Brexit poses ‘considerable challenges’, as 16% of Aurivo milk comes from North, says CEO.
A no-deal Brexit could hit a significant part of co-op Aurivo’s milk processing business, its chief executive Aaron Forde has warned.
Operating profits at Aurivo fell 23 per cent to €3 million last year. Figures released by the north western-based business show sales rose 4 per cent in 2018 to €443.8 million from €426.4 million in 2017.
Speaking after the co-op published its results, Mr Forde noted that Brexit posed “considerable challenges” to the co-op, as 16 per cent of the more than 400 million litres of milk it processes a year comes from Northern Ireland.
Mr Forde explained that milk from the north would have to be exported again to a non-EU country to avoid tariffs should the UK crash out of the bloc without a deal.
However, the business could encounter further barriers in non-EU countries that did not have trade agreements with the UK, Mr Forde added.
“In an ideal world, we would like it to stay as close as possible to how we operate today,” Mr Forde said of any EU-UK trade deals negotiated post-Brexit.
Aurivo’s profits fell in 2018 partly because it paid suppliers between half and one cent a litre more for milk than the market price at different times during the year to help combat volatile global conditions, Mr Forde explained.
Various factors fed into this, including unusual weather across the globe, and what he called “lower than optimum oil prices”.
Oil-producing countries make up 30 per cent of the global market for milk, but demand there is tied to crude prices, which were below $70 (€62) a barrel for most of last year, Mr Forde pointed out.
Aurivo invested €22 million in its business last year, the beginning of a €48 million programme that the co-op says will position it to take advantage of future opportunities.
Last week it began producing milk power from a new €26 million drying plant at its facility Ballaghadereen, Co Roscommon, which Aurivo installed as part of the programme.
Sustainability and growth
Mr Forde said in a statement that the co-op would focus on growing a sustainable business that will create value for its members.
“Our €48 million planned investment programme aims to ensure we become a sustainable partner of choice for our customers, both nationally and internationally, with the facilities and capabilities to produce the best possible products,” he added.
Pat Duffy, chairman of Aurivo said 2019 will see the co-op further expanding its business.
Sales at its consumer foods division, which includes Connacht Gold and Donegal Creameries milk and For Goodness Shakes nutrition, were steady at €98.8 million last year.
Dairy ingredients grew turnover to €153.4 million in 2018 from €143.5 million the previous year while agri-business sales expanded to €120.7 million from €102.1 million.
Cancellations due to weather and to allow work to boost customer safety following an incident left turnover at its marts division at €71 million last year, down from €81.6 million in 2017.
Overall, Aurivo processed 439 million litres of milk last year, making butter and powder with 327 million litres of the total.
Aurivo sells it products to 50 different countries and has customers in the Middle East, Africa and south and central America.
The co-op was previously known as Connacht Gold.