2nd Feb 2005 07:45
Glanbia PLC02 February 2005 Glanbia plc and Dairygold Co-operative Society Limited Joint Announcement Glanbia to take on CMP brand. Milk Processing Co-operation Agreement. Glanbia plc and Dairygold Co-operative Society Limited today (2 February 2005)confirm that, subject to the approval of the Irish Competition Authority,Glanbia will operate the CMP liquid milk, cream and juice branded business ofDairygold. The consideration is €10.05m. This development includes the relevant sales and distribution assets of CMP butexcludes the production and chill facility. Under the new arrangementDairygold's 130 liquid milk suppliers will continue to supply Dairygold andDairygold will sell the 6.15m gallon CMP liquid milk pool on to Glanbia. Glanbia will continue to supply the CMP milk, dairy and juice brands into theCork area, including continuing CMP door-to-door deliveries. In addition Glanbia and Dairygold have also confirmed that they have agreed inprinciple to enter into a contract manufacturing arrangement for elements oftheir respective milk processing activities. This is subject to finalisation ofcontract negotiations, which are ongoing. Once finalised the arrangement isdesigned to enhance capacity utilisation, as well as maximise scale andefficiency for both parties as advocated by the recent Prospectus report. Under the terms of this agreement Dairygold will supply a volume of cream toGlanbia annually, beginning in 2005, for the contract manufacture of Dairygoldbranded butter and butter oil at Glanbia's Ballyragget butter productionfacility. In addition Glanbia will purchase a volume of whey from Dairygold forprocessing. Glanbia will supply Dairygold a volume of milk for contract manufacturing intoGlanbia dairy products at Dairygold's Mitchelstown plants, from 2006 onwards. As appropriate both parties will make capital investments in their respectivefacilities and both parties will continue to maintain their own existingseparate commercial arrangements with milk suppliers and customers. Commenting, Glanbia plc Group Managing Director, John Moloney, said: "This development regarding the CMP brands and the contract manufacturingagreement with Dairygold are in line with Glanbia's strategy of maximising scaleand efficiency in the most appropriate way. The CMP brands will furtherstrengthen Glanbia's Consumer Foods' customer offering as one of Ireland'sleading suppliers of chilled foods and beverages to the retail and food servicesectors. Likewise the contract manufacturing agreement is consistent with ourstrategy of developing further industry alliances and co-operation to achievemutual efficiencies. Glanbia has a long track record of co-operation with otherprocessors, including Dairygold, and we view this mechanism as a sensible wayforward for the industry." Mr Jerry Henchy, Dairygold Chief Executive, said: "The decision to exit the liquid milk business was not taken lightly but inlight of the highly fragmented nature of the sector, growing volumes of importedmilk and the downward price pressure exerted by the multiples on the marginsthat can be achieved, it is the right business decision for Dairygold and itsliquid milk suppliers. The Glanbia Dairygold co-operation agreement is a verypositive move in the Irish dairy sector. Calls for consolidation of the industryhave been made for many years, but progress to achieve meaningfulrationalisation has been slow. This is partly because the route torationalisation was generally perceived as being through takeovers or mergers.We have developed a pragmatic solution where we will be happy to co-operate withneighbours where appropriate to share facilities and production assets tocontract manufacture dairy products as cost-efficiently as possible". Ends2nd February 2005 For reference: Glanbia plcGeraldine KearneyDirector of Corporate CommunicationsTelephone: 00353 56 7772357 Mobile 00353 87 231 9430 Dairygold Co-operative Society LtdPat KeatingKeating and AssociatesTelephone : 01 6620345 Mobile 00353 087 254 1757 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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