Carbery Annual Report 2019
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2019 ANNUAL REPORT Sustainably owing Back to Contents 1 Gr 2 2 Carbery at a Glance / Our Values 6 Chairman’s Statement 10 Chief Executive’s Review – Business Update – Outlook 16 Sustainability p24 Our Environment p34 Our Community p38 Our People Contents p44 Our Supply Chain p52 Our Marketplace 60 Report of the Committee 64 Society Information 65 Committee Responsibilities Statement 66 Independent Auditor’s Report 68 Consolidated Income Statement 69 Consolidated Statement of Other Comprehensive Income 70 Consolidated Statement of Financial Position 71 Consolidated Statement of Changes in Equity 72 Consolidated Statement of Cash Flows 74 Notes to the Consolidated Financial Statements 74 employees globally 44 at a glance million revenue Carbery 10 facilites worldwide 1220 farmer suppliers supplying 50+ countries Tries te, S Ita U ly r, ina B e h a t , C B n s ai a g e h lli k h g n o c n e o e k a n , R h sus , T S g ta I in in R h w a L a i b l o a r l n W y d H G a i u g l i c h z o a W n r d f y B a o s c , o , r r lo S m U a o e u U S v a b e y i, e r 50 P t a , o U Sã n K in Ja c ka in rta C , Indonesia 2 Operational highlights Cumulative capital expenditure 140 litres567m of milk processed in 130 Ballineen 9 120 €130. 110 Milk volume 100 90 +6% 80 70 5 REVENUE 60 €71. 2019 €434.1m 50 2018 6 €423.5m 40 €52. EBITDA 4 2019 30 €44.3m €35. 2018 €43.9m 20 0 EBITA 10 €20. 2019 €30.2m €m 0 2015 2016 2017 2018 2019 2018 €32.4m Back to Contents 3 To create sustainable value for our farmer shareholders. Our focus and investment is aligned to our three strategic platforms of Dairy, Nutrition and Taste to ensure we are well positioned for long term growth. OUR DAIRY platform will continue to create value for our milk pool, focus on delivering efficiencies in our cheese business and Our Mission growing our cheese portfolio internationally. OUR NUTRITION platform will deliver value through the development, production and marketing of nutritional ingredients for performance and lifestyle nutrition, infant formula and clinical nutrition markets. OUR TASTE platform, represented by our taste division, Synergy Flavours, will deliver growth through the creation of innovative customer solutions with flavours, extracts & essences. 4 These are the qualities that we seek to achieve in our performance. They give us direction, reflect our highest principles and release tremendous potential for success and accomplishment. Dedication to sustainability As a co-operative owned Group, we pursue economic viability and social responsibility in everything we do. Carbery supplies grass-fed, hormone & antibiotic free, sustainable premium dairy ingredients to consumers across the globe every day. Dedication to service & integrity Our Values Our entire business is customer focused. We align with our customers to ensure we understand their businesses and help them achieve product success through an agile, responsive and reliable customer service. Collaborate to innovate We continually invest in consumer insights, technology, R&D and key partnerships with our customers and suppliers to help define the next generation of food and drink. Quality excellence We deliver the highest quality products and services for our customers. We excel in quality and food safety through efficient processing, operational excellence and strong product stewardship. Nurturing talent We develop individual talent and empower high-calibre teams across all geographies. We actively recruit the best talent, promote diversity, provide training and mentoring through specialised development programmes. Back to Contents 5 2019 at a glance We will remember 2019 as a very significant milestone in the continuing development of our cheese business with works commencing on the €78m cheese investment project at Ballineen. This expansion is due for commissioning in 2020 and excitingly opens the route for product and market diversification opportunities in the years ahead. Similarly, 2019 saw our Taste division Synergy continuing to build for future growth with both an investment in our main manufacturing facility in Chicago as well as an investment in a new commercial / technical centre in Indonesia. Overall while 2019 was a less challenging year weather wise compared to 2018 for our shareholder suppliers, it was a little more challenging with regard to the returns from some of our main dairy markets. However, I am pleased to say that in order to help offset the impact of weaker markets on milk pricing, the Board of Carbery took Statement the decision again to support milk prices for suppliers over the course of 2019. Milk supply Overall the weather in 2019, including a very early Spring, was Chairman’s favourable for milk production during the year which was a blessing compared to the challenging weather events of 2018. Although global and EU milk output expanded at modest rates of 0.1% and 0.5% respectively, Ireland’s output grew at a greater rate of circa 7%. Milk supply to Carbery from our shareholder suppliers grew by 6% in 2019, with record milk volumes being processed at Ballineen during the peak season. Brexit looms The challenges of Brexit continued to rumble on over the course of the year with continually changing perspectives and predictions adding to uncertainty especially around the UK market, which is our main market for cheddar. 