Tirlán reports jump in payments to farmers in 2024

Tirlán reported a 5% increase in revenue to €2.66bn and a slight decrease in operating profit to €67.2m for 2024. The processor made payments of €1.5bn to farmers for the milk and grain supplied during the year, an increase from the €1.2bn paid in 2023.

Tirlán maintained its significant lead as Ireland’s largest milk processor with a 3.028bn litre milk pool in 2024. This was approximately 1% lower than 2023’s volume.

The co-op is also the largest purchaser of Irish green grains with intake reaching almost 179,000t.

The Kilkenny Cheese plant, established in partnership with Royal A-ware, opened during the year and produced 40,000t of continental cheese, including Edam and Gouda.

Tirlán said the facility, which employs 85 people, is moving towards full production. The whey and cream stream from Kilkenny Cheese is returned to Tirlán for processing.

Tirlán CEO Seán Molloy told the Irish Farmers Journal that production will probably go to 50,000t in 2025, which is the contracted level with Royal A-ware.

He added that “if the commercial realities presented more opportunities, we and our partner would be anxious to take those”.

Net debt at the processor dropped 11% to €138m, the lowest level in a decade. This figure does not include the €250m exchangeable bond which matures in January 2027.

That bond is backed by 15.2 million Glanbia shares, with the exchange price set at €16.43 per share. Tirlán said that the board continues to assess a range of options for the exchangeable bond.

During the year the co-op had exceptional costs of €9.5m related to restructuring and a group-wide cost saving programme.

That programme, which was announced in June of 2024, will lead to approximately 150 redundancies in the company.

Similar cost

Tirlán chief financial officer Michael Horan said that a similar cost is expected during 2025 as the programme is completed.

Molloy said that the job losses were right across the business, and the vast majority of redundancies were on a voluntary basis.

Molloy said that it is not envisaged that there would be another round of job cuts at the processor.

Employment at Tirlán actually rose during the year as some of the redundancies had not taken place by the end of the year and, as part of the separation from Glanbia, Tirlán had to set up its own corporate services functions which meant employing people in sectors like treasury, tax and legal.

Horan said the hiring replaced a charge which was being paid to Glanbia for those functions, and did it on slightly more favourable terms.

Molloy emphasised that it remains a key focus for Tirlán to be able to attract and retain “really good people into the industry”.

Looking at the outlook for the rest of the year, Molloy said as he sees it today, Tirlán could pay a weighted average milk price 10% ahead of where it ended up in 2024.

Too early

He added it was too early to say where Tirlán would end up on grain, but that the co-op paid a very good price in 2024.

He said that Tirlán are “evaluating opportunities within the core of the business for 2025”, noting that the company went for planning permission for expansion of its whey facilities.

He said that the investment fund is still in place, and while Tirlán has been “close on a number of items, we haven’t found the right thing yet”.

On the outlook for the industry as a whole, Molloy said that, in his opinion, “over the next decade I could see the industry in Ireland having two or three co-ops at most”.

He said that the challenge would be to find a model that would work for both the co-ops and their farmer suppliers.

Molloy added that while scale isn’t everything, that there are some small co-ops who do exceptional jobs and who may continue to do that. “In the main scheme of things we need that scale to invest and to interface with our customers.

The customers we are dealing with today are incredibly large organisations, and the need for investment in science and technology is very real and very expensive,” he said.

When it comes to conversations about investment and future developments for Tirlán, the recent performance of Glanbia is very much the elephant in the room.

Looking at the numbers, Tirlán holds 75.5 million shares in Glanbia. Following a vote of members at a special general meeting (SGM) held in October last year, the co-op got agreement to reorganise its investment in Glanbia with a view to reducing its exposure to a single investment.

When members were asked to vote at the SGM, Glanbia shares were trading at €15.90 per share, putting the value of Tirlán’s holding at €1.2bn. Since then, the collapse of Glanbia’s Tuesday’s share price to around €10 each has dropped the value of that holding to €755m.

Tirlán has promised to spin out 15m shares to members, a move expected to happen in May of this year. Those 15m shares are currently worth €88.5m less than they were ahead of the SGM.

The Tirlán exchangeable bond would, at the current share price, take 25m shares to pay off. Adding that number and the spin out together, Tirlán is left, at current market prices, with a holding of 35.5m shares valued at €355m.

When the exchange was proposed, that holding, once the spin out and exchangeable bond were accounted for, was valued at €658m.

The loss of over €300m in value in seven months has put a very significant hole in Tirlán’s investment fund, and also increased the pressure on Tirlán’s board and management to try to address the situation.

Molloy said: “We’re a long-term prudent investor in our plc, and our plc to be fair has delivered very strongly for what is now Tirlán and our farmer members over many years.

We engage with the board and the management of that entity on a regular basis and we continue to do that. We obviously monitor the reduction in the share price and we make our views known.”

The co-op ethos is obviously working at Tirlán, with the benefit of the stronger market returns generated during 2024 being passed back to suppliers in the milk and grain price.

The management had freedom at the start of the year to support members during the bad weather, launching a €30m package in April which included direct weather payments, feed offers and cashflow assistance.

It is certainly less likely that such payments would have been made if Tirlán was still part of a larger public listed company. Seán Molloy said that the split from Glanbia had served Tirlán well, as it allowed management to focus on the job at hand, rather than trying to serve the interests of both members and financial shareholders.

His point on management focus is one that was brought up last week in the letter to the Tirlán board from Clearway Capital seeking Tirlán’s backing for a move which could include the breaking up of Glanbia into its component parts.

One of the arguments made in the letter was that splitting Glanbia would allow the management at each division, whether it be cheese, ingredients or performance nutrition, to fully focus on the job at hand and help maximise returns for their sectors.

The split of the co-op from the public listed company seems to be going well, and it may be that a repeat performance by Glanbia would have similar effects. In the short term, at least, such a move could provide a much-needed uplift to Glanbia’s share price, and Tirlán and its members would certainly welcome that.

In Brief