Armagh based Fane Valley Co-operative this week reported on a positive performance for the year ended 30th September 2014.
A pre-tax profit of £6.8m was recorded on group turnover which increased by 4% to £553m. Group chief executive Trevor Lockhart described the performance as being ‘a solid set of results achieved in a challenging market environment’.
The co-op’s net asset position also strengthened during the year growing by 5% to £73.6m while the Society’s net debt fell by 9%.
Commenting on the group’s latest results Mr Lockhart said: “The society is pleased with the outturn achieved for the year. 2014 was undoubtedly more difficult as the industry adjusted to adverse changes in market conditions. Most notably the continued fall-out from the ‘Horsegate’ crisis within beef and the much anticipated surge in global milk output were the stimulus for reduced farm gate prices. The scale of these challenges was exacerbated by the ban imposed by Russia on a wide range of EU food products linked with the wider political destabilisation in the Ukraine.
“Within Fane Valley we maintained our strong focus on the continuous improvement of our products, processes and people with many significant achievements. The acquisition of McCaughan Animal Health was successfully completed in February 2014 and a head office, warehousing and distribution centre was acquired near Moira in July 2014.”
Mr Lockhart continued: “In Fane Valley Dairies the volumes of milk powder increased by 20% while the quantity of butter reduced by 20% reflecting the product mix and a strong emphasis on whole milk powder. As a result of the initial high selling prices in the year, turnover was at an all-time record level of £106m, a 15% increase. Fane Valley’s direct supply milk pool increased through the year to over 240m litres whilst work commenced on its three year investment programme with a new effluent treatment facility due to be commissioned in spring 2015. The next phase of investment will focus on new evaporation and packaging technology aimed at further enhancing the quality and functionality of the products we produce.”
Referring to market conditions Mr Lockhart commented: “The initial uplift in product prices during January and February 2015 has retrenched somewhat as buyers wait to evaluate the post quota production response in Europe. This market uncertainty is likely to prevail through Q2 thereby limiting any significant recovery in market prices for now.”
In relation to Fane Valley’s agri-businesses Fane Valley Feeds recorded a 6% decrease in revenues, linked to lower raw material costs but encouragingly achieved a 4% increase in volumes maintaining the growth in tonnages secured since the opening of Bankmore Mill in 2010. Higher throughputs in the Newry Mill are now also feasible following a significant refurbishment during 2014.
Building on recent success Fane Valley Stores achieved a further 8% growth in sales. According to Mr Lockhart this growth is being underpinned by a programme of store upgrades and new store openings.
“The acquisition and integration of the three stores formerly trading as McCaughan Animal Health has been extremely positive. Store revamps have now been successfully completed at Ballycastle, Ballymena and Omagh. In addition the size of the Augher Store was more than doubled during 2014.”
Mr Lockhart continued: “2015 has got off to a busy start with the acquisition of the McCauley Agricultural and Dairy supplies business near Rathfriland. This represents an exciting new opportunity for Fane Valley Stores and will contribute to our aim of growing this division both organically and through acquisition.”
Sales within the Linden Food Group (including the Slaney Foods joint venture) were largely unchanged at £336m. Mr Lockhart noted however that 2014 had been a particularly challenging year which resulted in reduced profitability within the red meat division.
He commented: “Positive performances in our branded and added value beef and lamb activities were overshadowed by the pressures in primary beef processing. The demand for supermarket specification animals was intense in the aftermath of ‘Horsegate’ as processors sought to fulfil the requirements of the UK multiples. This initially pushed cattle prices to record highs. At the same time significantly reduced demand across Europe for manufacturing meat resulted in the build-up of substantial meat stocks. This eventually had a more depressive effect on cattle prices. The lower cattle prices did not however compensate fully for the reduced market returns and the end result was a reduction in processor margins, something that was experienced across the trade.”
Fane Valley’s food division comprised of Hilton Meat Products, Duncrue Food Processors and Whites delivered improved sales and profitability in 2014. Mr Lockhart stated: “Each of these businesses continues to make satisfactory progress within their respective market segments and overall make a significant contribution to Group performance.”
Referring to the wider agri-business environment Mr Lockhart highlighted the changing dynamics of the UK retail environment and the associated supply chain pressures. He also pointed to the emerging international opportunities available to NI agri-food and the potential for these initiatives to deliver enhanced returns.
He stated: “Gaining access to markets such as the US for beef and China for a range of products must be regarded as an economic and political priority. Key to unlocking this potential will be obtaining the necessary veterinary and technical certifications. Industry and Government have much to do in this regard.
“In parallel we must also develop the business models which will allow NI to maximise the return from these exciting new opportunities and to fulfil the undoubted potential for the industry as outlined in the ‘Going for Growth’ strategy. Fane Valley is well resourced and ideally placed to play a full part in realising the vision for the future,” concluded Mr Lockhart.