Dairy cooperative Milk Link has revealed details of its performance last year ahead of the release of its audited annual report and accounts, which will be published on 12th June.

Amongst the highlights released in advance by Milk Link are:

• Group turnover up £42 million to £628 million (+7.1%);
• Turnover per litre up from 38.6ppl to 41.9ppl (+8.5%);
• An increase in comparable Earnings Before Interest Tax Depreciation and Amortisation of £4.5 million to £33.7 million (+ 15.4%).  It should be noted that the 2010/11 reported EBITDA was £34.4 million which included £5.1 million of Member ‘levy’.  However from 1 April 2011 the ‘levy’ ended for the majority of Milk Link Members and therefore the comparative EBITDA was £29.2 million;
• Comparable Profit Before Tax up by £4.3 million to £14.3 million (+42.7%);
• An increase in the Member milk price during the year of an average 2.85ppl.  This meant that in comparison to the previous year Milk Link generated and paid out an additional £33.7 million to its Members for their milk; 
• An increase in Member Processing Interest Payment relating to the 2011/12 financial year of £2 million to £5.95 million equating to a 12.8% return on Members’ Qualifying Loan balances;
• Cumulative Reserves increased by £3.4 million to £13.5 million (+34.2%);
• A slight rise in the ratio of third party borrowings to Members’ Funds (gearing)  from 1.18 to 1.19;
• An increase in Group borrowings of £2.1 million to £82 million. However, at the same time capital expenditure increased to £10.0 million compared to £5.5 million in the prior year;
• Member milk volumes increased year on year by 148 million litres up over 14%. 

However, last week, following similar actions by other major processors, Milk Link cut prices for its farmer suppliers by 1.5 pence per litre, effective from 1st June. Last Monday, the group said in a statement, “It is with regret that the Milk Link Board has announced a reduction in its Member milk price; the decision reflects the significantly weaker returns being generated from the dairy ingredients and fresh liquid milk markets.”

The farmer-owned group pointed out that the price cut was lower than those being dealt by other processors and pledged to freeze prices through June to August. In 2011, Milk Link’s 1,600 members received 15.4 per cent higher pay than during the previous year. The cooperative’s chief executive Neil Kennedy said, “Our main focus is on returning a sustainable milk price to our Members; we are determined to shelter them from the impact of what are very challenging economic and trading conditions.”

Nevertheless, following a 2.5ppl rise for member producers last year, prices will fall by 1.5ppl from next month.

The group benefited from strong commodity prices for skimmed milk powder, cream, curd and whey products and increased milk production by members. However, despite raising the farm gate price for producers, the group’s average price paid remained below Defra’s UK farm gate average.

Ronnie Bell, Milk Link Chair, today commented on the phyrric performance report, “Despite challenging economic and trading conditions we strengthened financially, commercially and operationally. Most importantly, we were able to reward the hard work and commitment of our dairy farmer Members by both increasing the price we paid them for their milk and by delivering a record rate of return on their investment in the business. 

“I believe, we started to demonstrate the important role progressive, forward-looking, farmer-owned co-operatives such as Milk Link can play in building a growing and vibrant British dairy industry.”
 

However, he went on to say, “It was with great regret that after the year end the Board announced a reduction in the Member milk price. We fully understand the financial burden this will have placed on our farmers especially given the continuing high level of on-farm input costs.  As such, the Board and senior executive team are committed to identifying further ways of maximising returns for our Members.”

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