The Irish Dairy Board (IDB) has refinanced and extended its debt options, in advance of the removal of European milk quotas in 2015.

The board, a co-operative owned by dairy processing companies, has secured €420mn in total, an increase on the €350mn facilities it opened in 2011. Group finance director Donal Buggy tells GTR that the IDB attracted sufficient demand in the banking market to have upscaled significantly, but decided that it wasn’t required.

The finance is broken into two tranches: a €165mn syndicated loan facility which will be used by the IDB itself for working capital requirements and future acquisitions; a €255mn committed syndicated reverse invoice discounting (RID) facility, which will allow the IDB’s members (also its suppliers) to get paid by the banks once their invoices are approved. The IDB then pays the banks at the end of the term time.

“Our members supply us with produce throughout the year,” says Buggy. “Some of this produce has relatively long credit terms. Cheese, for instance, can have terms of up to nine months; butter, five months. Our members might therefore have a working capital requirement to fund for six months, until they get paid by us. In 2011, we agreed with our banks to put together a facility to allow members to be paid on agreement of invoice by us.”

There is also the option to draw-down an additional €50mn on the RID facility post-April 2016, which would bring that tranche to €305mn.

The banks are the same six that arranged and financed the 2011 facilities: AIB, Bank of America Merrill Lynch, Barclays, HSBC, Rabobank and Ulster Bank and while Buggy says borrowing conditions have “undoubtedly improved”, the food and agri industry weathered Ireland’s post-2008 financial difficulties relatively well.

“The industry has been strong throughout. It hasn’t been one of the industries under the most stress and banks have supported it over that time. Borrowing conditions have improved. This RID facility was put in place in 2011. Would you have been able to put it in in 2009? I’m not sure.”

In 2015, the EU will remove the quota on dairy produce in its member states, meaning farmers and processers will be free to produce as much as they wish. Ireland has one of the most successful dairy exporting sectors in Europe – it is the world’s largest exporter of infant milk and has exported a series of pioneering dairy technologies. It’s expected that post-quota, the additional produce will come in the form of powders, which will be exported to regions with weak local dairy sectors.

Buggy says the IDB is preparing for the change by expanding its routes to market. “We’ve invested heavily in our branding, Kerrygold (butter) and Pilgrim’s Choice (cheese) are both growing very well overseas. Separately we’re continuing to invest in capex and acquisitions. Over the past three years we’ve completed four acquisitions and a very important strategic alliance with First Milk in the UK.”

The board’s emerging markets focus is on Africa, the Middle East, Russia and China. It has significant operations in both the Democratic Republic of and the Republic of Congo, as well as Angola, and has established a continental headquarters in South Africa.

In the Middle East, the IDB acquired 75% of Saudi Arabia’s Al Wazeen Trading last year, in a bid to tap the world’s fifth-largest dairy import market. It will develop a cheese processing plant in the country, which will use Irish dairy powder to produce the white halal cheese that’s popular in the Kingdom, and throughout the Middle East.

Given the €165mn facility which the IDB has taken on for working capital and acquisitions, it’s likely that there will be further expansive moves in the future.