Glanbia targets milk expansion

Glanbia is set to buy the IDA’s greenfield site at Belview, Co Kilkenny, as part of its plans to expand its milk processing capacity.

It is understood the development will be two thirds the size of Glanbia Ballyragget, which is the largest integrated dairy processing facility in Europe.

The new site is expected to have two 7.5-tonne driers, with capacity for up to 19m litres per week.

This move is dependent on talks between the group’s majority shareholder, Glanbia Co-op, and the plc to create a joint venture (40% plc and 60% co-op) in respect of its Irish dairy processing business, Dairy Ingredients Ireland, which is the largest dairy ingredients processor in Ireland.

Glanbia said: “The strategy of the proposed new joint venture will be to facilitate the continued development of the existing global Dairy Ingredients business, including the flexibility to expand milk processing capacity post the abolition of EU milk quotas in 2015. For any new processing capacity to be ready for 2015, a planning application needs to be submitted in early July. Any new development is contingent on the outcome of the ongoing discussions with the society [co-op].”

Glanbia said progress had been made with the proposed transaction, but said it did not expect talks to conclude before the end of August.

Stockbrokers have reacted positively to the progress in the co-op and PLC talks. While the decision is dependent on 75% of co-op shareholders voting in favour, net proceeds for the PLC would be between €50m and €100m after the required investment for new processing capacity.

Davy analyst John O’Reilly wrote: “The ownership structure suggests that [the new company] will be an autonomous business managed distinctly from Glanbia. In this regard, it is very different to the Southwest Cheese joint venture where Glanbia receives a management fee and has the first marketing call on output.

“There is an opportunity to uniquely focus on, and invest for, the medium-term organic growth prospects within Irish milk, which the 2015 abolition of the EU milk quota is expected to create; it can also participate in what may be [and what many would like to see] a consolidation of the Irish milk processing sector.”

Meanwhile, IFA president John Bryan urged Glanbia board members to be ambitious in their final discussions and ensure that dairy farmers are put firmly back in control of their industry.

Mr Bryan said: “Any final decisions must facilitate greater transparency, collaboration and integration of future processing facilities within the region.”