Cheese and milk sales on the up at First Milk

Farmer-owned dairy co-operative First Milk increased turnover and operating profits in the year ending 31 March 2019, growing sales of both liquid milk and cheese.

The co-op saw group turnover rise from £252.7m in 2018 to £272.3m in 2019, with operating profit (before exceptional items) jumping from £6.6m to £7.2m.

However, net profits were down from £3.2m in 2018 to £2.7m in 2019, with the business incurring exceptional costs of £2.2m, some of which relate to the end of its old haulage contract and the potential sale of its Scottish creameries.

See also: First Milk announces Arran creamery closure

It admitted its plan to sell off the creameries at Campbeltown and Arran, because they were too niche for its new streamlined operation, had not proceeded ‘as anticipated’ and it was currently working to bring this process to a conclusion.

Earlier this month, it announced the closure of the Arran site and said operations at Campbeltown would be scaled back while negotiations over a potential farmer buyout continue.

In its annual report, the business said its financial performance was in line with budget expectations and it was in a good place to move forward and grow.

It is the third year in a row that First Milk has posted positive financial results and follows a massive shake-up of the business which suffered a pre-tax loss of nearly £25m in 2015.

Over the past 12 months, the co-op has reduced its bank borrowings by £3.8m year-on-year and invested £4.4m across its sites to increase operating capacity and reduce costs.

It had also delivered improved returns to its farmer members by improving its relative milk price.

This is measured by its milk price index, which tracks its milk price against its competitors on a 12-month basis.

‘Stable financial performance’

Shelagh Hancock, First Milk chief executive, said: “Over the last 12 months we have been focused on further strengthening and developing the business, with stable financial performance, efficient manufacturing, strengthened commercial relationships and, crucially, improved returns to members.

“With a strong platform in place, we are committed to maximising the value we return to our members.”

Ms Hancock said the future success of the business would come from building demand, growing capacity and securing supply – in that order.

Growth in sales

Over the past 12 months the co-op has grown the cheese volumes it supplies to Ornua, an Irish agri-food business that is the largest buyer of British cheese in the UK.

It has also grown its international cheese sales and now exports to more than 21 countries, including Saudi Arabia, Turkey, Jordan, Australia and Taiwan.

The business has also taken steps to maximise returns from whey by forming strategic partnerships that allow it to tap into rising global demand for whey concentrate.

On the liquid milk side of the business, First Milk remains Nestlé’s single largest UK supplier and it has also been recruiting farmers in the Somerset area to supply Yeo Valley with conventional milk for their own-label manufacturing.