Henchy faces huge task at troubled Dairygold
It looks as if Jerry Henchy has a much tougher job on his hands than he ever imagined when he signed up for the job as chief executive.
It is probably going too far to say that Mr Henchy was handed a poisoned chalice, but judging from the reported dramatic drop in performance last year, one could be forgiven for thinking this was the case.
It is reckoned that the milk price paid to Dairygold’s suppliers last year cost the company €6 million, while poor returns from the beef division and the leakage from the trading stores resulted in profits plunging.
Profits before tax were slashed from €13.25m to €2.7m in 2002 and without the sale of assets totalling more than €6m, the loss for the year could have been over €4m. Given the catalogue of disasters last year, Mr Henchy’s hand has been strengthened, although workers and farmers are already up in arms over the closure of 23 of the stores, whose existence cannot be justified on commercial grounds.
It is also inescapable, however, that the amalgam of Ballyclough and Mitchelstown that formed Dairygold has deep roots in that part of Co Cork. Attempts to turn Dairygold into a more cohesive profit-driven organisation will not be achieved without some blood being spilt in the coming months.
The group employs more than 3,000 people and no one knows for certain how many of the jobs are surplus to requirements. Could it be as many as 1,000?
It is hard to say, but it is certain that with so much of the co-op’s operations under scrutiny, the toll on employment has to be quite heavy if the job is to be properly carried out.
Already the closure of the Kilcorney creamery has been postponed, an action that no doubt would cheer the heart of the Bold Thady Quill, were he still to the good, but the point is well made.
In south Tipp, farm families took to the streets recently to protest at the closure of the Clogheen trading branch by the group, and it is clear that the clear-out required to put the slumbering Dairygold on a sound financial footing will not be an easy task.
The big question is will the colossus of a 209-member board of directors be pliable enough to go all the way with Henchy’s strategic plan. Commercial and common sense suggest he has to cut milk prices again and that he has to either close or sell all of the non-performing assets if Dairygold is to have a future.
In that sense, talk of merger with Glanbia in this column last week was a bit premature. Mr Henchy has to sweep up his own kitchen before he can start looking at the bigger strategic picture that is also lurking in the background, but which cannot be tackled just yet. Dairygold’s beef plant in Charleville is the last in farmer hands. Last week, Mr Henchy admitted that it was up for sale and speculation is also rife that the pig farm, that lost €770,000, might also go in the clean-out.
All of the others threw their hat at the beef sector, but until now, Dairygold has soldiered on despite the commercial logic of getting out of the business.
As time goes on, however, Mr Henchy will come to realise that there is more to Dairygold than the bottom line and that its connection to the local farmers and the local communities is probably a lot stronger than elsewhere in the country. But then, given his background, he probably knew all that anyway and he is not in a state of shock as a result of the scale of the challenge on his hands.
Whether he has enough support within the group to see this thing through is a gamble he probably took when he accepted the job in the first instance.
He will need more than commercial logic to see this enormous task through.
So far, he has closed 23 non-profitable local branches and the momentum seems to be with him at this stage.
