IDB slam poor bank sup­port

Irish Independent - Farming - - Farming -

THE Ir­ish Dairy Board (IDB) has raised se­ri­ous ques­tions about the com­mit­ment of Ir­ish banks to the much an­tic­i­pated ex­pan­sion of the dairy sec­tor.

The group is now look­ing for €350m in a new bank­ing deal to fund their cash re­quire­ments for the next three years, €100m more than they had bud­geted pre­vi­ously.

How­ever, IDB CEO Kevin Lane was crit­i­cal of the sup­port that his com­pany had re­ceived from the Ir­ish banks for their fund­ing pro­pos­als.

“We've plenty of in­ter­est from for­eign banks but the ques­tion has to be asked why the tax­payer is be­ing asked to sup­port our banks if they don't sup­port the de­vel­op­ment of Ir­ish busi­nesses,” he said.

Last Oc­to­ber, Lane told a dairy con­fer­ence that the to­tal cost of cop­ing with a 50pc ex­pan­sion could be as much as €850m.

“I stand by those num­bers,” he said at the an­nounce­ment of the group's re­sults for 2010. “If any­thing they have in­creased in the in­terim. I still be­lieve co-ops will need to in­vest €400m in their fa­cil­i­ties, even though I have heard some com­men­ta­tors claim­ing that it can be done for lit­tle or noth­ing.”

It has been more than seven years since the IDB has made a pur­chase of any sig­nif­i­cance, but Mr Lane was adamant that his ex­ec­u­tive team were ac­tively look­ing for new op­por­tu­ni­ties.

“We don't ex­pect to see Christ­mas with­out hav­ing made a move in this re­gard,” he said.

The CEO said his first 12 months at the helm of the group that em­ploys over 3,700 peo­ple world­wide was to com­pletely re­assess the en­tire or­gan­i­sa­tion with a view to re-po­si­tion­ing the busi­ness for the fu­ture.

Re­sults for last year have left the IDB with prof­its down on 2009 by 33pc to €27m, de­spite an in­crease in turnover. Howev- er, the main rea­sons for the in­crease in turnover were im­prove­ments in cur­rency ex­change rates.

Man­age­ment blamed the drop in prof­itabil­ity on higher raw ma­te­rial prices along with ag­gres­sive competition in the US where its DPI dis­tri­bu­tion busi­ness is based.

This ac­counts for ap­prox­i­mately one third of the com­pany's turnover, and man­age­ment said that the re­turn on in­vest­ment from this divi­sion had fallen be­low 10pc in the last year.

“We have re­fo­cused on core ac­tiv­i­ties that in­volve get­ting our mem­bers' prod­ucts to prof­itable mar­kets,” com­mented Mr Lane. How­ever, the IDB are re­luc­tant to off­load their US dis­tri­bu­tion busi­ness .

“As long as we can make a re­turn on in­vest­ment of over 11pc we are happy to keep this busi­ness,” he said. “But the fo­cus has switched from growth to ef­fi­ciency and we've put in a com­pletely new man­age­ment team to en­sure this hap­pens.”

Mr Lane said that with 80pc of the IDB's dairy ex­ports sold within the EU, his fo­cus will now be on de­vel­op­ing new mar­kets for Ir­ish dairy prod­ucts in North Africa, the Mid­dle East and Asia.

“They are riskier mar­kets but we've de­cided to give them a lash. It could be a case of in­vest­ing mil­lions in a plant to process Ir­ish milk powder into some­thing that suits lo­cal tastes or it could just be a man on the ground look­ing for cus­tomers.”

The IDB es­tab­lished a sales of­fice in China and dis­tri­bu­tion chan­nels in Al­ge­ria last year.

The big­gest suc­cess story for the IDB was the launch of a new spread­able but­ter called Ker­ry­gold Ex­tra. It was a mar­ket­ing suc­cess, boost­ing sales by 16pc.

“That was a phe­nom­e­nal per­for­mance which sur­prised us be­cause we thought it would im­pact on our ex­ist­ing but­ter busi­ness. But it has suc­cess­fully tapped into a new de­mo­graphic.”

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