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Cross-border dairy processing co-operative Lakeland Dairies has reported its financial results for 2023 with the global dairy market collapse significantly influencing revenue and profit.

Following record profits and unprecedented dairy market returns in 2022, Lakeland Dairies has seen Group Revenues reduce to €1.6bn from €1.9bn which was in line with the collapse in global dairy markets. Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for 2023 were €43.4m reduced from €60.2m. Operating Profits decreased from €32.5m to €14.8m last year.

Lakeland Dairies processed 2bn litres of high-quality milk collected from 3,200 farm families in 17 counties across the island of Ireland. Despite global market uncertainty nearly €800m was issued in milk payments to farmers throughout 2023 across, helping to drive a balanced regional economy.

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Group revenues – €1.6bn

Group revenues for 2023 were €1.6bn compared to €1.9bn in 2022, resulting in an operating profit of €14.8m before exceptionals, reduced from €32.5m in the prior year, in line with the significant market volatility experienced throughout 2023.

During the year, there were once-off exceptional expenses arising from strategic decisions to restructure the co-operative’s processing footprint. This includes workforce redundancy and facility restructuring costs of €14.5m.

EBITDA (Earnings before Interest, Tax, Depreciation & Amortisation) was robust in the circumstances at €43.4m compared to €60.2m in 2022. The co-operative retained a very strong balance sheet with shareholders’ funds of €253.5m and the capability to generate strong earnings even in a year of very significant market uncertainty and turbulence.

Food Ingredients – €955m

It was a challenging year for the Food Ingredients division which was most exposed to the collapse in global dairy markets. Revenues of €955m in 2023 were down from €1.2bn in 2022.

The market downturn started during the third quarter of 2022 with buyers sitting on stock which had been bought at record high prices. This resulted in a dramatic demand reduction as the market moved to work through these higher priced products. The market pressure continued into 2023 with a gradual recovery in global markets commencing only in the second half of 2023.

Foodservice / Consumer Foods – €531m

Revenues of €531m in 2023 (comprising of €324m from the Foodservice segment and €207m from the Consumer Foods segment), compared to an outturn of €584m for the prior year (derived from €311m in Foodservice and €273m in Consumer Foods).

In terms of consumer demand, domestic markets across Ireland and the UK held steady. The Middle East continued its recovery post-pandemic. Chinese demand for foodservice products, albeit relatively modest, growth was stable throughout the year.

For Consumer Foods, the market was steady with solid demand throughout the year on the domestic front and inroads being made internationally.

Agribusiness – €112m

The Lakeland Agribusiness Division, increased feed sales while market prices reduced in 2023. A total of 235,000t of high-performance products was supplied to the co-op’s loyal customers at the most competitive rates.

Fertiliser prices also reduced, tracking national and EU trends and there was a modest reduction in turnover within this category. This reduction in price is positive for farmers and it is hoped this trend can continue throughout 2024.

The Agribusiness division implemented a support programme for farmers introducing a €20/t and £20/t feed discount in November 2023. This has increased to €30/t and £30/t and continues to operate into April 2024.

Commenting, Lakeland Dairies Chairperson Niall Matthews said:

“In what was one of the most challenging years for the dairy industry, farmers and processors both demonstrated tremendous resilience in the face of enormous pressures. Whether it is inside the farm gate or at processing level, we are all committed to maximising efficiency to ensure that we were as lean as possible.

“Thankfully the global markets in 2024 have been more positive which is critical given the very challenging weather conditions we have endured since the end of 2023.

“At all times, we are fully committed to returning the best possible price to our farm families who do huge work producing world-class, safe and sustainable milk. This forms the bedrock of our 240 products which are enjoyed by customers and consumers in over 100 global markets. We paid out €800m in milk price last year which supports farm families as well as driving a balanced regional economy. The economic importance of the dairy industry cannot be underestimated.

“Given the recent market volatility as well as huge regulatory and policy uncertainty, it is more important than ever that we look to the future in a very strategic manner. Following rapid dairy industry growth and the expansion of milk production and processing over the past decade, the industry is transitioning from a supply volume perspective into more value-added product positioning. This is our key strategic focus as a Board and as a co-op. We are making very definite steps to move up the value-add chain to support the long-term operations of our farm families.”

Commenting, Lakeland Dairies Group Chief Executive Officer Colin Kelly said:

“2023 was a difficult year for the dairy industry. Nobody, from farmer to processor, was disappointed to see the back of a year that challenged us at all levels. Global markets collapsed, costs at farm and processor level remained stubbornly high, interest rates reached levels not seen for decades, and inflation impacted every one of us both inside our homes as well as inside the business.

“However, despite all these challenges, the financial strength of the co-op and our robust balance sheet ensured that we were well-placed to navigate this volatility. Our Revenues, EBITDA and operating profit before exceptionals all show a strong and resilient co-op.

“Notwithstanding these global trade issues, 2023 was truly a defining year for the co-op in our 130-year history, as we commenced our new strategy entitled Foundations for a Better Future.

“This strategy is focused on our business being fit for growth and embracing value-add opportunities that will benefit the co-op, our farmers and our people sustainably for the future.  We are making strategic decisions that will benefit the co-op in the short, medium and long term.”