Glanbia performs strongly in KPMG 2018 Milk Price Review

Glanbia performed strongly in the KPMG Milk Price Review for 2018, which was published by the Irish Farmers Journal on 1 August. The annual KPMG Milk Price Review measures the actual price paid for manufacturing milk over the full calendar year.

The KPMG Irish Farmers Journal Milk Price Review for 2018 confirmed that, in terms of net milk price paid, Glanbia paid the highest milk price in Ireland after the West Cork Co-ops, whose milk is processed by Carbery.

In its current format, the annual KPMG Irish Farmers Journal Milk Price Review is the only independent and audited measure of milk price in Ireland, trusted by farmers for decades.

Key facts from the 2018 KPMG Milk Price Review include:

• After the deduction of collection charges and levies, Glanbia paid 34.57 cent per litre (cpl);
• Glanbia paid a net price that was 1.43 cpl more than Arrabawn, 1.35 cpl higher than Kerry, 1.31 cpl more than Lakeland and 0.43 cpl more than Dairygold;
• Glanbia’s price was estimated to be 0.7 cpl above the weighted average for all KPMG participants (excluding Glanbia).

The Glanbia milk price includes all payments for manufacturing milk which includes conditional bonuses, seasonality payments, winter milk payments, fixed milk price schemes, and the Glanbia trading bonus scheme – all of which have been approved by KPMG as validly relating to the supply of manufacturing milk by suppliers during the year.

Similarly, the Dutch LTO European milk league accepts all of the schemes for inclusion in its pricing.

In a difficult year for farmers, Glanbia milk supplier members received considerable other supports that are not included in the KPMG – including the €20m Extended Credit Scheme to allow farmers draw down interest-free cashflow and €50 per tonne feed price support in April.

In addition, Co-op dividends, which were worth €1,560 to the average milk supplier in 2018, are not included in the KPMG.

Glanbia chairman Martin Keane said: “The review clearly shows that Glanbia delivers a strong, competitive price for milk, with a similar ranking achieved over the past five consecutive years. In addition to a very competitive milk price, the Glanbia model delivers considerable value growth for member suppliers.

“We have worked hard to ensure that we lead the way in the agri-sector with an unrivalled range of volatility tools including MilkFlex Loans and FundEquip.”

KPMG Milk Price adjusted for constituents

The Glanbia price in the main KPMG table includes the benefit of constituents. When the net prices paid are adjusted to standardise for the level of solids in the milk delivered to each processor, Glanbia retained its relative position.

Glanbia Ireland Performance in 2018

In addition to paying a strong milk price in 2018, Glanbia Ireland (GI) achieved a Profit-After-Tax of €57.8 million. 60% of this profit is owned by farmers through Glanbia’s Co-Op’s majority ownership of GI. A dividend of €17.4m was paid by Glanbia Ireland to Glanbia Co-op. The value of shareholders’ funds on the GI balance sheet was €398m at the end of 2018, having risen by €25m during the year. Expanding Glanbia suppliers are not required to pay any capital contribution and there is no deferred payment element. In order to facilitate the growth ambitions of milk suppliers and generate added value, GI has invested €359m in milk processing assets since 2013. In 2018 Glanbia Ireland paid approximately €1 billion, including VAT, for milk directly to 4,500 farmer suppliers across rural Ireland.

Value Distribution

A key point in any comparison between Glanbia and other milk buyers is that, in addition to milk price, Glanbia member suppliers benefit from the value created by Glanbia plc, which is distributed through the Co-op.

Since 2013, Glanbia members have benefitted from significant value distribution.

For example, in 2018 Glanbia milk supplier Members received Co-op share interest of 39 cent per share (dividends) or €14.8m.

First Published 1 August 2019