All eyes on Dairygold results amid profit fears as DIY spinoff Reox faces an uncertain future

THE profit warning from Glanbia, the publicly-quoted international dairy group late last week, has heightened interest in the results for 2008 expected this week from Dairygold.

The north Cork co-op is the largest in the country and its offshoot, Reox in which it has a 25% stake, is struggling in the downturn.

The two have a common shareholder base of roughly 7,500 farmers.

These were hived off in 2006 by the then Dairygold boss Jerry Henchy.

The idea was to protect milk incomes for farmers and to enhance their future income by developing the non-dairy assets of the co-op in a new and separate company called Reox, in which Dairygold suppliers hold the other 75% of the equity.

The downturn in the economy has pulled the rug from under Reox and some now question its ability to survive as a standalone operation.

Already some of the DIY 4Homes stores are being brought back into co-op ownership and the Portlaoise branch has been closed.

Property is in the doldrums and the consumer food division has been virtually eroded with the recent sale of the branded consumer pork and dairy product range to Kerry Group for €140 million.

The collapse of milk prices since their peak in 2007 has added to the financial pressures of the combined Dairygold/Reox group.

The profit warning forecasts late last week by Glanbia has raised fears that Dairygold struggled badly last year under the collapse of milk prices and may have slipped into significant losses as it sought to maintain milk prices for its farmers.

Those pressures forced the of resignation Jerry Henchy as chief executive of Dairygold in January while he has since resigned also as boss of Reox.

In 2007 the dairy group delivered profits of over €21m, substantially up on the figure of €250,000 returned for 2006.

Sceptics fear the results for 2008 will show a dramatic reversal of the figures achieved in 2007 – by how much will be revealed in the next few days.