Conor Galvin, appointed CEO of Ornua in May last year summed up the co-op’s performance when talking to the Irish Farmers Journal by saying “we’ve held our own in terms of overall business.”
The financial results for the year back this up, with revenue at the owner of the Kerrygold brand coming in at €3.4bn for the third year in a row while operating profit before exceptional items and the Ornua value payment to member co-ops grew to €130.5m, up from €116.8m in 2023.
The value payment was €72.8m, a decrease of €1.7m from 2023’s payment which had been boosted by funds from the sale of the share in DPI Speciality Foods in the US that year.
Digging deeper into the financial results for the year, Ornua Chief Financial Officer Donal Buggy said revenue had a small boost from currency movements, saw a “very favourable” uplift on price and was slightly behind on volume when compared to the previous year.
He said the volume decline was largely in US ingredients where he said “it had been a challenging environment, particularly in the first half of last year”.
On volumes, Ornua purchased 353,000t of Irish dairy products in 2024, down 21,600t from 2023 and 34,000t lower than 2022.
Operating profit was driven by margin growth, Buggy explained, saying that it was due to a “switch from low-margin commodity-type sales to value-add both in ingredients and in food, which is the Kerrygold premium performance. The goal going forward is to continually drive more into that value-added side.”
During the year Ornua purchased €2bn of Irish dairy products, up from €1.65bn in 2023. This higher figure, despite the drop in volume, reflected improved average dairy prices in 2024.
As well as the Irish dairy products, Ornua spent over €900m on non-Irish products. Buggy said that while they talk about returns to the Irish farmer a lot the company does have “a bigger business out there that does create profit which allows us pay back to the Irish dairy farmer”.
Net debt at the end of the year stood at €86m, down from €153m 12 months earlier. Buggy said that Ornua had been carrying extra inventory through the previous two-year ends which added to the net debt position, but that the company “had done really well in selling that inventory right down in 2024, so we would have ended the year with what we would consider to be the optimum level of inventory.”
Conor Galvin, CEO Ornua
Outgoing chair of Ornua Aidan O’Driscoll emphasised that “from the board’s point of view, this is something we are very focused on and are very, very pleased with these figures.
“Managing down the inventory and the debt de-risks the business quite a bit.”
Market overview
Stepping away from the financial performance, Galvin said that there are “challenges with European supply this year and we can see as the season goes on that there will not be an absolute glut of product.
The expectation globally is that annual volume growth is unlikely to exceed 0.5%, however solids are stronger.
You can really see some benefits coming through in terms of genetics in cows where solids in a lot of the larger markets are growing ahead of volumes.”
Galvin said that demand remains robust, and will probably remain ahead of supply growth. “The problem with demand in some of the more mature markets is the changes you are going to see to trade flows.
“The challenge with tariffs is that some of it has to do with products going into the US, but a lot of it also has to do with the disruption to trade flows.
“So, for example, US dairy flowing into China is going to be obliterated. It won’t make any economic sense to move solids in at 145%, so where does that product go, and where do the Chinese get the protein they need?”
Trade movement
He added that while there is some settling down to do on those trade flows, it probably won’t affect Ornua significantly. However, in terms of overall ingredient flows in 2025, there is going to be some disruption
“We just need to keep an eye on that and we are all adopting a wait-and-see approach in terms of what it might do to pricing.”
That being said, Galvin noted that most of the European price indexes and the futures look “pretty solid at the moment”.
On the outlook for the Kerrygold brand, Galvin pointed to a “nice amount of growth” for the brand in the US in 2024 where it remains the number two butter brand, a position that Ornua will seek to consolidate and put the number one brand, Land O’Lakes under pressure.
On the possible risks to sales of Kerrygold products in the US from a downturn in the economy there and a fall in consumer confidence, Galvin said “I think it is fair to say that in the US we have a premium product but we also have a premium experience. For the consumer in the US, everything that we see would suggest that they’re happy to pay that premium and we’d expect them to pay that premium in the future.”
Overall, while conceding that there is a lot of change and a lot of uncertainty that has been purposely created in the world and a lot of tension in trade, Galvin remains optimistic. “Irish dairy is unique.
The products we can produce and give to consumers have a very, very strong value proposition and that’s something we shouldn’t talk ourselves into problems on. We have a very good product, we have very good farmers, good people selling it, and that’s not going to change.
“The products we sell have leading positions in diversified markets, we have a diverse portfolio and good customer relationships.
“I think we are well placed and the resilience of this industry will shine through over the next twelve months.”
