for the period ended 26 December 2015
The Directors submit their report together with the audited financial statements for the period ended 26 December 2015.
The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with Irish law and regulations.
Irish law requires the Directors to prepare financial statements for each financial period giving a true and fair view of the state of the Society’s affairs at the end of the financial period and of its profit or loss for the financial period. Under that law, the Directors have elected to prepare the financial statements in accordance with Generally Accepted Accounting Practice in Ireland (accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland and Irish law).
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Society will continue in business.
The Directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the Society and enable them to ensure that the financial statements have been properly prepared in accordance with the requirements of the Industrial and Provident Societies Act, 1893 to 2014. They are also responsible for safeguarding the assets of the Society and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Society’s website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors, through the use of appropriate procedures and systems and the employment of competent persons, have ensured that measures are in place to secure compliance with the Group’s obligation to keep proper books of account. The books of the Company are kept at the registered office of the Parent Society.
The Directors, after making enquiries, have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future. For this reason, the going concern basis continues to be adopted in preparing the financial statements.
The Group is engaged in the purchase, marketing, and sale of consumer dairy products and dairy food ingredients worldwide through its subsidiaries and extensive network of agents and distributors. The Group is comprised of two divisions – Ornua Foods and Ornua Ingredients. Ornua Foods activities are supported by subsidiary companies in and in-market teams in China, Germany, the Middle East, the UK and the US and Consumer dairy products are marketed primarily under the Kerrygold, Dubliner, Forto, Pilgrims Choice, Eureka! and Beo brands. Ornua Ingredients sells and trades products across the globe. Its facilities include powder blending and packing in the UK and ingredient cheese processing in Saudi Arabia, Spain, the UK and the US.
The Group reported a strong performance in 2015. Group EBITDA* increased by 18% to €58.8 million. Turnover increased by 9% to €2.5 billion. The Group closed the year with net debt of €17 million and a very strong Balance Sheet with net assets of €526 million, up 21% on year prior. Product purchases from members rose by 16% to a record 286,000mt. This reflects the impact of Ornua’s work in opening new routes to market for Irish products and delivery of strong product price returns.
Members bonuses of €14 million, up 17% on 2014, were declared to our members including a cash element of €10 million payable in April 2016.
The Group divested of its third division, DPI, a US speciality food distribution company, in late 2015. This yielded significant proceeds for the business some of which will be invested in opening new routes to market for Irish dairy. The balance will facilitate the payment of a special cash bonus to members of €15 million in April 2016.
Ornua Foods continued to deliver strong growth, maintaining market-leading positions in many of its core markets. In the US, Kerrygold butter delivered a substantial increase in sales volume, significantly exceeding expectations. While in Germany, Ornua Deutschland achieved a record year of growth across the business. In the UK, Pilgrims Choice, the number two cheddar brand, achieved record growth.
Ornua Ingredients saw a strong performance throughout the business, with strong growth in Ireland, a turnaround performance in the UK, the establishment of Ornua Ingredients UK and further development of the recently established Ornua Ingredientes España. Despite a small volume growth in 2015, Ornua Ingredients North America experienced a reduction in profitability due to low availability of cheese solids for processing, record butter input costs and low CME cheese prices. In response, a strategic review of the business was undertaken, from which a robust management strategy was put in place.
2015 will be remembered for being an extremely challenging year across the world’s major dairy-producing regions. A combination of strong supply and demand weakness led to global prices falling. The Ornua PPI averaged at 93.5 points for the year, reflecting the sharp decline in global dairy prices.
Ornua has, over the last five years, delivered a Business Transformation Strategy which has prepared the business for the expansion in Irish dairy output.
Key 2015 operational highlights:
• Kerrygold Dubliner Wedges, Kerrygold Butter Sticks, Kerrygold Dubliner Premium Cheese Spread launched in the US
• Eureka! range for children launched in the Middle East
• Kerrygold Soft launched across international markets.
The Group has made significant investment across the business over the past few years as it prepares to take advantage of the opportunities the post-quota environment will bring. The Group will continue to invest in its people, develop new products and build and enhance routes to market, to fulfill its role in driving the growth potential of the Irish dairy sector.
Innovation has played a critical role in the Group’s success over recent years. The NPD team has made great progress in developing innovative branded and ingredients products to meet consumer and customer needs across global markets. The Group will continue to invest in its consumer and market insight capabilities to drive its growth plan.
It is the policy of the Group to ensure the safety, health and welfare of its staff, contractors and members of the public by ensuring that each Group site operates in full conformance with local legislative requirements and that appropriate policies and practices are in place to ensure safety in the workplace.
A list of the significant trading subsidiary companies is included in Note 30 to the financial statements.
Executive remuneration at Ornua is subject to full oversight by the Board and specifically its Personnel and Remuneration sub-committee. The Remuneration Committee has delegated responsibility for the implementation of the remuneration policy of the Board, determining the remuneration arrangements for the Members of the Board, Chief Executive, COO and Senior Executives. The process includes Review and Assessment against comparable organisations, ensuring that remuneration arrangements are consistent with Shareholder interest and the Vision, Mission and Values of the Society. The resources of Independent Professional Advisers were used in the Review and Assessment process.
The Directors and Secretary and their families had no interests in the shares of the Parent Society or any other Group company at any time during the period.
The Group did not make any political donations during the year (2014: nil).
The rules of the Society provide that the Auditor shall be appointed at the Annual General Meeting. The incumbent Auditor is eligible for reappointment.
There have been no significant events since the period end which require disclosure in the financial statements.
|Aaron Forde (i) (ii) (iii) (iv)||Chairman||Aurivo Co-operative Society Limited|
|Jim Russell (i) (ii) (iii) (iv)||Vice Chairman||Irish Co-operative Society Limited|
|Jim Bergin (iii) (iv)||Glanbia Ingredients Ireland Limited|
|John Comer (iv)||Irish Creamery Milk Suppliers Association|
|Denis Cregan (ii) (iv)||Appointed December 2015||Independent Non-Executive Director|
|Michael Hanley (i)||Lakeland Dairies Co-operative Limited|
|Martin Keane (i)||Chairman of the Audit Sub-Committee||Glanbia Co-operative Society Limited|
|James Lynch (ii)||Dairygold Co-operative Society Limited|
|Dan MacSweeney (ii) (iv)||Carbery Food Ingredients Limited|
|Ted O’Connor (iii)||Tipperary Co-operative Creamery Limited|
|Dermot O’Leary (i)||Appointed May 2015||Carbery Food Ingredients Limited|
|Sean O’Leary (i)||Irish Farmers Association|
|Conor Ryan (ii)||Arrabawn Co-operative Society Limited|
|Pat Sheahan (ii)||Electoral Area|
|Jim Woulfe (iii) (iv)||Chairman of the Personnel & Remuneration Committee||Dairygold Co-operative Society Limited|
|Bertie O’Leary (ii)||Resigned February 2015||Dairygold Co-operative Society Limited|
|Donal Tobin (i) (iii)||Chairman of the Audit Sub-Committee/Resigned May 2015||Carbery Food Ingredients Limited|
(i) Member of the Audit Committee
(ii) Member of the Rules Sub-Committee
(iii) Member of the Personnel and Remuneration Sub-Committee
(iv) Member of the Acquisitions and Investment Sub-Committee