Mike Gallacher, First Milk chief executive said it was now a ’much simpler business’
FIRST milk is now a ’very different’ business to the one which was in crisis last year, according to First Milk chief executive Mike Gallacher.
"We are not as exposed to commodity markets and do not have significant overhead costs. It is now a much simpler business," he said.
The co-operative has planned to concentrate on its ’core business’ of British cheddar and ’good liquids’.
Rumours have continued to circle round a possible sale of First Milk – although Mr Gallacher said he was not concerned about these.
"Dairy seems to be an industry with a lot of rumours. I can understand why the speculation takes place," he said.
It came as First Milk revealed operating profits of £9.2 million in the six months to September 30 and profits before tax of £6.8m, compared to a £2.4m loss last year. Bank borrowing has fallen by £20m to £26.1m which Mr Gallacher said was a ’normal level’ for running such a business.
He said First Milk now needed to be less exposed to future volatility in markets.
"We suffer from cyclical pricing and it is not going to go away. We have long-term partnerships with Nestle and Ornua. We do not have a lot going into commodities, such as powder," he said.
He said problems with Russia and the removal of milk quotas meant the industry had faced a ’perfect storm’ of issues.
When Mr Gallacher arrived in March last year, a ’significant’ number of members handed in their resignations.
"We have some now on our books. They are looking for continued improvement and I hope they will stay."
Mr Gallacher and his team are from a commercial background. Having spent most of his career with Mars, he said the priority at First Milk was maximising returns for farmers, not profits.
"Our operating system is to break even and make enough profit to run the business and invest in farms," he added.
The co-operative’s milk price has increased by 8ppl since July, with about 2ppl coming from internal business activities.
In January, First Milk said the A price was expected to increase by 2ppl.