First Milk losses reflect challenging dairy year

Farmer-owned co-op First Milk made a pre-tax loss of £7.8m in the year to 31 March 2013 on a reduced turnover of £530m.

This compares with a pre-tax profit of £13.3m in the previous year on a turnover of £570m.

Exceptional charges and the decision to support farmgate milk prices in the second half of the year contributed largely to the loss.

“In the year to 31 March we made a small pre-tax loss, before exceptional costs, of £800,000 during the year,” said chairman Bill Mustoe.

“This reflected the board’s decision to support members with a milk price that was not directly in line with the timing of market returns coming through in the second half of the year.”

Exceptional charges during the year totalled £7m, including £4.5m to write off the value of goodwill and depreciation of assets at the group’s Glenfield operation at Cowdenbeath, West Fife, when its grated cheese operation was moved to another site.

There was also an exceptional cost of £1.1m to cover uninsured costs on a product recall.

Borrowings rose by £26m in the year, with almost £10m invested in the company’s sites and £8.4m spent on buying sports nutrition company CNP Professional. Higher cheese stocks also meant more working capital was needed, said a spokesman.

Preliminary results for the six months to 30 September 2013 show a better picture, with pre-tax profits up to £1.1m (£100,000 in the same period of 2012), and turnover up £41m to £280m.

“Our performance in the six months to 30 September demonstrates clear progress on our strategy and makes us confident about our ability to increase returns to members in the remainder of the current financial year,” said Mr Mustoe.

Improved returns for members would come from operating across a range of sectors and markets and a range of products, he said. Exports, food service and lifestyle nutrition were now the focus, as well as developing new products such as Lake District Dairy Company Quark and the recently launched fruit/milk drink Frumoo.

“Five milk price increases in the past six months and a record-breaking return on capital are clear signals of the progress being made. We will look to further increase returns to members through the remainder of this financial year.”

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