Dairy sector needs to prepare for challenges

An interesting takeover battle is under way in the Australian dairy industry that should be analysed by all those involved in the Irish milk industry.

Its unfolding asks important questions about how the sector in Ireland should prepare for the challenges and opportunities that lie ahead.

Warrnambool Cheese and Butter is now the subject of a three-way bidding contest that has pushed its valuations to astronomical levels. The latest bid, from Canadian dairy firm Saputo, values Warrnambool at 22x trailing Ebitda. To put this in context, most traditional dairy companies trade at Ebitda multiples of between 5x and 7x. The reason for the excitement — China.