Profits up 40% for farming co-operative
Armagh-based farming co-operative Fane Valley has posted a 40% rise in operating profit for its latest financial year, but warned of major challenges in the sector.
At its annual general meeting last week the co-operative said its total operating profit for the year to September 30, 2008 was £5.84m on turnover up 23% to £333.2m. After tax retained profit rose to £2.7m from £0.7m a year earlier.
Commenting on the figures, chief executive Trevor Lockhart said: “These results reflect the improved margins obtained in what was a more buoyant year for agricultural commodities.
“Dairy, redmeat and cereal products all delivered improved returns, a fact that is reflected in both our increased turnover and profit levels. However, since the year end the trading environment has changed significantly, particularly for dairy products, a development which will be reflected in our accounts for the current year.”
Mr Lockhart said all divisions had made a contribution to the performance of the group. Fane Valley owns a number of companies including White’s of Tandragee, Linden Foods and Hilton Meat Products.
Sales in the Armaghdown Creameries division were up 25% reflecting higher sales volumes and higher average selling prices.
However, net debt rose by £7.3m to £16.6m for the period, which Fane Valley said reflected increased working capital requirements and expenditure on a new feed mill in Omagh.
At the start of Fane Valley’s financial year milk auction prices peaked at an average of 34 pence per litre but by October 2008 they had fallen to 18ppl.
“Such volatility will be more common in future,” said Mr Lockhart,
“The challenge for Northern Ireland is to develop a more cost efficient industry which is better equipped to deal with these market conditions. As we have seen export dependent regions such as Ireland are impacted more heavily by weak global markets. It would therefore be a dangerous strategy to allow price alone to regulate the market.”
He added that while there had been a modest improvement in auction prices, currency fluctuations meant prices are still short of delivering a sustainable return to dairy farmers.
Mr Lockhart also said that all businesses now have to contend with a generally more challenging economic climate and low availability of finance and credit insurance. “The challenges presented by the wider economic downturn seem set to persist throughout 2009 and into 2010. Coupled with the dramatic fall in dairy market returns 2009 will be a more difficult year for the Group. However Fane Valley is well resourced to support its operations, thereby leaving the Group in a strong position for the future.”