First Milk Uses Reserves to Shelter Members from Market Downturn
First Milk increased the returns paid to its members in the year to 31 March 2009, with the average standard litre price rising to 25.35ppl, an increase of 3.76ppl compared with to the previous year.
Group turnover declined by 3% to £582 million, mainly due to a decrease in powder, cheese and whey returns in the second half of the year.
The business made a loss after tax of £7.1 million year during 2008/09, this included a non-recurring charge of £3.6 million primarily related to restructure and redundancies at the Claygate and Maelor sites.
Peter Humphreys, First Milk's chief executive commented:
"As we have seen from the results of others who operate in the UK dairy sector, 2008/09 was a year of challenges and volatility.
"Recognising that rising on-farm costs were putting serious financial pressure on our producers, as a Board we took the decision in late 2008 to utilise the reserves we had built up in order to shelter members as much as possible from the market downturn.
"Our balance sheet remains strong and our forward plans will ensure that reserves are replaced over the period of our business plan.
Progress in 2009/10
"While the marketplace we operate in remains extremely competitive, we have made good progress in a number of areas since the start of 2009/10.
"Following the acquisition of Bank Of Scotland PLC by Lloyds Banking Group early in 2009, we took the opportunity to strengthen our banking partner relationships and we have now negotiated terms with Lloyds Banking Group and Barclays Bank plc for the refinancing of our banking facilities.
"This is a very important step for our business. By securing a £130 million deal over three years, it provides us with a more flexible approach to our lending and ensures that as the volumes and the value of the milk that we produce grow, the banking facility grows too. The new deal also gives us up to £30 million of additional facilities to help us develop our business.
"In July, we announced our intention to build a new creamery in Campbeltown on the west coast of Scotland. The Scottish Government has committed to providing us with a grant of up to £3.9 million – the largest it has ever given to the dairy industry - while we have agreed a mutually beneficial deal with Tesco to purchase our existing creamery site where they intend to build a new store.
"Our cheese brands are all in growth year on year. The Lake District Cheese Company brand in particular continues to go from strength to strength. It is the fastest growing branded cheddar in the marketplace having now sold more than 5 million packs. The brand is also officially the UK's best cheddar after winning the accolade at the International Cheese Awards at Nantwich at the end of July. In addition, our Welsh brand, Pembrokeshire Cheese Company, successfully secured the position of no.1 Welsh branded cheddar only 12 months after launch.
"We will continue to develop our branded offering. Our target for 2009/10 is to sell 20% of the cheese we produce as brands compared to 5% in 2008/09.
"While the dairy market remains very competitive, I am pleased to say that we are making progress in a number of areas: our customer and product mix has strengthened markedly over the last year; we are making great strides in improving our cost base; and we have protected our balance sheet while closely managing cash and stocks."
Group communications director, First Milk
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