First Milk made an operating profit of £1.1m in the first half of its financial year, compared with a loss of £7.6m in the same period last year.
The six months ended 30 September 2015 showed significant improvement over the previous year, said the co-op. It expected results for the second six months to March 2016 would also show a positive operating profit, compared with a £12.3m loss in the second half of last year.
Chief operating officer Mike Gallacher took up his post in March this year. Changes he has made so far include the introduction of A and B pricing for farmer members’ milk and several top-level appointments in the group’s executive team.
The better results were down to a combination of changes implemented as part of Mr Gallacher’s turnaround plan, said a spokesman. There had been staff reductions and every department had to deliver better figures, he said. The better business performance included reductions in stocks carried, changes in stock valuations, member (farmer) contributions and the move to A and B pricing.
First Milk is now expected to make an operating profit for the current financial year as a whole. Debt fell to £46.1m by the end of the first half year, compared with £84m at September 2014.
“The actions taken to reduce costs, improve quality and drive operational performance are delivering results, with further progress planned over the next year,” said Mr Gallacher.
“We are confident this will deliver improved milk prices and a more sustainable business model for our farmer shareholders.
“My team and I are very aware of how tough it is at present on farm and the need to sustain this improvement trajectory to deliver benefits to our members.”
First Milk’s governance underwent a review over the summer, with the result that a new smaller commercial board structure is likely to be approved by members before year-end. A commercially experienced chair will be recruited to replace Sir Jim Paice.
In the meantime, the co-op is renegotiating its borrowing – its current facility runs until 1 February.