Co-op can plug into boom
While the economy prospers, their Alchemy Properties and 4HOME Superstores divisions have the potential to raise Dairygold’s overall profitability, even if difficult trading conditions continue in their dairy processing and agri-business.
The co-op has done well to get the non-core businesses up and running quickly, in place to benefit from continuing annual growth of about 5% in the Irish economy.
Dairygold shareholders made a sound decision last January to transfer non-core businesses into a wholly owned subsidiary.
Separating their management from the traditional co-op businesses should be seen as a positive move.
Dairygold’s expertise is in dairy and meat processing, liquid milk production, animal feed manufacture, grain trading, supply of farm inputs, animal breeding and livestock marketing.
The proposed Reox subsidiary needs a completely different set of management skills.
That is why shareholders attending upcoming information meetings might question why it is proposed that the traditional side of the business appoint up to half of the Board of Directors of the new Reox subsidiary, and if Jerry Henchy intends to continue long term with the hugely challenging task of leading both the farm based Dairygold Co-op and the consumer driven Reox companies.
These are important questions because the priority for shareholders right now should be to give the non-core businesses every chance of succeeding in their highly competitive sectors.
Only if they succeed can they grow, develop and reach their full potential, and pass on considerable real benefits to their owners, Dairygold Co-op and its shareholders.
Shareholders should bear in mind that all three divisions of Reox will, arguably, have to be managed even better than competing businesses, because the guaranteed dividends flowing back to Dairygold out of profits make Reox less flexible financially than competitors.
It might be interesting in this context for shareholders to enquire why Consumer Foods are included with DIY and property businesses, and why the baby food business which Dairygold is negotiating to buy would stay with the core business, and how it is proposed to meaningfully link manufacturing in Dairygold with consumer foods in Reox.
If all the correct decisions are taken by Dairygold Co-op and its shareholders in this separation of core and non-core activities, Reox could become one of the country’s top firms, and could guarantee strong financial back-up for the farm-related side of the co-op. Not alone could reasonable prices for farm produce be guaranteed, but the research and development and re-investment needed for a thriving modern food company could be more easily financed.
If the correct decisions are not taken, there is provision in the proposal being put before shareholders for winding-up the assets of Reox. That’s a sobering prospect for the shareholders who now have the responsibility for setting up Reox.
