Dairy farmers 'set to sell out'
Since 2001 it has lost 1,000 suppliers, but the exodus is set to increase dramatically as farmers with small dairy quotas sell out.
To stay competitive farmers will need to produce 100,000 gallons of milk, a survey for the Kilkenny-based group has found.
At present Glanbia's suppliers have a 60,000-gallon average quota, which is not enough to produce a long-term livelihood.
Speaking at the launch of the group's results for last year yesterday, chief executive John Moloney said: "There is a basis for a dairy industry in Ireland, but we're still in a quota regime and people have to be able to scale up in order to survive."
The group's Irish operations suffered a serious profit dip last year due to difficult trading conditions, attributed to the CAP reform and a more competitive retail environment.
Operating profits fell 7% from €86.3 million to €80.6m, all of which was attributable to the Irish businesses.
For the last four months of 2005 the group paid farmers 4 cents per gallon more for milk that could not be recovered due to increased competition internationally which hit the bottom line hard.
During the year, operating margins fell from 4.9% to 4.4%.
However, shareholders will benefit from a better final dividend, which is being increased 5% to 5.51 cents per share.
Glanbia said it is on the cusp of making an important acquisition in the nutritional area which it aims to double in size over the next three years.
Its US business, where it is a key player in cheese, is evolving rapidly. Its South-West Cheese operations in New Mexico should deliver sales of €293m at full production in 2007, adding significantly to earnings growth, Mr Moloney said.
Recently, the group launched its Yoplait Essence brand in Ireland. This offers health benefits to the over-35s. Developed by Glanbia, the range may be taken up by Yoplait in France with significant benefits to the Irish group, said Mr Moloney.
In Nigeria, the group's Nutricima milk-processing joint venture will contribute e84m to sales at full production next year.
As a result of the rationalisation in Ireland and on-going developments across its nutritional and cheese products, Glanbia says it will hit double-digit earnings per shares in 2007.
Analysts reacted favourably to the figures, but John O'Reilly of Davy Stockbrokers said the group might miss its double-digit EPS target by a short head. He forecasts an EPS growth of 9.7% in 2007.
