arabia to service the Middle East North Africa market.

DPI Specialty Foods

DPI Specialty Foods, Ornua’s US based speciality food distributor, is a sales, marketing and logistics provider with a range of over 40,000 products.  DPI continued to grow sales in 2014 by both winning new customer contracts and solid year-on-year growth.  In 2014, Turnover was up over 9% with DPI clearly maintaining its place as the third largest US distributor of speciality foods to the retail sector.

About Ornua

Ornua Co-operative Limited (formerly The Irish Dairy Board) is an agri-food commercial co-operative which markets and sells dairy products on behalf of its members, Irish dairy processors and the Irish dairy farmer.  We are Ireland’s largest exporter of Irish dairy products.

Our core purpose is to bring quality Irish dairy products to markets around the world.  We do this by sharing the story of Irish farming and explaining how Irish dairy products are produced from the milk of grass-fed cows, the most sustainable dairy farming system in the world.  By building markets for dairy products, we aim to increase the value of Irish milk and to deliver strong returns for Irish farmers.

Operating from 19 subsidiaries worldwide, we have sales and marketing teams working in-market across all four corners of the globe from Algiers to Bejing to Lagos and LA.   We are the proud owners of the Kerrygold brand.  Our brand portfolio also includes Pilgrims Choice, Dubliner, Shannongold and BEO, a popular milk powder sold in Africa.

With pre-packing and blending facilities located in Germany, the UK, the USA and the Middle East and extensive R&D experience, we are consistently exploring new formulation possibilities to enhance our ingredients range. We develop bespoke food ingredient solutions for many of the world’s major food manufacturers.