2018 Chairman’s Report to Members

Creamery volume increased by 11.4 million litres (6.1%) on 2017; mill output was up by 22.8 thousand tonnes (30.8%) and sales in the stores increased by €4.19 million (10.2%). Together, the divisions yielded an increase in operating profit of €0.799 million (2017: + €0.740 million). In addition to the increase in mill volume sales, there were continued operational efficiencies achieved. Fertilizer volume increased by almost 5%, while other sales in our branches network were up over 7%, which included continued growth in the non-agri sector. The pharmacy division of our stores saw continued sales growth, particularly the Schull pharmacy operating for its first full year in the Society and having successfully moved to a new, bigger location.

The Consolidated Income Statement reports a negative €4.81 million investment income compared with a positive €1.99 million in 2017. Under Financial Reporting Standard 102 (FRS102) investments that have a reliable market value have to be stated in the financial statements at that market value. The impact is that profits or losses for these investments are reported on the difference in market value from one financial year to the next rather than on the profit or loss that may have been realised on the sale of these investments. In 2018 there were no realised losses in respect of the Society’s holding of Aryzta and IPL (formerly One51), but under FRS102 an unrealised loss as a result of the market value movement between 31 December 2017 and 31 December 2018 of €7.27 million had to be recorded. This was offset in part by a €1.08 million positive market value movement for Mainstream. The performances of both Drinlis and Shinagh Estates have again contributed positively to profit for the financial year while in Germany, new tenants and the strengthening of some existing leases in the building there have together offset some of the negative impact of one of the main tenants vacating during 2018.

Carbery reported a strong performance for 2018 with profit before tax increasing by 3.7% on 2017 (2017: + 15.8% on 2016). This can be attributed to continued positive results from its Dairy, Nutrition and Taste businesses. Having utilised €4.26 million from the stability fund in supporting milk price during 2018, Carbery allocated a further €4.26 million to the fund at the end of the year increasing the balance back up to €10 million. Carbery is to invest €78 million in a diversification project, which will broaden the range of products produced to include mozzarella cheese. Carbery Ballineen is the largest cheddar cheese plant in Ireland and the largest market for that product is the UK. Amid Brexit and all the turmoil, it is strategically very important for Carbery and its milk suppliers that this investment is made, which will open the door to new and exciting markets going forward.

During the year Carbery celebrated 50 years since the commencement of operations. To mark the occasion all milk suppliers and families were invited to an open day at the Ballineen headquarters in October. Many of our suppliers availed of the opportunity to see the facility and to meet the Carbery staff.

Milk supply for the year increased by 11.4 million litres (6.1%) to 197.9 million litres. In fact, milk supply has grown by 31.8% or 47.8 million litres since the last full year of the milk quota regime in 2014. The growth in supply for 2018 came in spite of a difficult year for milk production. Early Spring supply was reduced due to very poor weather conditions. Mid-Summer production was curtailed by an unprecedented drought where supply was only maintained by feeding high levels of concentrates. A good backend to the year allowed suppliers to make up the previously lost ground.

At year end the board approved a bonus of 0.5 cents per litre on 2018 milk supply.

Milk quality is critical for the Society. Our suppliers continue to supply excellent quality milk and have been to the forefront in local and national milk quality competitions. Brendan and Pauline O’Driscoll, Leap won the Drinagh section of the Carbery milk quality awards. Timothy and Shane McCarthy, Drimoleague represented the Society in the Bord Bia Origin Green Sustainable Producer awards and Liam and Dolores O’Donovan, Clohane were category winners at the NDC & Kerrygold Quality Milk awards. The Society also had 51 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.

Our stores operation continues to perform a very important function in the area and in the period under review made a significant contribution to the bottom line.

The mill had an exceptional year with record breaking throughput. This was due mainly to adverse weather from cold to wet and drought. Due to the severity of the situation in March 2018 the board sanctioned a rebate of €20 per tonne for that month. Trade bonuses for the year of €15 per tonne for ruminant feed, €5 per tonne for pig feed and €10 per tonne for fertilizer have been approved by the board. In July An Taoiseach, Mr. Leo Varadkar, officially opened our new mill extension. On a beautiful summer’s day, a large crowd attended a very pleasant function.

2018 will be go down in history as one of the most difficult years for farmers in the area due to adverse weather conditions. The wet weather early in Spring was followed by snow in March, which in turn was followed by a scorching drought for most of the Summer. Farming has to go on despite the weather conditions. The Society staff also had to contend with this extreme weather and increased demand for feed to keep animals fed. I would like to take this opportunity to thank all staff for the extra effort needed to keep the feed supplied and milk collected in difficult conditions.

I would like to thank the board, management and all staff for their efforts during the year.

Thanks to all our loyal customers, milk suppliers and shareholders for their custom during 2018.

Drinagh Co-Op is a very special organisation, it is made up of people, not just things and it’s these people that make things happen.

TJ Sullivan
Chairman

Attachments:
Drinagh Annual Report 2018
Drinagh Annual Report 2017
Drinagh Annual Report 2016
Drinagh Annual Report 2015
Drinagh Annual Report 2014
Drinagh Annual Report 2013
Shareholder Data Protection Notice