Operating profits more than doubled at Dairygold last year as a massive restructuring programme at the troubled co-op began to deliver its promised result.
Dairygold said yesterday that it had made "solid progress" on its mission to become an internationally competitive food business in challenging times.
This saw operating profits on continuing businesses grow from €7.3 million in 2002 to €15.6 million last year. The result came before a hefty exceptional charge of €46.5 million, however, as the co-op absorbed the cost of its restructuring and, more specifically, the departure of some 825 staff. This pushed pre-tax profits down from a small profit of €2.3 million in 2002 to a loss of almost €40 million last year.
Dairygold chief executive Mr Jerry Henchy, who was appointed in 2003 to lead a turnaround in the group's operations, said he was happy the firm had "nailed" its financial targets for the year.
"I recognise that we have a long way to go," he added, describing last year as a period for "housekeeping".
He said the next two years would be about "the things that require more thought". In particular, he pointed to a plan for substantial consolidation within Dairygold's dairy processing wing, which accounts for about 40 per cent of overall business.
"If we look to the future, we cannot continue to process milk in five sites," said Mr Henchy.
He accepted that the Government-sponsored Prospectus report, which last year recommended fairly radical consolidation in the dairy sector, might have concentrated the minds of processors but suggested that consolidation might have happened naturally anyway.
Dairygold employs about 550 people in milk processing but this staffing level looks difficult to sustain beside Mr Henchy's vision of just one or two processing plants.
The group has discussed processing consolidation with its various dairy neighbours such as Kerry Group and Tipperary Co-op but has yet to arrive at a final solution.
"Certainly, you can expect to see a decision made this year," said Mr Henchy, adding that the capital aspects of the consolidation would probably follow in 2005.
"Everybody in the organisation understands that the structure is still not right."
The overall shape of Dairygold changed substantially last year, with the firm selling two Irish beef plants because of lack of scale and outsourcing its milk transport division. The two moves formed part of Mr Henchy's "fix it, outsource it, sell it or shut it" strategy.
About 825 staff were shed over the year, with 300 going as various undertakings were sold and another 170 departing with the transport division. The remainder were let go because "their positions were no longer viable", according to Mr Henchy.
He acknowledged that the industrial relations problems that had hit Dairygold over the past few months were a natural consequence of change.
"Historically, we lived in a very sheltered cove," he said.
Turnover on continuing operations across the group dropped from €989 million to €964 million in 2003, with the fall largely attributable to weakness in consumer foods.
Dairygold plans to use its existing capacity to win more own-label consumer goods contracts in the potentially huge UK market this year, having "sharpened up" its selling skills in 2003.
"The next stage is bolt-ons in the UK," said Mr Henchy.
Despite last year's sizeable restructuring charge, Dairygold's balance sheet remains strong, with debt levels declining by €5.8 million to €126.3 million in 2003 as cash flow strengthened.
