First Milk, the UK's only major dairy company owned by British farmers, has announced financial results for the year leading to 31 March 2016.
The financial performance of the business improved significantly in the year to 31 March 2016 reflecting the results of the turnaround plan executed by the new management team, and the focus on delivering operational efficiencies and quality improvements in the core business.
"Overall we returned a modest operating profit in the year, compared to a large loss in the previous year – a £28.1m improvement," Chairman Clive Sharpe said.
Milk prices continued to decline throughout the course of the year as a result of continued growth in global supply not matched by growth in demand.
Mr Sharpe explained: "The reduced value of milk and other dairy ingredients, accompanied by a significant reduction in the volumes of bought-in milk and the impact of divestment of loss-making businesses, led to a significant drop in group turnover in the year. The business is smaller, but is in much better shape than last year.
"As a consequence of being a more balanced business in terms of supply and demand subsequent to the year-end we have modified our “A” and “B” pricing structures by reducing the proportion of “B” milk from 20% to 10% with effect from April 2016. We also reverted to the 0.5ppl capital contribution due from members as from August 2015, as promised."
Whilst the year to 31 March 2016 has been a difficult year for the dairy industry, First Milk’s business is now on a firmer footing.
"Milk prices are finally starting to rise," Mr Sharpe says, "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 2ppl business performance supplements paid as promised, and a substantial 7ppl increase in the “B” price from July/August 2016.
"It is this with reducing debt and improving liquidity that has allowed the board to increase milk prices paid to members by two pence per litre above market related movements since 31st March 2016."
First Milk's turnaround plan
• Restructuring and downsizing of central functions to reduce overhead costs
• Improving operational performance and product quality in the hard cheese business
• Divestment of the loss-making Glenfield soft cheese business
• Exit from the loss-making Westbury skimmed milk powder, butter and cream business
• Step changing the CNP sports nutrition business bringing it closer to break-even (subsequently divested after year-end)
