Hard times for the dairy industry
UK –, 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 –, including Dairy Crest, Express Dairies and Robert Wiseman Dairies –, 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.
