Aurivo Co-Operative Society Ltd. Full Year Financial Results for year ended 31 December 2019
Strong underlying financial performance in 2019 Ongoing capital investment programme solidifies and underpins Aurivo’s future performance
AURIVO, the globally focused Agri business headquartered in the North West of Ireland, today announced full-year financial results for the year ended 31 December 2019. Our five-year investment programme is well and truly underway, with €37m of the €48m budgeted investment programme completed and installed, ensuring that Aurivo is well-positioned to take advantage of future market opportunities and continued growth in milk supply.
2019 marked another year of volatility in global dairy markets. Aurivo’s turnover for the year was €446.8m, an increase of 1% on FY 18 (2018: €443.8m). Aurivo reported a 5% improvement in Group operating profit (before exceptional items) to €3.2m, (2018: €3.0m).
Operational highlights:
The completion of three significant capital investment projects in our Dairy Ingredients plant, animal feed mill and our liquid milk processing site. Cumulative investment over the past three years was €37m
459m litres of milk processed – a 4.5% growth on 2018
Two new fixed milk price schemes were introduced in 2019, bringing the number of fixed milk price schemes to six
Once off exceptional cost of €6.4m included an impairment charge of €5.96m on goodwill in our For Goodness Shakes brand, restructuring costs in the business of €1.3m and settlement gains on our defined benefit pension of €868k
A solid year for new product development and innovation across the business
Given the high level of capex in recent years, net debt increased to €18.8m (2018: €14.6m)
EBITDA for 2019 was €8.9m (2018: €8.2m)
Net debt to EBITDA ratio at 31/12/19 is a manageable 2.1 times
Average price paid for milk in 2019 was 34.07cpl
Performance & outlook
Commenting Donal Tierney, who was appointed Chief Executive of Aurivo in January 2020, said:
“As we near the halfway point of our 2022 strategy, Aurivo progressed from the planning and building stage to the implementation and realisation of significant capital investment in the co-operative. During 2019, we completed three significant capital investment projects – our new €26m, five-tonne dryer at our dairy ingredients site; a €6m investment in front-end processing at our liquid milk plant; and a €1.2m investment in storage and out-loading facilities at our animal feed mill. The strategic objectives of the Engage 2022 strategy continue to resonate throughout the business and underpin our growth.”
“Through cost efficiencies, we will ensure lower operational costs and eliminate all waste. We intend to invest further in the latest technology to provide enhanced data and insights, which will guide our decision-making and help us concentrate on areas of growth and development.”
“The political volatility that prevailed in 2019, coupled with the COVID-19 Pandemic that has swept the nation in 2020, has brought unprecedented challenges to our business and the economy. For over 120 years we have made every effort to improve the viability of local farming communities and create employment. It is this community ethos along with Aurivo’s proven track record that will see us through this challenging time and enable us to continue to serve our members and communities of the future.”
Pat Duffy, Chairman of Aurivo said,
“We are beginning to reap the benefits of our five-year investment plan as capacity and capabilities have increased throughout our businesses. These achievements will allow Aurivo to grow and develop in order to secure and strengthen the future of our co-op.”
FY 19 business performance overview:
Progress in 2019 is outlined as follows across Aurivo’s businesses:
Consumer Foods
Turnover in Consumer Foods decreased marginally in 2019 to €95.1m (2018: €98.8m), this was due to a combination of lower market prices for cream and a slight reduction in private label volume.
We continued to develop our milk brands, Connacht Gold and Donegal Creameries, we launched 11 new product lines across the key retailers in the liquid milk and spreadable butter categories. Our products continue to be supported by our loyal customers and recognised for their quality as we won the prestigious award of Best Dairy Supplier at the annual Checkout ‘Best in Fresh’ Awards for the second time. Four Great Taste awards were also secured across our Connacht Gold products.
We invested €6m in our liquid milk plant in Killygordon to increase front-end processing capacity and significantly improve energy efficiency. We invested €0.5m in a new distribution hub for milk and butter in Achonry, Co. Sligo, which will further streamline our logistic operations for liquid milk and butter products.
Climate change and environmental concerns continue to gain momentum and we, as a key stakeholder within the dairy sector, are integrating more sustainable processes within the co-operative. We invested in heat pump technology in our Killygordon milk plant to reduce on-site fossil fuel consumption by 80%. A new packing machine now produces fully renewable bio-based milk cartons manufactured from renewable sugarcane and paperboard. We are producing the first private label milk for retailers on the island of Ireland in a 1.75 litre carton.
Our For Goodness Shakes brand retains its position as the leading ready to drink sports nutrition brand in the UK market. However, the loss of a key customer and competition from alternative brands has resulted in profit erosion of the brand, which has resulted in an impairment charge of €5.96m in 2019. For Goodness Shakes remains a very profitable and valuable brand.
Dairy Ingredients
2019 saw an increase in market returns for protein products but a gradual reduction in pricing for butter. The net effect of this coupled with the growth in milk volume of 4.5% led to an increase in Dairy Ingredients turnover growing to €169.2m (2018: €153.4m). The Forto brand of enriched milk powder (EMP) has grown by 38% since its launch in 2017. Aurivo representatives witnessed firsthand the success of Aurivo’s milk powder products as they travelled to our most significant export markets in the Middle East, Africa and Asia.
In July 2019, we marked the completion of a new five-tonne spray dryer in Ballaghaderreen, increasing capacity by 55%, this was the result of €26m investment in Dairy Ingredients. The project was turned around within 14 months, on time and on budget. Ireland is one of the world’s most carbon efficient dairy producing countries and
Aurivo believes the opportunities for Irish dairy in global markets are far reaching.
The theme of climate change and sustainability is embedded in Dairy Ingredients. Aurivo is the only dairy processing co-op in Ireland using woodchip and bulk liquid natural gas (LNG) as an energy source to process milk.
Agri Business
Aurivo’s Agribusiness reported turnover of €115m, although a 5% reduction on 2018 (2018: €120.7m). This was a very satisfactory performance and ahead of budget. Feed and fertiliser tonnage were both on budget in 2019 as volumes returned to more ‘normal’ levels in 2019, following the exceptional weather-related trading volumes experienced in 2018.
Our Homeland & Nutrias brands continued to grow as we brought a new pet food range, along with organic animal feed, to the market during 2019. We also invested in new out-loading bins at our feed Mill, which have increased storage capacity and flexibility.
The Homeland.ie website has successfully established our online presence and, coupled with the launch of the click-andcollect service, brings enhanced convenience to our customers. Our commitment to our customers was recognised as the retail business achieved a Best Rural Business award and an Innovator Excellence award.
Marts
Aurivo livestock marts recorded a decline of 2% in cattle throughput for the year, which was in keeping with trends for the region. Balla Mart, however, did show an increase of some 3% in cattle throughput. Average cattle prices were back on average by €31 per head. 60,000 sheep were sold in the year, marginally back on last year with prices on par with 2018. The reduction in the suckler herd along with an emphasis on a younger age profile for slaughter-fit cattle is driving a reduction in availability for all livestock marts. This resulted in a 5% decrease in turnover to €67.5m (2018: €71.0m). Health and safety at our facilities remains a key focus as we strive for zero notifiable accidents or incidents.