Dairy co-op First Milk has bucked the sector’s challenging market conditions to increase sales in a year of “profitable growth”, its latest accounts have shown.
The supplier – which manufactures cheese and dairy ingredients for the likes of Tesco (via a partnership with Ornua) and Nestlé – saw its turnover climb by 38% to £456m during the year ending 31 March 2023, according to its annual report, published this week.
Operating profit before exceptional items was described as “stable” at £5.1m – the same level as its previous financial period. Growth came mainly from the recovery from rising milk prices from its customers, First Milk said.
The business also benefitted from an increase in capacity of 20% at its Haverfordwest creamery and agreed a new partnership with Arla Foods Ingredients to produce a specialist whey powder at its Lake District Creamery.
And in a year when First Milk also achieved B Corp status, other highlights included the launch of its regenerative farming-derived Golden Hooves cheddar brand, while its farmer members committed an extra 7% of land area to regenerative farming practices.
Like the wider dairy sector, First Milk pointed to “rapidly rising costs” during the financial year, which led it to increase its average milk price over the period by an average of 14.4p per litre.
As a result of rising milk prices and a related £32.5m increase in its stock value (without any significant volume changes) its net debt increased by £20.5m (or 47.2%) to £63.9m.
However, it stressed that this increase would be “recovered when the maturing cheese is sold profitably in the future”.
The supplier added the business had managed to refinance quickly over the past year to keep up with market rises and ensure it could “maximise the milk price” paid to its members, helped by the support of its lender Wells Fargo and new banking provider HSBC.
This demonstrated “proof that of how far we’ve come as a business”, and the “resilience that is now built in” to the dairy co-op, it said – in a nod to the supplier’s difficulties during the middle of the past decade.
“The last year has been tumultuous, with a roller coaster ride on milk prices and energy costs creating challenges across the whole dairy supply chain, from farm to consumer,” commented First Milk CEO Shelagh Hancock.
“Yet, whilst these massively changing market dynamics have been challenging, the value we have in our secure contractual relationships meant that we were able to maximise the milk price paid to members as quickly as possible,” she said.
“Despite the volatile market conditions, our cheese business has continued to grow and we have continued to progress our regenerative approach, receiving external acknowledgement of our progress through B Corp certification and the King’s Award for Sustainable Development.”
Hancock added she was “confident that we are on the right path and that growing recognition of our approach to regeneration will help to differentiate our offer and help us to deliver our vision of enriching life every day to secure the future”.
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