Tuesday 24 October 2017

Sale of dairy business to co-op may be back on the table if prices fall

Peter Flanagan

Peter Flanagan

THE "STRATEGIC rationale" for the PLC to sell the Dairy Ireland business back to the co-op remains, but the project is unlikely to be revisited in the "near term", Glanbia said yesterday.

Last May, the disposal was rejected by co-op shareholders, when only 73pc of farmers supported the deal. Since then the business has been boosted by a rebound in global dairy prices, to the point that the business generated earnings before interest and taxes of €47.9m, up nearly 74.2pc from 2009.

If a deal is to be resurrected, it will have to come from the co-op, John Moloney said.

"The world has moved on since [last year].

"Dairy farmers are looking at good performances now while the previous government's Food Harvest 2020 report indicated that output could increase by 50pc after quotas are removed in 2015. The business is increasing value steadily."

Co-op chairman Liam Herlihy agreed, pointing to "radical changes in dairy market prices" since last year."

Despite the public utterances of both men, the lack of a deal is believed to be more a product of high milk prices than anything else.

The dairy sector was battered in 2009 and Dairy Ireland was a drag on the PLC business. That is no longer the case but if dairy prices fall again, the disposal is likely to be revisited sooner than the three to five years, Mr Moloney suggested.

High commodity prices will remain key to how the company performs for the medium term .

Davy Stockbrokers believe Glanbia has entered 2011 with good momentum while Bloxhams share the expectation that the dairy market will remain firm.

As long as that expectation holds true, then Glanbia should remain in the driving seat for the year ahead.

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