Ireland’s Ornua sees 14.8 percent rise in operating profits and growth in US market, as group gears up for Brexit
04 Apr 2019 --- Irish dairy cooperative Ornua Group, owner of the Kerrygold brand, has released its financial overview of 2018, attributing a “successful year” to a significant and sustained investment across its facilities and brand portfolio. Ornua reports selling 3.4 billion liters of milk across 110 different countries worldwide. The overview highlights an overall turnover reaching €2.1 billion; Group EBITDA of €60.5 million, up 12.5 percent; and operating profit of €40.4 million, up 14.8 percent year-on-year.
Ornua Ingredients, specializing in bespoke cheese and dairy solutions for the global food manufacturing and foodservice sector, was reported to have delivered strong purchase volumes and continued to grow its value-added routes to market for Irish dairy products. In the US, Ornua Ingredients had a record year with double-digit volume growth. Ornua Ingredients Europe saw its new product pipeline grow significantly during the year with a new line commissioned in Ledbury, UK.
Among other key operational highlights from the report notes the elevation of Ornua’s Kerrygold Butter to the number 2 spot of best-selling brand butter in the US market, with 2.6 million packets of the brand product sold each week. An €18 million product brand premium has been paid to members for product sold through Kerrygold. In total, Ornua purchased 342,000 million tons of Irish product in 2018. Additionally, to keep up with demand, construction of a new 110,000 sq. ft cheese production facility is underway in Spain.
Financial performance in 2018
Overall, Ornua’s turnover reached €2,082 million with Group EBITDA of €60.5 million up 12.5 percent, and operating profit of €40.4 million, up 14.8 percent. The late production season and Brexit planning resulted in the Group carrying additional stock over the year-end, bringing net debt to €110.1 million compared to €0.3 million net cash in the prior year.
The Ornua Purchase Price Index vs LTO (European Milk Prices) shows an average of 99 percent. In 2018, Ornua purchased 342,400 metric tons of Irish product and paid a total Members’ Bonus of €19 million, up 27 percent year-on-year. The company purchased 570 million liters of milk under fixed-price contracts, as a way to help protect members against volatility.
Brexit
For over the last two years, Ornua has been preparing for the potential impact of Brexit. The UK remains a “key strategic market” for the dairy group. Changes in the status quo have been noted as competitive challenges for Irish dairy exports.
“Ornua has developed sales channels across a range of markets and will continue to invest to minimize the potential impacts of any Brexit deal,” reads a statement by the company. Representatives of the Group were unavailable for comment on which key foreign markets will be pursued.
Ornua’s growth in global demand in 2019 has been forecast to be between 1 – 1.5 percent, implying that volatility is likely to be supply driven. Subdued EU milk supply in the first quarter of 2019 and solid export demand were said to support commodity prices and – outside any significant changes to the trading environment – average farm-gate milk prices are likely to remain at 30-32 cents (including VAT) per liter.
Brand performance
Other highlights for Ornua’s dairy brand Kerrygold include accelerated growth in Germany, where Kerrygold Butter is the fastest selling product of all food and drink brands in the retail market. Kerrygold also saw a 25 percent volume growth in the US, which marks the ninth consecutive year of double-digit volume growth.
