Price Volatility Hits Carbery Dairy and Cheese Operations

Although cheese, which is the predominant output of the Dairy division, reacted more slowly to the decreases in the commodity markets, prices still fell by 26% over the course of 2008 and have continued their decline into 2009.

11/05/09 Carbery Group has just issued its 2008 results which show a strong performance for its Ingredients division and a difficult trading year for its Dairy and Cheese operations. Carbery Group’s ingredients division includes the Carbery Dairy Ingredients business and Synergy, its sweet and savoury taste business. The Ingredients business performance was underpinned by strong growth in demand and improved sales in new markets. In contrast, exceptionally difficult global trading conditions affected the performance of the Group’s Dairy and Cheese operations, resulting in an overall fall in Group turnover to €204 million.

“Carbery Group’s key goals for 2009 are to drive more value from its Ingredients division, produce its dairy portfolio as efficiently as possible by minimising cost and maximising support for our dairy farmers,” commented Dan MacSweeney, CEO of the Carbery Group.”

Synergy’s growth has been boosted by growing recognition of its expertise across many sectors of the food, beverage and nutritional products industries. This has been underlined by the launch of natural flavour solutions that help manufacturers stabilise costs while enhancing overall product quality and flavour. Synergy has also capitalised on its global reach with production, R&D and technical facilities in Europe and the USA recently boosted by the opening of two technical centres in Thailand and Brazil. These new resources will ensure that local consumer insight and flavour expertise is available to match the company’s understanding of global taste trends, expanding Synergy’s capabilities and international reach.

Price volatility and decreases in global dairy markets impacted on Carbery’s cheese operations in 2008, leading to reduced operating margins and in turn lower supplier milk prices. Although cheese, which is the predominant output of the Dairy division, reacted more slowly to the decreases in the commodity markets, prices still fell by 26% over the course of 2008 and have continued their decline into 2009. Carbery is focused on sustaining a strong, high quality milk supply from its farmer suppliers. This resulted in the business subsidising the milk price to varying degrees during the course of 2008, assisting the West Cork Cooperatives in paying relatively strong milk prices to their farmer shareholders throughout the year. Processing improvements are set to offset some of market issues and continued investment in the company’s cheese processing facility was successfully commissioned in the early part of 2009.

“Demand for dairy products has and continues to be depressed due to the recession,” continued Mr. MacSweeney. “Commodity prices on the international dairy markets have continued their fall into 2009. With current EU support proving incapable of providing an acceptable dairy market and a sensible income for farmers, it is likely that the market will have to find its way to sustainability.”

For the 2008 fiscal year Carbery Group has reported Pre Tax Losses of €0.8m (2007: €8.5m profit) on turnover which decreased by 8% to €204m (2007: €222m). Operating Profit before Interest, Taxation and Goodwill (EBITA) is reported at €1.9m (2007: €12.2m).

Carbery Ingredients recently commissioned new research at North Carolina State University (NCSU). Focusing on in-depth sensory science and the flavour chemistry of whey protein ingredients, the research programme with NCSU will help Carbery bring new and improved whey ingredients to the market. Carbery recognises the importance of evolving its technology and manufacturing capabilities. Last year significant investment was undertaken in its whey processing facilities in Ballineen Cork, to allow more flexibility in production of high specification ingredients for the nutrition sector.