6 Although greater political certainty from buyers. For now it seems that Milk pricing exists in some regards, it is almost butter pricing might remain in a As noted earlier poorer market certain that uncertainty relating lower and tighter range than seen returns resulted in reduced milk to the implications of Brexit will over the past few years. pricing over the course of 2019. remain for a while yet. However, Now that EU stocks have been The Board of Carbery took the current concerns around the unwound, skim milk powder (SMP) decision to support milk prices over the course of 2019 with a view to lessening the impact of lower milk prices for our shareholder suppliers. We provided this support through a combination of Carbery bearing extra costs during the year plus support paid from the stability fund. Investment in product and Synergy expansion in Wauconda market diversification To help the Carbery Ireland Dairy impact of Covid-19 have, for looks to be better positioned from & Nutrition business become more now, overshadowed the potential a market return point of view. Prices flexible and better able to withstand implications of Brexit in 2020. of SMP improved during 2019 from market shocks, the investment in a very low and weak 2018 base. product and market diversification Cheddar, which is a significant kicked off in earnest during 2019 Dairy markets product for Carbery, experienced with major construction work taking In global market terms overall market price falls of 6% on place in Ballineen. When fully supply/demand fundamentals average in 2019. Brexit fears operational, this expansion will remained reasonably in balance for drove aggressive selling by some allow Carbery to tap into exciting 2019. However against this overall producers and this together with new diverse markets, adding value backdrop some dairy commodity signs of increased stocks in the to our ever increasing milk supply markets, notably butter and cheese, UK resulted in weaker sentiment from the finest farmers in the world, were on a negative trajectory from amongst buyers. on the lush, green pastures of West early spring onwards due to a Cork. This will help create a more variety of factors. Other factors, including the global sustainable future for suppliers economy, trade negotiations, and but also have an eye on the next Butter which has been the shining the associated risk of tariffs, like generation of milk producers star of more recent years saw prices those seen between the US and who will be the backbone of our decline by as much as 20% over the EU, had an impact in 2019 and communities in West Cork. course of 2019. Global supply (and remain issues with the ability to as a result global stocks) of butter affect returns for our products from increased, causing reduced demand international markets. On-going work in our Balineen plant as part of the Cheese Diversification Project Back to Contents 7 Opening of Synergy facility in Jakarta, Indonesia Synergy healthy body and mind are what Board and global team Our Taste business Synergy makes us resilient. Take care of I would like to thank my fellow continues to broaden its global yourself and try to farm safely as board members for their dedication footprint with the opening of a second chances may not come and time during the year as we commercial / technical facility when dealing with animals or continue to build on the strategic in Jakarta, Indonesia. 2019 also machinery. decisions which have made Carbery saw the completion of a major Group a diverse international expansion of the Synergy USA Quality & sustainability food company. Thanks also to the headquarters based in Wauconda, Sustainable dairy production is a management, staff, shareholders, Illinois. Synergy now operates from top priority for Carbery. Being a milk producers and everyone nine locations globally covering the co-operative with a collaborative involved in another successful year. UK, mainland Europe, Asia and the mindset, Carbery has already Americas. come a long way and this is further demonstrated by the integration Safety & wellbeing of our sustainability report this year As a farmer I am acutely aware of within our annual report.