First Milk has reported operating profits of £9.2m for the six months to 30 September 2016, up from £1.2m the previous year.
It said the figures showed continued progress and improved returns to members, with profits before tax up to £6.8m – compared to a loss of £2.4m a year earlier.
The farmer-owned co-op says it has undergone a radical transformation over the past 20 months, with a new business strategy, the divestment of loss-making subsidiaries, improved operational performance and a more effective co-op governance structure.
It says the programme has delivered a £33m improvement in business performance, and is passing on the benefit to members through milk price increases that are running ahead of the market. It has increased its milk prices to members by 8p a litre since July, with a further 2p rise forecast this month.
“The huge challenges at First Milk were very evident in early 2015 and required us to make rapid and significant changes to the business,” said chief executive Mike Gallacher.
“The combination of strategic, operational and governance issues have all needed to be addressed and the new leadership team have worked with focus and pace. Clearly the aim of these changes has been to deliver a better result for our members, customers and employees.”
He added: “First Milk is now a simpler and more efficient business. This is demonstrated through significantly improved financial results and most importantly through increasingly competitive milk prices to our farmer members.
“To align the company better, we now have employees targeted on an index which measures our milk prices versus other leading UK dairy processors.”
Mr Gallacher said the organisation had implemented all the recommendations of the independent Greenburn Report into its governance structure. This was carried out after his appointment in 2015 and led to a new board and member council.
First Milk is now focusing on its blue-chip long-term contracts and joint ventures, he added, with the new business model offering “strong and stable returns for our farmer members”.
“It is particularly pleasing to see their loyalty now being repaid,” he said. “The largest challenge for all UK dairy farmers over the last two years has been the wider market performance and it is encouraging now to see both First Milk and the market recovery well underway.”
Chairman Clive Sharpe said: “First Milk is now a focused and profitable business. Rapid surgery was required from the new management team over the last 20 months and it is a testament to our farmer members that they recognised and supported this through the most difficult market conditions.”