First Milk has announced a £2.8m drop in net profits compared with last year.
The co-op has stressed that this is in line with its budgets and a direct consequence of improving the relative milk price it paid to its farmer members.
First Milk’s annual results for the year ending 31 March show that group turnover increased by 22% from £206.5m last year to £252.7m this year.
This was driven by a combination of new business growth, higher cheese and brokered milk selling prices as well as higher returns from whey.
First Milk annual results highlights
- Group turnover up 22% to £252.7m (2017: £206.5m)
- Net profit for the year of £3.2m (2017: £6.0m)
- Net bank borrowings of £44.9m (2017: £38.6m)
- Capital investment of £3.2m across all sites in the year
- Total group capital and reserves up by £5.4m to £27.4m
However, operating profits (before exceptional items) fell from £11.7m in 2017 to £6.6m in 2018, with net profits slipping from £6m in 2017 to £3.2m in 2018.
The business, which has been implementing a turnaround plan since it posted pre-tax losses of £25m in 2015, said the fall was in line with its budgets and expectations.
“Our strategic objective is to maximise the return of value to members, primarily through milk price, while retaining sufficient profits to meet our business obligations and commitments,” said a statement.
“Profit comparisons year-on-year therefore need to be considered in conjunction with relative improvements in milk price returned to members.
“The reduction in profit in 2018 is a direct consequence of improving our relative milk price.”
First Milk’s milk price index, which tracks its milk price against its competitors on a 12-month basis, showed an improvement of more than 0.5p/litre between March 2017 and March 2018.
This difference is after any market-related movements in price have been paid, so demonstrates a real improvement versus the market, says the co-op.
First Milk chief executive Shelagh Hancock said: “This second year of positive trading results demonstrates that First Milk is consistently delivering stable financial performance and making solid progress on strengthening and growing the business.
“Critically, we have done this while putting our farmer members back at the heart of the business and, most importantly, delivering improved returns to our members.”