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Milk Link reports ‘satisfactory’ first-half performance
UK dairy cooperative Milk Link has published its 2009 half-year trading update, which reported that the business performed satisfactorily in the first six months of the financial year despite a challenging economic and trading environment.
Full-year profits for 2009/10 are expected to be broadly in line with last year.
Milk Link’s financial performance in the first half of the year reflected its emphasis on maximising member returns at a time of downturn in dairy commodity prices, the import of ‘cheap’ cheese and unprecedented levels of branded cheese promotions, which have stripped value from the market.
Financial and trading highlights
- Milk Link’s member milk price improved relative to the market year-on-year by around 1ppl in comparison to the Defra UK farmgate average. By the end of September, Milk Link’s average actual price paid to members was around 0.18ppl ahead of the Defra average.
- Group turnover was slightly down to £271m (08/09 H1 c. £278m).
- Profit before tax was £4.9m (08/09 H1 c.£1.4m). This reflects the fact that, last year, Milk Link bore exceptional costs in relation to the disposal of its Staplemead creamery, whereas this year there are no exceptional costs in H1.
- Earnings Before Interest, Tax, Depreciation and Amortisation (Ebitda), reduced from £17.5m in 2008 to £12.5m. This reflected the higher relative milk price paid to members (equivalent to c. £5m in H1), the reversal of cheese stock profits and slightly lower cheese sales as a result of the high level of branded promotions and substitution of cheaper imported cheese in certain customers.
- Group borrowings (before the acquisition of the Llandyrnog creamery) fell from £92.7m to £76.6m. Including the acquisition, group debt increased to £101.7m.
- Member funds increased to £64.4m, with group gearing standing at 1.58 (08/09 H1 1.89).
Milk Link chief executive, Neil Kennedy, said: “I’m pleased to be able to report that Milk Link performed satisfactorily in the first half of the current financial year despite the backdrop of a very challenging economic and trading environment. Although we regrettably had to reduce our milk price, we have done so both later and by less than many of our competitors, and in relative terms our member milk price continues to improve vs the market. At the end of September, our average actual member milk price was 0.18ppl above the Defra UK farmgate average and in comparison to the same period 12 months previously we have improved our relative milk price by 1ppl.
“In the first half of the current financial year, in response to the highly challenging trading environment, we have taken and implemented a further series of difficult decisions to drive out costs from the business and improve our operational performance. This activity is ongoing in many instances, but we will start seeing the benefit of them in the second half of the year.
“At the same time, we continued our commitment to adding value to our members’ milk through investing in innovation and marketing and delivering service excellence to our customers. As a result, we’ve continued to strengthen as a business both structurally and commercially and we’re confident that we are well positioned to handle the volatility and pressures within the dairy market.”
Source: Milk Link
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