On how US tariffs will hit Kerrygold, Galvin said that the 10% tariff introduced by Donald Trump will increase the price of butter into the US. He said that because it is a percentage tariff, rather than current import duties on butter which are set at $1.54 (€1.36) per kg, the more valuable butter gets, the higher the tariff will be.
“One of things that is a real uncertainty at the moment is around how much the tariff will be, when it will be relevant from and how much will it change.
We can’t underestimate the challenges there will be in managing that.” Galvin said that Ornua had planned to put as much butter into the US as possible ahead of the possible announcement of tariffs.
However, he said Ornua has to some extent been the victim of its own success as while they did move the butter as planned “it all sold”. He said that there is currently about 10 weeks of butter stock in the US which would not be unusual for the time of year.
On whether retailers would be willing to swallow some of the higher prices from tariffs, Galvin noted that discussions with retailers thus far “have been clouded by the fact that there has been so much chopping and changing”. When tariffs were introduced in 2019, the extra cost was added to the retail price.
When it comes to other macro effects from Trump’s trade measures, such as the current weakening of the US dollar against the euro, Buggy confirmed that Ornua is “well hedged” for 2025 against movements in the currency.
The performance of Ornua in 2024 could certainly be described as a solid outcome from a year that saw significant differences between how it started and where it finished. The continued strong performance of Kerrygold is very welcome as is the improved margin across the business.
However, in terms of the business challenges currently facing the company which is so exposed to the US market in its key Kerrygold brand, 2024 now looks like ancient history.
Perhaps it is unfair to expect much in the line of certainty from management about what the coming months will hold – after all, the US president has shown considerable talent when it comes to moving goalposts and keeping everyone guessing about what he might do next.
The challenge of navigating this uncertainty is not unique to Ornua – in fact, as Galvin outlined, the impact of the trade disruption will be felt far and wide, and even potentially by exporters who do very little business with the US.
As Galvin said, companies can only take a ‘wait and see’ approach right now as events are unfolding too rapidly to allow any kind of strategic response. However, over the longer term it is only the strongest firms which survive periods of economic uncertainty and low global growth.
For the Irish dairy industry this means that processors may find themselves having to work closer together to find the necessary efficiencies to continue to provide the best returns to their farmer suppliers.
Conor Galvin, appointed CEO of Ornua in May last year summed up the co-op’s performance when talking to the Irish Farmers Journal by saying “we’ve held our own in terms of overall business.”
The financial results for the year back this up, with revenue at the owner of the Kerrygold brand coming in at €3.4bn for the third year in a row while operating profit before exceptional items and the Ornua value payment to member co-ops grew to €130.5m, up from €116.8m in 2023.
The value payment was €72.8m, a decrease of €1.7m from 2023’s payment which had been boosted by funds from the sale of the share in DPI Speciality Foods in the US that year.
Digging deeper into the financial results for the year, Ornua Chief Financial Officer Donal Buggy said revenue had a small boost from currency movements, saw a “very favourable” uplift on price and was slightly behind on volume when compared to the previous year.
He said the volume decline was largely in US ingredients where he said “it had been a challenging environment, particularly in the first half of last year”.
On volumes, Ornua purchased 353,000t of Irish dairy products in 2024, down 21,600t from 2023 and 34,000t lower than 2022.
Operating profit was driven by margin growth, Buggy explained, saying that it was due to a “switch from low-margin commodity-type sales to value-add both in ingredients and in food, which is the Kerrygold premium performance. The goal going forward is to continually drive more into that value-added side.”
During the year Ornua purchased €2bn of Irish dairy products, up from €1.65bn in 2023. This higher figure, despite the drop in volume, reflected improved average dairy prices in 2024.
As well as the Irish dairy products, Ornua spent over €900m on non-Irish products. Buggy said that while they talk about returns to the Irish farmer a lot the company does have “a bigger business out there that does create profit which allows us pay back to the Irish dairy farmer”.
Net debt at the end of the year stood at €86m, down from €153m 12 months earlier. Buggy said that Ornua had been carrying extra inventory through the previous two-year ends which added to the net debt position, but that the company “had done really well in selling that inventory right down in 2024, so we would have ended the year with what we would consider to be the optimum level of inventory.”
Conor Galvin, CEO Ornua
Outgoing chair of Ornua Aidan O’Driscoll emphasised that “from the board’s point of view, this is something we are very focused on and are very, very pleased with these figures.
“Managing down the inventory and the debt de-risks the business quite a bit.”
