UK &#8211, The financial period 1997 to 2000 was characterised by deteriorating profitability and efficiency, combined with increased borrowing and contractions in sales and profits, according to a report by research organisation The Prospect Shop.

‘The Dairy Industry’ analyses and compares the financial performance of 124 dairy companies in the UK &#8211, including Dairy Crest, Express Dairies and Robert Wiseman Dairies &#8211, over the last three years.

According to the report, the industry as a whole has seen return on capital fall from 17.5% in 1997/98 to 16.4% in 1998/99, ending the period at 10.9% in 1999/2000. Return on total assets also declined, falling from 6.7% in 1997/98 to 6.0% in 1998/99, ending at just 3.7%.

The sector’s pre-tax profit margin, which began the period at 1.9%, ended at 1.3%, while return on investment followed a similar pattern, falling from 11.7% to 7.0%.

*A separate report by financial analyst Plimsoll Publishing, entitled ‘Dairy Farmers’, details how 49% of dairy farms increased their level of debt last year, leaving only 16% owing nothing at all.

However, according to the report this is not a bad sign. Adding debt takes confidence, not only in the future ability of the company to repay the monies but also to generate extra profits to justify this risk.