Dairy co-op First Milk is to bring its member payments back into line next week, more than two years after it was forced to defer them amid severe cashflow problems.
The processor controversially withheld payments to farmers for a fortnight at the start of 2015 - with all future payments also being deferred by two weeks - after citing “cashflow pressure and losses” during the last few months of 2014 as dairy commodity prices plummeted.
The payment crisis prompted an outcry by First Milk members at the time, with many warning the deferral and plunging farmgate prices would force them out of business.
First Milk CEO Kate Allum subsequently stood down from her position two months after the announcement, to be replaced by ex-Mars Petcare MD Mike Gallacher. The co-op will now give members an extra two-week payment in their February paycheque on 10 February, signalling the completion of the supplier’s turnaround project, said Gallacher, who also confirmed the business had secured new, long-term financial arrangements.
“Returning to our previous payment terms draws a clear line under the turnaround process for First Milk. We now need to concentrate on the future,” Gallacher said.
“First Milk is a very different to the business of early 2015. We are a lean, focused and financially secure business capable of delivering a competitive milk price for the long term,” he added. “The role for a scale British dairy co-operative is even more compelling post-Brexit and we aim to demonstrate this in the years ahead.”
The announcement sent a “clear signal” on the progress made by the once-struggling business, said chairman Clive Sharpe. “The board recognises the huge role members have played in the turnaround of their co-op, and thanks them for their continued support.”
First Milk delivered pre-tax profits of £6.8m (compared with a loss of £2.4m last year) according to interim results published in December, while operating profits grew from £1.2m to £9.2m and bank debt fell 43% to £26.1m.
Speaking to The Grocer at the time, Gallacher said the business had turned around its fortunes after divesting loss-making divisions such as sports nutrition brand CNP.
“We have focused on a solid core, based around British Cheddar, and in particular our long-term contract with Ornua, and very good liquid contracts with the likes of Nestlé.”
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