Ornua Operating Profit up 69% robust performance despite Covid-19

Ornua Press Release (21.04.21)

Ornua, one of Ireland’s leading dairy companies, today published its operating and financial results for the twelve months ending 26th December 2020 with Group turnover reaching €2.3 billion. Group EBITDA* grew by 49.6% to €107.4 million, driving a robust 69.2% increase in Operating Profit* to €83.1 million. This performance was achieved against the backdrop of a complex trading environment dominated by Covid-19, market volatility, and the macro-economic challenges of Brexit and punitive US tariffs.

Ornua exports to over 110 countries and is the proud owner of the iconic €1 billion Kerrygold brand which experienced 13% volume growth in 2020, selling over 10 million packets of butter and cheese a week.

2020 Financial Highlights

2020 Operational Highlights

– Over €1 billion (366,000MT) in purchases of premium Irish dairy products providing a critical global route to market for Ireland’s milk suppliers during a period of unprecedented challenges.
– Ornua delivered a 54% year-on-year increase in the brand premium and bonuses paid to co-op members with a record €68.7m Ornua Value Payment.
– Kerrygold sales volume up 13%, with 10 million packets of butter and cheese sold each week.
– Robust response to Covid-19 keeping Ornua’s people safe and ensuring continuity of supply to key customers facing sudden surges in demand globally.
– New fit-for-purpose governance structure embedded to drive future international growth.
– Launch of Growth for Good 2025, Ornua’s ambitious new five-year growth strategy.
– Expansion of Ornua Ingredients North America facility, unlocking 30% growth capacity.
– 25% decrease in absolute emissions and 38% decrease in carbon intensity per tonne of product since 2016, demonstrating commitment to growing sustainably.

Commenting on the robust performance delivered in 2020, John Jordan, CEO Ornua said “Ornua had a unique performance in a unique year, and we are pleased to report a record profit with Operating Profit of +69%. The strong fundamentals of our business – great people and great products – came to the fore allowing us to maximise the opportunity presented with the change in consumer behaviour, doubling down on driving profitable value growth against the backdrop of the global pandemic. This performance delivers on our commitment to maximise returns to our member co-operatives and the 14,000 farmers who supply them.

Ornua’s 60 years of experience navigating global trade stood to us in 2020, as did our balanced product portfolio, geographical spread across 110 markets, and strong financial foundations. Our branded and own-label portfolio benefitted from the change in consumer behaviour which saw Kerrygold volumes grow by 13%, which coupled with our Ingredients business delivering positive year-on-year growth, enabled us to pay €68.7million to our Member co-ops through the Ornua Value Payment.

Looking ahead, we are cautiously optimistic about the gradual re-opening of economies as the global vaccine rollout gathers pace; we have clarity on Brexit, and we welcome strong signals from the US on improved US/EU trade relations. This, coupled with Ornua’s clear and ambitious new 5-year strategy focussed on driving profitable growth in priority global markets, will ensure we continue to deliver value for the 14,000 Irish farming families we represent.”

Financial Performance

Ornua delivered a strong performance in 2020 with Group turnover of €2.3 billion, EBITDA* of €107.4 million, up 49.6% year-on-year, and Operating Profits* of €83.1 million, up 69.2%. This unique trading performance is a result of Ornua’s agility in maximising on the opportunity arising from the sharp change in consumer behaviour due to global lockdowns. This financial performance is unlikely to be repeated as the retail and foodservice global landscape re-adjusts to the re-opening of economies post-pandemic.

Ornua’s purpose is to create value for Irish farming families by providing guaranteed routes to market and maximising the price paid back to co-ops and farmers for Irish dairy produce. In 2020, Ornua purchased over 366,000 MT of Irish dairy products at a value in excess of €1 billion, reaffirming its position as the largest buyer of Irish dairy products globally. In addition, Ornua paid Member co-ops an additional €68.7 million, up 54%, in premiums and bonuses through the Ornua Value Payment in proportion to the product supplied to Ornua.

Business Performance

In 2020, Ornua’s branded and own label portfolio benefited from the change in consumer behaviour which saw people all over the world gravitate towards brands they trust. Kerrygold sales volume grew by 13% with over 10 million packets of butter and cheese sold weekly. In the US, Kerrygold has become the preferred dairy brand for 10% of US consumers, establishing it firmly as the No. 2 butter brand. Kerrygold butter continues to be the fastest selling brand on supermarket shelves in Germany, with brand strength supporting the launch of additional cheddar products in 2020. In the UK, Pilgrims Choice outperformed the cheddar category with 29% growth year-on-year, securing its position as the No. 2 cheddar brand in the UK market.

Ornua Ingredients delivered positive year-on-year growth despite being particularly exposed to the impact of large scale and prolonged restaurant closures globally. 2020 was a year of sustained investment, with Ornua Ingredients North America expanding its facility in Wisconsin, unlocking a further 30% growth capacity. Ornua Ingredients Europe implemented Evolve, a business transformation project, in two of its UK manufacturing facilities enhancing its ways of working and supporting the business with world-class technology to drive maximum production capabilities and efficiencies.

Market Outlook

Dairy markets proved resilient throughout the pandemic, aided by retail sales and strong demand for milk powders from China, Southeast Asia, and Africa. Product balance within commodity markets supported milk price stability with Irish milk price averaging above 30 cents per litre. Looking to 2021, the outlook is largely positive with the market underpinned by foodservice recovery and strong export demand. Global milk output is likely to continue growing in 2021, with a projected growth of +1.3%.

Looking Ahead

The strong fundamentals of the Ornua business were evident in 2020 and remain key as the global economy looks set for a staggered re-awakening in 2021. Ornua’s market-leading product portfolio and diversified global reach will underpin the business’s long-term sustainability into next year and beyond. While the global trading environment continues to pose challenges, there is cautious optimism in the clarity around Brexit, the suspension of US trade tariffs and the re-opening of global economies in line with the vaccine roll-out. Ornua’s co-operative ethos ensured a compelling sense of purpose across the organisation in 2020. Looking to 2021 and the pursuit of the new success stories for Irish dairy, Ornua will continue to focus on its people, serving its customers, and returning value for Irish farming families.

The author:

Jack Mullen Editor of Farm Safely
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