IDB Reports Strong Results and “Ambitious Expansion Plans” for Kerrygold

17 Apr 2014 --- The Irish Dairy Board (IDB) has announced details of a new €30m investment which will create 50 new jobs in Cork and serve as an innovation centre for Kerrygold. The announcement comes amid reports of a 5% increase in turnover for IDB in 2013 to €2.1bn.

The new centre will be a 50,000 tonne capacity, fully integrated butter production and packing facility, which will also act as an innovation centre for Kerrygold as there are ambitious expansion plans for this brand post the abolition of milk quotas in 2015.

The IDB reported record sales for Kerrygold in 2013 with 350m packets sold worldwide. The brand is now the number one butter in Germany with a 17% market share (and 55% of the branded butter market), and the number one imported butter in the US.

“I am pleased to report a very strong business performance in 2013, combining solid earnings growth across all divisions and enhanced product returns to our members,” explained ceo Kevin Lane. “Our continuing investment in brand growth, new product development and in-market expansion is designed to ensure that our members and suppliers can expand on the basis of sustainable market demand.”

“The abolition of milk quotas in 2015 will present the Irish dairy industry with its first opportunity for meaningful expansion in the past 30 years. Our strategy is to ensure that IDB members and dairy farmers are optimally positioned to participate in this expansion opportunity through enhanced routes to market and sustainable, market led products.” Mr Lane added.

The Group reported Turnover of over €2.1 billion in 2013, up 5% year-on-year and a very strong Operating Surplus of €25.8 million, up 25% on prior year.  The Group closed the year with a very strong Balance Sheet, with net assets of €417 million, debt free and with Cash of €51.9 million, a strong financial base from which to support its business growth strategy.

In addition, in May 2013, the Group made an exceptional payment of €2 million to an emergency fund for Irish dairy farmers in response to the unprecedented fodder crisis.

The Q1 drought in New Zealand and a prolonged winter in Europe led to a reduction in milk output levels in the first half of the year compared to 2012.  This relative milk scarcity occurred in the face of tight stocks and very strong emerging market demand, particularly in China.  It took the full year before the EU and New Zealand managed to climb above the previous year’s levels.  

Milk scarcity in the face of strong demand caused prices to rise quickly in early Q2, with Whole Milk Powder prices rising more than 60% between January and April 2013 on the GDT. EU prices were up more than 25% on average over 2012 levels for Butter, Skim Milk Powder and Whole Milk Powder, with returns for commodity cheeses up c.10%.  These very high prices, combined with benign input costs, stimulated a supply response.

The Group’s Consumer Foods division reported a strong result for 2013 against a back-drop of high input prices.  Turnover for the division rose by 6%.  Record volume and market share were achieved in Germany and the US and the Pilgrims Choice and Kerrygold brands were further enhanced in the UK.  2013 also saw the continuation of the Group’s investment in its brands through increased advertising and promotions, research and New Product Development.  

In addition, investment in in-market presence increased significantly, with new offices in Africa, Russia and China, complementing the Group’s growing presence in the Middle East.  With these additional investments, the Consumer Foods business is positioned for optimum growth.

The Dairy Trading & Ingredients division reported a solid trading performance for 2013, with strong growth in volume, Turnover and Operating Surplus.  Turnover for the division rose by 4%.   The Republic of Ireland and US businesses performed particularly well, but the UK businesses, while up year-on-year, did find local market conditions more challenging in 2013.  The businesses acquired in recent years (Meadow Ingredients USA LLC, Thiel Cheese & Ingredients LLC and The Cheese Warehouse Limited) have been successfully integrated and are performing ahead of plan.  

The restructuring of the US speciality food distribution division, DPI, is completed and this division reported year-on-year growth in both Turnover and Operating Surplus.  Despite the continuing competitive market, Turnover growth has been achieved from both existing and new customers, with a pipeline of significant new business already secured for 2014.  With a strong management team now in place, with a clear understanding of the customer needs, this division is well positioned for growth in 2014 and beyond.

Over the past four years IDB has been preparing the business for the removal of milk quotas.  The Business Transformation Strategy outlined in 2010 has been successfully implemented across the Group and is delivering real, measureable results.