Market overview
Stepping away from the financial performance, Galvin said that there are “challenges with European supply this year and we can see as the season goes on that there will not be an absolute glut of product.
The expectation globally is that annual volume growth is unlikely to exceed 0.5%, however solids are stronger.
You can really see some benefits coming through in terms of genetics in cows where solids in a lot of the larger markets are growing ahead of volumes.”
Galvin said that demand remains robust, and will probably remain ahead of supply growth. “The problem with demand in some of the more mature markets is the changes you are going to see to trade flows.
“The challenge with tariffs is that some of it has to do with products going into the US, but a lot of it also has to do with the disruption to trade flows.
“So, for example, US dairy flowing into China is going to be obliterated. It won’t make any economic sense to move solids in at 145%, so where does that product go, and where do the Chinese get the protein they need?”
Trade movement
He added that while there is some settling down to do on those trade flows, it probably won’t affect Ornua significantly. However, in terms of overall ingredient flows in 2025, there is going to be some disruption
“We just need to keep an eye on that and we are all adopting a wait-and-see approach in terms of what it might do to pricing.”
That being said, Galvin noted that most of the European price indexes and the futures look “pretty solid at the moment”.
On the outlook for the Kerrygold brand, Galvin pointed to a “nice amount of growth” for the brand in the US in 2024 where it remains the number two butter brand, a position that Ornua will seek to consolidate and put the number one brand, Land O’Lakes under pressure.
On the possible risks to sales of Kerrygold products in the US from a downturn in the economy there and a fall in consumer confidence, Galvin said “I think it is fair to say that in the US we have a premium product but we also have a premium experience. For the consumer in the US, everything that we see would suggest that they’re happy to pay that premium and we’d expect them to pay that premium in the future.”
Overall, while conceding that there is a lot of change and a lot of uncertainty that has been purposely created in the world and a lot of tension in trade, Galvin remains optimistic. “Irish dairy is unique.
The products we can produce and give to consumers have a very, very strong value proposition and that’s something we shouldn’t talk ourselves into problems on. We have a very good product, we have very good farmers, good people selling it, and that’s not going to change.
“The products we sell have leading positions in diversified markets, we have a diverse portfolio and good customer relationships.
“I think we are well placed and the resilience of this industry will shine through over the next twelve months.”
On how US tariffs will hit Kerrygold, Galvin said that the 10% tariff introduced by Donald Trump will increase the price of butter into the US. He said that because it is a percentage tariff, rather than current import duties on butter which are set at $1.54 (€1.36) per kg, the more valuable butter gets, the higher the tariff will be.
“One of things that is a real uncertainty at the moment is around how much the tariff will be, when it will be relevant from and how much will it change.
We can’t underestimate the challenges there will be in managing that.” Galvin said that Ornua had planned to put as much butter into the US as possible ahead of the possible announcement of tariffs.
However, he said Ornua has to some extent been the victim of its own success as while they did move the butter as planned “it all sold”. He said that there is currently about 10 weeks of butter stock in the US which would not be unusual for the time of year.
On whether retailers would be willing to swallow some of the higher prices from tariffs, Galvin noted that discussions with retailers thus far “have been clouded by the fact that there has been so much chopping and changing”. When tariffs were introduced in 2019, the extra cost was added to the retail price.
When it comes to other macro effects from Trump’s trade measures, such as the current weakening of the US dollar against the euro, Buggy confirmed that Ornua is “well hedged” for 2025 against movements in the currency.
The performance of Ornua in 2024 could certainly be described as a solid outcome from a year that saw significant differences between how it started and where it finished. The continued strong performance of Kerrygold is very welcome as is the improved margin across the business.
However, in terms of the business challenges currently facing the company which is so exposed to the US market in its key Kerrygold brand, 2024 now looks like ancient history.
Perhaps it is unfair to expect much in the line of certainty from management about what the coming months will hold – after all, the US president has shown considerable talent when it comes to moving goalposts and keeping everyone guessing about what he might do next.
The challenge of navigating this uncertainty is not unique to Ornua – in fact, as Galvin outlined, the impact of the trade disruption will be felt far and wide, and even potentially by exporters who do very little business with the US.
As Galvin said, companies can only take a ‘wait and see’ approach right now as events are unfolding too rapidly to allow any kind of strategic response. However, over the longer term it is only the strongest firms which survive periods of economic uncertainty and low global growth.
For the Irish dairy industry this means that processors may find themselves having to work closer together to find the necessary efficiencies to continue to provide the best returns to their farmer suppliers.
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