FDBusiness.com

Glanbia, the global nutritional solutions and cheese group, has agreed with its majority shareholder, Glanbia Co-operative Society, to enter into a joint venture in respect of its Dairy Ingredients Ireland business. The proposed joint venture will be 40% owned by Glanbia with Glanbia Co-operative Society holding the remaining 60%. Separately, but related to the joint venture, Glanbia Co-operative Society has announced that it intends to reduce its shareholding in Glanbia to 41.4%.

The proposed joint venture, to be known as Glanbia Ingredients Ireland, incorporates the business and assets of Dairy Ingredients Ireland, a business unit of the Dairy Ireland division of Glanbia, including its 45% share of the Corman Miloko Ireland JV and its 23% shareholding in the Irish Dairy Board.

The existing DII business is the largest dairy ingredients processor in Ireland, assembling a milk pool of 1.6 billion litres and processing it into about180,000 tonnes of dairy ingredients largely for export to over 50 countries worldwide. In 2011, DII generated revenue of Eur738 million, operating profit of Eur33 million and EBITDA of Eur44 million. As at 31 December 2011, DII had gross assets of Eur313 million.

There is a compelling strategic logic for the creation of the joint venture for both parties as it facilitates the expansion of dairy processing inIreland in advance of EU milk quota abolition in 2015, while also ensuring that Glanbia’s financial resources are directed towards business segments that deliver the highest return on capital for all shareholders.

The opportunity to expand milk production is underpinned by a positive long-term outlook for global dairy markets and the comparative advantage thatIrelandenjoys as a grass-based system. It is envisaged that GII will seek to increase existing peak dairy processing capacity by up to 60% through a total investment programme of Eur180 million to 2020. Planning permission is progressing for a new greenfield facility at Belview, County Kilkenny. The board of GII will reflect the relative shareholding of the joint venture partners and the existing management will remain in place. The financing of GII will be independent of the joint venture partners.

John Moloney, group managing director of Glanbia, comments: “The proposed joint venture offers a compelling proposition for all stakeholders for the longer-term as it facilitates the desired expansion of dairy processing by Society members and allows Glanbia to continue to focus on its successful international growth strategy. The abolition of EU milk quotas in 2015 will initiate a new era for milk production and offers increased prospects for the Irish dairy industry through a clear opportunity to expand milk supply. Glanbia already has a number of successful international dairy joint venture operations in the UK, USA and Nigeria.”