Business Performance Supplement introduced

Business Performance Supplement introduced

During recent member meetings across the UK, the First Milk Board covered progress made in reshaping the company through exit-ing poorly performing business units, cutting costs and operational improvements.

Now that the company is back trading profitably, First Milk is introducing a 2ppl Business Performance Supplement which will be awarded to members in stages to reflect these improvements.

Chief Executive Mike Gallacher commented:

"While the majority of our commercial returns are linked directly to market prices and therefore not within our control, our relative performance versus others in the UK market is within our control.

"We have therefore committed to members that we will deliver a 2ppl improvement in milk prices over and above any market-related movement in returns. We do not intend to save up money, but will instead pass cash through to members as soon as it becomes available.

"The first part of this money will come in June with a 0.25ppl Business Performance Supplement. This amount will build in the coming months as we improve our relative performance and will be measured by our Member Council using a new First Milk Price Index that will also be externally audited.

"Compared to a year ago, First Milk is a very different business. We have used the opportunity provided by members to develop a clear plan which we are delivering month by month, working with urgency to pass back improvements in the business directly to members."

Over the last month, several dairy processors have announced price cuts which impact on First Milk's basket/market mechanisms and reduce the commercial prices that are received by the business.

Based on these reduced market returns, First Milk's A prices would have reduced from 1st June by 0.69ppl for its four creamery pools, by 0.59ppl for our Scottish mainland pool and by 0.57ppl in the Midlands pool.

However, taking both the reductions in the milk price mechanisms and the 0.25ppl Business Performance Supplement for June into account, First Milk's net June price changes are as follows:

• -0.44ppl for its four creamery (Haverfordwest, Lake District, Campbeltown & Arran) milk pools
• -0.34ppl for the Scottish Mainland pool
• -0.32ppl for the Midlands pool


Notes to editors

First Milk's farmers that are part of Nestlé pools in Scotland and Cumbria will not receive this Business Performance Supplement as their price is set separately in liaison with Nestlé.

First Milk's turnaround plan has included:

Improved financials:
o Operating profits of c£5m were delivered for FY16, an improvement of £25m on the prior year
o Debt has also continued to reduce, and at the end of March 2016 was £33m, compared to £84m as at Sept 2014
o Improvements to cheese quality are driving operational performance and an improved financial position

Heavyweight commercial appointments including:
o Clive Sharpe, chairman, (ex Quorn Foods,  Burtons Biscuits, Duerr's jams, WT Foods, Golden Wonder and Homepride Foods)
o Mike Gallacher, CEO (previously UK MD of Mars Petcare and senior leadership positions within Mars Inc. Asia Pacific and Europe),
o Brian Mackie, chief operating officer (ex Starbev/Molson Coors Europe, Maxxium Worldwide, Cott Corporation)
o Carl Ravenhall, non-executive director (former MD of Müller Wiseman Dairies, Milk Link & Adams Foods)
o Kenny Bain, group operations director (ex Unilever, ABF, Mars),.

A full strategy review, which resulted in:
o A clear focus on the core businesses of hard cheese manufacture and liquid brokerage
o The sale of the Glenfield Dairy business based in Fife, Scotland to Graham's the Family Dairy in November 2015
o The exit of its joint venture in Westbury Dairies in January 2016.

Wide ranging Governance changes including a smaller, more commercial Board and new Member Council

About First Milk

First Milk is the UK's only major dairy company, 100% owned by British farmers.  It supplies a wide range of dairy products and dairy ingredients to customers in both national and international markets including block cheeses, raw milk, butter, skimmed milk powder, whey proteins and sports nutrition brands.

It is headquartered in Glasgow with seven manufacturing sites across England, Scotland and Wales.

For media enquiries, please contact:

Paul Flanagan
M: 07767 241452