Donegal Creameries today reported a 16.5 per cent rise in turnover to €69.6 million for the first six months of the year boosted by a strong performance from its agribusiness unit.
The agribusiness profits offset poor returns from commodity dairy products, where profits fell from €1.8 million in the first six months of 2007 to €586,000 for the same period this year.
NCB Stockbrokers said poor dairy market returns hit Donegal more than its peers because it assembles milk for sale to third party processors “thus experiencing weaker returns in difficult markets than processors who manufacture the milk into products”.
As a result pretax profits for the period were €3.47 million, down on the €4.80 million reported over the same six-month period in 2007.
Donegal Creameries said it expects this year to be "more challenging" than 2007.
The company said its balance sheet remains strong with total assets rising by €18 million to €121 million. Net debt increased to €14.4 million reflecting, according to the company, the financing of investments and increased working capital requirements.
Earnings per share increased 5.8 per cent to 30.8 cents.
Turnover at its agribusiness unit increased 23 per cent to €39.7 million and the company said its seed potato business continues to grow and said the outlook for this area of the business remains "positive".
The board is also upbeat regarding the potential of its property and investment arm and said the conversion of the 2,500-acre An Grianán estate, near Burt in Co Donegal to what would be the biggest organic farm in the State is on target one year into a two-year plan.
The company added it purchased 6 acres of development land in Northern Ireland during the first half of the year.
Worrying the board are commodity dairy products and its producer supplier base. Donegal Creameries said "milk prices have not been reduced sufficiently to reflect falling market returns during the first six months of the year" and that the full impact of this remains a concern.
Finance director Tony Hanlon said he expected returns from the dairy unit to improve and that the company performance was slightly ahead of internal forecasts. "We always knew this was going to be a difficult year".
In a research note Davy Stockbrokers said the turnover from the dairy division grew only marginally to €29.9 million and profit was €0.6 million, compared to €1.8m in the first half last year.
"This outturn reflects the significant decline in market returns for the period".
At 4.30pm shares in Donegal Creameries were unchanged at €5.80. The stock is down almost 8 per cent this year, outperforming the Iseq which has fallen 35 per cent this year.
