2017 Chairman’s Report to Members
As Chairman I am pleased to report that the Society has delivered another very strong trading performance in 2017.
Together, the divisions yielded an increase in operating profit, before trade bonuses, of €694k. This was achieved through: (i) additional mill volume sales and continued operational efficiencies, (ii) strong fertilizer and non-agri performances in our stores, (iii) a full year’s trading of our acquisition of O’Sullivans Allcare Pharmacy in Bantry in September 2016 and (iv) further expansion into the Pharmacy sector with the acquisition of McCarthy’s Pharmacy Schull Ltd in September 2017.
In addition to reporting a net positive market value movement in our Aryzta and IPL (formerly One51) share values as required by FRS102, income from investment securities has been positive. The performances of both Drinlis and Shinagh Estates have also contributed positively to profit for the financial year, with further investment in Drinlis having been made in 2017 in order to facilitate a buy-out of that company’s bank loan, thereby strengthening its financial position into the future. The German property has seen a very strong performance again in 2017, the building being almost at capacity throughout the year. With one of the main tenants set to vacate in 2018, considerable strides have been made in finding new tenants together with strengthening existing leases and refinancing the loan on the property.
Carbery reported another strong performance with profit before tax increasing by 16% compared with 2016. This can be attributed to continued positive results from its Dairy, Nutrition and Taste businesses. Carbery in addition to paying a year-end bonus of 1.0 cent per litre on milk supplies during the year, also set aside a €10.0m stability fund to support future milk prices during price challenges.
Milk supply for the year increased by 14.7 million litres (8.6%) to 186.5 million litres. This was driven by favourable weather for grass growth especially in the first half of the year and strong milk prices.
Sustainable milk production is a necessity and certification with the Bord Bia Sustainable Dairy Assurance Scheme is now an absolute requirement for milk collection. Consequently the SDAS bonus was incorporated into the base milk price by reducing the ‘C’ value to 3.55 cents per litre.
The Society offers fixed milk price schemes to our suppliers as a tool to reduce the effects of milk price volatility. Scheme 2 finished in June 2017 and Scheme 4 was made available from January 2018. These schemes are voluntary and suitable for some suppliers that need an element of certainty in their milk price.
Milk quality remains a priority for the Society. We were honoured during the year when Michael and Marguerite Crowley, Bauravilla, Skibbereen finished joint runners-up in the NDC & Kerrygold Quality Milk awards. The Society also had 39 suppliers who received CellCheck Milking For Quality awards, which are given to the top 500 suppliers in the country based on somatic cell count results.
At year end the board approved a bonus of 0.5 cents per litre on 2017 milk supply on top of the 1.0 cents per litre paid by Carbery.
The Society’s stores division continued to perform excellently in the period under review. While sales increased across most areas, labour costs were well controlled. During the year the Society purchased McCarthys Pharmacy in Schull. This strong local business is an excellent strategic fit and enhances our geographic reach in this sector.
Provender mill throughput again hit record levels as farmers had to cope with difficult weather conditions in the second half of the year. The new “HI Maize” concept in our dairy feed range developed during the year has made a significant contribution and is continuing to grow. It is available at various protein levels to meet specific needs under different conditions. Investment in the mill and its delivery fleet continued in order to maintain our trend of improvement within the strict quality requirements of the European UFAS standard. Trade bonuses of €10.00 per tonne on ruminant feed, €5.00 per tonne on pig feed and €7.50 per tonne on fertilizer have been approved by the board.
In the recent past we have had to contend with two extreme weather events which made life very difficult for farmers and truck drivers in particular. I would like to take this opportunity to thank all the staff who went well beyond the call of duty to maintain services and respond to farmers’ needs in very challenging conditions.
I would like to thank the board, management and all staff for all their work and assistance during the year. Mr James O’Donovan is retiring from the board this year and on behalf of the board I want to thank him for his contribution to the Society over his term and wish him well in the future. Oliver Barry will be joining the board, we welcome him and wish him well in his term.
Sincere thanks to all our loyal customers, milk suppliers and shareholders alike for their valued and loyal custom during 2017.
Drinagh Co-op is more than a business, it is part of who we are, in the toughest of terrain in deep West Cork. As Chairman I want to help the Society continue on the journey we are on for the betterment of all of us.