It is pleasing to be able to write of more positive developments at Graham's (Scotland’s leading independent milk processor) and in particular as these affect its Nairn facility (formerly Claymore Dairies). The Courier (published in Dundee) carried the story a couple of days ago, when it reported that turnover had increased 21% in the year to end-March 2013, with sales reaching £68 million.
I've written before about the firm's focus on turnover at the expense of margins (and ultimately profits), but the Courier article reports that pre-tax profits doubled to more than £1 million during the year. Managing Director Robert Graham is reported as saying that the firm would "would continue its development of added-value products at its base in Nairn", the investment in which is being part-funded by a 'marketing and cooperation' grant announced in June of £482,000 from the Scottish Government, estimated to be about 20% of the capital expenditure.
However, other salient reported comments by Mr Graham included:
- 'Graham’s was "really pleased" with a result which continued a long-standing pattern of 20% per annum revenue growth(*)'
- 'But he warned that margins would have to come under pressure if the company’s continued investment was to generate appropriate levels of profit.'
(*) As I have mentioned before when writing about Claymore/Graham's, the eliding of turnover with profit, and even more so the assumption that growth in turnover, accompanied by pressure on margins will necessarily lead to increased profits is a dangerous one.
Of course, Mr Graham is the man actually running the business and if pre-tax profits have more than doubled in the year as reported, then that is certainly a good result, although perhaps more important would be to know the level of net after-tax profits, upon which the linked article is silent. However, the latest investment in Nairn is likely to lead to more jobs in the town, very positive news. It is clear that the dairy and dairy processing sectors are highly-competitive, operating generally on very low margins for both producers (dairy farmers) and dairy processors such as Graham's, as a result of the pressure from the main buyers, supermarkets, to keep their costs as low as possible to maintain their own margins, not forgetting the consumer (such as me, but more importantly the average family trying to make ends meet) anxious to pay as little as possible whilst still expecting the products bought to be safe, wholesome and attractive to eat. All this is undoubtedly a delicate balancing act for firms such Graham's.