September 12, 2011

 

Bandon Co-op profits up in 2010

 

 

Annual accounts of Bandon Co-op in West Cork, Ireland showed a turnover increase by 75% to US$116 million in 2010.

 

Compared to 2009, the co-op saw its operating profits this year up by 112% to US$1.8 million, in which its farming members suffered from low milk prices and difficulties in gaining access to banking credit.

 

Notable features in the co-op's report included analysis of its future strategy plans for Bandon Vale Cheese - the cheese packing business it acquired for US$2.7 million in December 2009 - plus a welcome return to stronger milk and dairy prices, which led to an output increase from suppliers.

 

The co-op's overall growth was achieved despite a 37% dip in profits to US$1.6 million in its associate companies - notably a poor 2010 for Clona Dairies, in which Bandon retains a 41% share.

 

The bulk of Bandon's profits were generated by sales of milk to Carbery Creameries, in which the co-op owns a stake of just over 20%. Carbery added 26% to the milk price it paid to Bandon's suppliers.

 

Overall sales to the creamery came to US$37.8 million for 2010, which also amounted to a 26% increase on 2009's sales total.

 

The co-op's chief financial officer, John Looney, said that amid a difficult 2009, the year 2010 was a much better year overall, but better for some areas than others.

 

Looney added that was an upturn in the retail sector, which was positive for both our own retail outlets and for farmers in that the rise was reflected in the price they were paid for milk and dairy products.

 

However, the farmers would have liked the price to have reflected world prices a bit more closely, but the price paid by Irish retailers did not rise to match world price levels, he said.

 

Over the next 12 months the cheese price, Looney added that the price should remain stable as it has gone up to a level which has benefited everyone in the industry.

 

Bandon's divisions include dairy processing, feed compounders, vegetable production and retail centres, which include outlets in Kilbrogan, Kinsale and Enniskeane.

 

Bandon co-op expects that the benefits from its acquisition of Bandon Vale Cheese will be more visible in the coming years. The co-op has identified a number of areas in which synergies and cost-savings can be achieved with the cheese packing business.

 

This acquisition should also lead to a strengthening of the co-op's relations with its existing customers as there is a sizeable crossover in the commercial base shared by both businesses.

 

The co-op acquired Bandon Vale in December 2009, at which time the cheese business was already tied into a three-year schedule to repay bank debts. Thus, for now the co-op is restricted in the changes it can make in the business, which means that several cost-savings and synergies are yet to be implemented.

 

Looney added that those savings won't be reflected in the short term, but the synergies will be more possible in due course. It is part of a longer term strategy, a business with which they are very familiar as it has a lot of shared customers between it and their operations.

 

At present, Bandon Co-op is 8% over its milk quota, but is seeing a marked reduction in deliveries from its suppliers. It anticipates that supply levels will continue to fall for the remainder of the quota year from now until the end of March.