Agribusiness

Our Rs. 1.2 Bn. dairy business, operated by Lonach Dairy Ltd, accounts for roughly 1.5% of Sri Lanka’s total milk production. This may seem a modest figure at first glance, but it carries weight considering that more than half of Sri Lanka’s dairy needs are still met through imports. Recognising this gap for the opportunity that it is, Lonach Dairy has set out to expand its market horizon within Sri Lanka, making a meaningful contribution to the nation’s long-elusive goal of dairy self-sufficiency.

Comprising approximately 1,600 animals at present, our herd includes over 700 high-yielding milking cows; all of them crossbreeds originally sourced from Australia and New Zealand. With an annual output of around five million litres of fresh milk, Lonach supplies such major clients as Kotmale, Nestlé, and Maliban. The milk itself commands a premium, due in part to its higher fat content compared to industry averages.

Animal welfare is a central tenet of our business outlook, with our operations anchored in ethical, data-driven husbandry. The farm uses a fully automated Dairymaster milking parlour imported from Ireland, equipped with sensors that monitor each cow’s temperature, feeding behaviour, rumination, and rest cycles. While this granular visibility serves to boost productivity, it reflects a deeper commitment to sustainable practice and the well-being of our herd. Composting and organic fertiliser generation from dairy waste also integrate the operation into the group’s circular resource strategy, which proves especially valuable during periods of synthetic fertiliser scarcity.

Although the business currently operates near break-even – constrained as it is by fluctuating demand and increased competition from imported milk powder – it remains a strategic pillar for the Group in its pursuit of sustainable growth.

The 2024-25 financial year saw Lonach Dairy make a concerted effort to recalibrate its operations, a strategy that certainly paid off, demonstrating the business unit’s resilience against unrelenting odds. Though topline growth remained subdued throughout the period, the dairy business held its ground in a market that proved increasingly volatile. Having weathered cost pressures, a shift in consumer demand, and heightened competition from milk powder imports over the past several years, the reporting period proved constructive in many ways. Performance remained steady, if not quite spectacular, in a period marked by tempered demand.

Revenue stabilised during the reporting period amid a still fragile macroeconomic backdrop, and while profitability stayed at break-even, the fundamentals of the business quietly strengthened beneath the surface, which we consider a significant win.

Milk production held firm at approximately five million litres, thanks to our 700-strong milking cow herd, while yield per cow remained consistent at 18 to 19 litres per day, in a nod to our sound herd management efforts and nutritional protocols.

However, profitability remained thin, hovering at break-even for much of the reporting period. We can, however, take solace in the fact that this was a reflection not of operational inefficiency but of macroeconomic headwinds far beyond the farm gate. Demand for fresh milk softened further during the year under review as household purchasing power continued to lag despite some macro-level stability, while the return of imported milk powder – no longer hindered by pandemic-era restrictions and exchange rate volatility – exerted downward pressure on domestic prices, prompting more consumers to opt for powdered milk. Even so, better feed sourcing and a release of high-cost inventory from previous years helped offset what might’ve been an unhelpful trend of margin compression. A modest profit was projected for the fiscal year, speaking to the sheer resilience of the operation.

On the sustainability front, the farm continued to invest in ethical, data-driven herd management. Our state-of-the-art Dairymaster milking system remained central to daily operations, while a suite of animal welfare sensors enabled proactive monitoring of feeding, temperature, and behaviour, advancing both productivity and well-being.

Looking ahead, expansion is on the cards, though approached with an advisable degree of caution. While downstream processing remains a possibility in the long run, our focus for the time being is on collaborative models rather than heavy infrastructure investments. Sri Lanka’s dependency on dairy imports is not just a trade imbalance; it’s a structural gap waiting to be filled. Lonach Dairy Ltd intends to be part of that solution, but on disciplined, sustainable terms with the well-being of both the nation and the Group at heart.