Glanbia virtual regional meetings continue across the co-op’s catchment area, but what did we learn from last week’s online presentation?

The chair, John Murphy, was quoted in other media suggesting that Glanbia was not for taking any more milk. However, on the virtual webinar Murphy clearly stated that Glanbia expects 3% to 4% growth per year in milk, even with the environmental challenges on farmers.

He also stated in his opening address that the new co-op ambition is signaled by the investment fund of €160m. He further explained the new €160m spin-out will be on top of the €740m already spun out to farmers, bringing the total amount to over €900m down through the years.

The chair did say that 10% of the dividend from the investment fund would be ringfenced for shareholders, which we understand is a dividend to all active and retired shareholders – not just dry shareholders.

Milk price

There were questions on what was going to change to allow the co-op pay a higher milk price.

In reference to milk pricing questions, newly appointed co-op CEO Jim Bergin said the €14m plc dividend would not be going to the plc, but that there are also further retained dividends and earnings that can now potentially be used for milk price or grain price.

The plc dividend was €8.6m in 2018, €11.6m in 2019, €12.6m in 2020 and €14m in 2021.

One farmer queried if the deal does not contain a guarantee that Glanbia will be in the top tier then what good is anything. Jim Bergin replied: “I think in the current year we have improved our position in the Irish Farmers Journal monthly league and we know over the last four or five years through the KPMG (KPMG/IFJ Annual Milk Price Review) we have made steady progress against those above us who are the Carbery Group [the west Cork co-ops] and they are the only ones above us during the last four or five years.

“We know the monthly Irish Farmers Journal league is sensitive for farmers and we have improved our position on that in the last 12 months and will continue to focus on that.”

Name change

The name change came up for discussion and this is significant in any deal like this, especially for a company that is trading on the international markets.

Think about it, nobody will know the new name, while everybody in the business knows Glanbia and it has a respected reputation. But that “Glanbia” link will go with the plc.

Bergin said: “The plc own the name so they keep it as they are on the stock exchange etc.

“We have mixed feelings on it but often our commercial team have to explain the difference between the plc and ourselves.”

There obviously will be a cost to rebranding all the lorries etc and one person questioned the budget for this.

However, the bigger cost could be international buyers recognising what changes have happened at Glanbia.

Sean Molloy of Glanbia added later in the webinar that experts were looking at it and there is a 12-month window to work on that.

There still wasn’t clarity on the multiple of profit that is being used – a multiple of 9.2 current year earnings. Also there wasn’t any further detail on alternative funding options.

Comment

The chair said he was looking forward to a good debate on the proposed deal.

The key measure of success for management will be the capacity for the new entity to deliver highly competitive prices for milk and grain and an efficient range of services when trading with its farmer members.

The real question facing Glanbia farmers is should the deal include some measures of certainty for farmers around output prices or specific future financial disciplines? Will farmers be presented with a business plan? Other dairy companies forecast a range in milk prices in advance and then strive to meet those milk price forecasts – could the new Glanbia do this?

Also, surely it would be a reasonable ask by farmers to see delivery on a strategic plan prior to allowing them trigger a new investment fund?