Huge losses at troubled farmers’ co-operative First Milk have been confirmed at £24.9 million. 

Financial results released yesterday reaffirmed the huge financial challenges faced by the biggest player in Cumbria’s dairy industry.

Previous trading statements had forecast losses of about £20m and a huge operation is already underway to try and turn the business around.

As well as being supplied by over 200 Cumbrian farmers, the company operates the Lake District Creamery at Aspatria. The accounts also reveal that a breakdown at the creamery cost the company £1m.

The dairy co-operative has been hit significantly by the ongoing downturn in global milk markets in the year to March 31, and its group losses are about £20m up from £4.3m last year.

In First Milk’s statement the group raised significant doubt over its ability to operate as a ‘going concern’.

This may mean that the group is unable to continue to realise its assets and discharge its liabilities in the normal course of business, said the report.

Meanwhile, First Milk plan to overhaul the way it is run has been hailed as a positive move by Cumbrian producers.

The company said this week that it was looking to cut the number of board members and top-level producer representatives, and bring in more commercial experience and expertise.

This, said new chief executive Mike Gallacher, would ensure the co-operative avoided some of the pitfalls of recent years, referring to the under-performance of the business and the need for faster decision-making.

“The aim of the changes will be to create a smaller board with appropriate commercial skills, knowledge and experience while establishing a new council body to oversee the strategy of the business and represent the farmer owners,” said First Milk in a statement.

The proposals follow an independent review by consultancy Greenburn Associates, and will be put to members for approval over the coming weeks.

They include a board of seven directors (currently nine), with an independent commercial chairman, two external commercial non-executive directors, two farmer directors, the chief executive office and chief operating officer.

Mr Dunning, a dairy farmer from Raisgill Hall, near Tebay, who is also chairman of First Milk’s farmer representative group, said there had always been five farmer members on the board.

“Two are being re-elected, one is Cumbrian producer Robert Craig and the other Jim Baird from Scotland.

“There is a push from members that there needs to be more commercially-minded people on the board, but it could not have happened until Mr Gallacher came along.

“From my point of view it will be a good thing for the company.”

First Milk chairman Sir Jim Paice said that the recent appointment of Brian Mackie as chief operating officer and Carl Ravenhall (formerly Muller Wiseman Dairies’ managing director) as a non-executive director meant that governance improvements had already begun.

The current board has an independent chairman, another non-executive director, five farmer directors and two executive directors.

Mr Dunning added that a seven-member council would replace the current 13 area representatives from milk fields, also with an independent chairman with commercial experience.

In June Sir Jim Paice announced his intention to resign the chairmanship, telling members that the role needed someone with “real commercial and business skills”.

He will remain as chairman until a replacement is appointed.

A spokesman said farmers were told the business was on a firmer footing, and had been breaking even since April. Mr Gallacher said in the statement: “This change continues the pace of transformation at First Milk, which has included the setting-up of business units within the group, significant restructuring, a step improvement in the financial transparency of the business, and a drive to focus on our core cheese and liquid contracts business.”