4 June 1999

Express liquid milk lead up as Glanbia deal is confirmed

By Robert Harris

EXPRESS Dairies confirmed this week that it will buy Glanbias UK milk operations for about £100m, subject to shareholder approval.

The deal increases Expresss lead in the liquid milk sector and follows its stated aim to expand, said Expresss chief executive Neil Davidson. It will also cut overcapacity in the UK industry, he added.

"Glanbias UK milk operations are an excellent fit with our own and the integration of the two businesses over the next 18 months will enable us to achieve significant cost savings and efficiency improvements."

Express already leads the UK liquid milk market with a share thought to be about 20%. Irish food group Glanbia, the fifth biggest processor, had a 9% share, though this is thought to have slipped.

The acquisition, predicted in last weeks farmers weekly (Business, page 21), includes four dairies processing fresh cream and milk, one UHT plant and 58 depots servicing smaller retailers and doorstep deliveries.

"Inevitably, given the geography, there will be closures and job losses, though not before a thorough review and consulting with trade unions," said Mr Davidson.

Industry observers have been predicting consolidation for some time. "Major supermarkets have slimmed down the number of suppliers, and if processors want to fit in with this there has to be rationalisation," said independent consultant Mike Bessey.

Glanbias UK milk arm reported tax before profits and exceptional items of £17.8m on a turnover of just over £292m in the year to Dec 31. But it has since lost two big retailer customers, and also warned this week of lower-than-expected earnings in its pork and British cheese operations and lower profits in its Irish milk manufacturing business.

Express also announced its results for the year ended Mar 31 – the first since its demerger from Northern Foods – at the same time. Pre-tax profits rose 9.3% to £60.2m, following the trend set by Wiseman and Dairy Crest in recent weeks.

Total volumes rise

Total liquid milk volumes rose 15%, including acquisitions. Focusing on major multiples enabled Express to gain share in a "highly competitive" market place, said Mr Davidson.

But doorstep deliveries slipped almost 7%, reflecting the national trend. To counter this, Express is investing £5m. More added value products are also in the pipeline.

Expresss rise in profits contrasts sharply with farm-gate prices. Producers received 8% less on average for the year, at just over 20p/litre, according to the farmers weekly milk price review. Chairman Lord Christopher Haskins blamed the strong £ for most of farmings problems.

"It is in the interests of all participants in the dairy industry that Britain joins the single currency at the appropriate rate as soon as is practicable. This should eliminate the significant fluctuations in farmers income which has been a feature of recent years," he said. &#42