The farmer-controlled milk processing business First Milk has returned to profitability as the culmination of a difficult period of trading and subsequent “rapid surgery” under its former chief executive Mike Gallacher.
The Glasgow-based company has reported a net profit of £6.05 million on revenues of £202.59m in the year to March 31st 2017, compared to a loss of £5.13m and sales of £291.45m in the previous 12 months.
The period saw the group divest loss making subsidiary Glenfield Dairy and its joint venture stake in the Westbury milk powder facility in 2015, followed by the CNP Sports Nutrition company in 2016. As a result, cost of sales in the latest year fell to £181.44m from £245.70m the year before. The divestments have left “a profitable core of businesses based around hard cheese and liquid milk contracts,” it notes. First Milk has also agreed long term supply deals foe cheese with Tesco and milk for Nestle in the UK and Ireland.
Brexit is likely to cause “considerable economic and political uncertainty”, it notes. But it is confident that ”the role for a scale British dairy co-operative is even more compelling post-Brexit and we aim to demonstrate this in the years ahead.”
New chief executive Shelagh Hancock, in post since April, says the group will be increasing its milk pool to meet growing consumer demand, while improving productivity and investing in additional processing capacity and capability.
“Over the last two years, First Milk has transformed,” says chairman Clive Sharpe. “We have put in place a new business strategy, divested loss-making subsidiaries, improved our operational performance and implemented an effective co-operative governance structure.
“The transformation of our business is complete and, as a result, First Milk today is now a more focused and financially secure business. This is demonstrated through these significantly improved financial results and, most importantly, through our ability to increase milk prices to our farmer members ahead of the market during the last financial year.”
George Jamieson, NFU Scotland’s milk policy manager, states: “The solid trading results published by First Milk are very encouraging and are indicative of the hard work and sacrifice which has steered the business towards calmer waters, following on from the drastic steps which had to be taken over the last few years.
“More can be done to build trust and while there are new governance structures in place, there is need to improve genuine communications, constantly review whether the governance structures ensure members are well represented and consulted.”