Efforts to improve the fortunes of dairy farmers’ co-operative First Milk are beginning to pay off.
The Glasgow-headquartered company made headlines in January last year when it was forced to delay payments to farmers after admitting it was suffering cash-flow problems.
An extensive turnaround plan, which included several high-level appointments and an extensive cost reduction programme, has resulted in a narrowing of losses.
The latest accounts for the company, for the year ended March 31, reveal a pre-tax loss of £3.439million. This compares to a loss of £25.542million the year below.
Turnover was down by just over a third to £291.451million, from £442.192million previously.
Chairman, Clive Sharpe, said the financial performance of the co-op had “improved significantly” and although the business was smaller, it was in much better shape than the year before.
He said the cost of implementing the turnaround plan, which also included the sale of the loss-making Glenfield soft cheese business in Fife to Graham’s The Family Dairy, had resulted in exceptional items of £5.1million in the year.
Improvements made during the year included a £3million investment in new cheese belts at the Lake District Creamery in Wigton, Cumbria, and work with Ornua Foods, previously Adams Foods, to improve the cheese business.
Mr Sharpe said the co-op had modified its AB pricing mechanism so that farmers were only paid the B price for 10% of the milk they produced, compared with 20% previously.
“We also reverted to the 0.5p a litre capital contribution due from members as from August 2015, as promised,” added Mr Sharpe.
He said the co-op had renewed its banking facilities until February 2017 and it would shortly start discussions to extend them for a longer period.
“Whilst the year to March 31, 2016, has been a difficult year for the dairy industry, First Milk’s business is now on a firmer footing,” added Mr Sharpe.
“Milk prices are finally starting to rise, and we have been pleased to deliver the first fruits of the turnaround plan in the form of higher, non-market driven, milk prices to members, with 2p a litre business performance supplements paid as promised, and a substantial 7p a litre increase in the B price from July/August 2016. The hard work done throughout the last year has started to show returns.”
Mr Sharpe said the improved financial performance of the co-op had continued into the current financial year.
Earlier this week the co-op increased its A price for its Scottish mainland milk pool by 1.22p to 21.24p a litre. The B price has also increased by 5p to 25p a litre for November.
