Kerry should follow Glanbia's example
Published 14/03/2010 | 05:00
IT may have been the farmer shareholders and their boardroom representatives who forced the issue, but Glanbia's announcement of its intention to hive off its Irish dairy processing to the Glanbia Co-op is long overdue and sets an example that should be followed by Kerry.
Following last year's disastrous slump in dairy commodity prices Glanbia's farmer-shareholders are obviously determined to regain greater control over the milk prices paid to farmers. Good luck to them. If Glanbia can extract a satisfactory price for these businesses then it shouldn't hesitate to sell them back to the co-op.
Last year, the Irish dairy businesses had a turnover of just over €1bn, representing 56pc of Glanbia's total sales. However, they generated operating profits of just €24m -- an operating margin of only 2.3pc.
Meanwhile, Glanbia's US cheese and global nutritionals arm had sales of €792m with operating profits of €90m -- an operating margin of 11.4pc.
Based on these figures the case for getting rid of the legacy Irish businesses is compelling. Meanwhile, as Glanbia is discussing an amicable divorce with its co-op parent, Kerry is apparently seeking to acquire Newmarket Co-op in north Co Cork.
This is crazy. Like Glanbia, Kerry's legacy Irish dairy operations deliver much lower margins than its international ingredients business. The sooner Kerry boss Stan McCarthy follows the example of his Glanbia counterpart John Moloney the better.