Ardagh meets competition with £25m investment

Ardagh, the glass bottle manufacturer, is to embark on a £25 million investment programme and make 150 people redundant in a plan to help meet competition from the new Sean Quinn glass plant in Northern Ireland. The proposed introduction of new capacity in Northern Ireland "means the industry is facing a very challenging scenario" with over capacity in Ireland, the UK and Europe, according to Ardagh chairman, Mr Peter Murray.

Announcing the development, with the preliminary figures, which showed an 11.7 per cent rise in pretax profit to £6.5 million in the year to June 1997, he said it will make the company one of the most competitive in Europe. It will also protect the remaining 240 jobs and provide it with a broader base, he said.

The redundancies will be voluntary, on a phased basis, over an 18 month period, Mr Eddie Kilty, group managing director said. He would not quantify the redundancy payments. Negotiation will now take place with the unions. Ardagh, formerly the Irish Glass Bottle Company, has had a number of redundancy programmes. Employment was at a peak of 1,150 in 1979/80.

Mr Quinn's £55 million plant at Derrylin, Co Fermanagh, is expected to go into production next summer and will have a capacity of some 170,000 tonnes. Ardagh's planned expansion will add 50,000 tonnes bringing its total capacity up to 170,000 tonnes. This is well ahead of the Irish market estimated at 140,000 tonnes. Ardagh has a near monopoly supplying around 125,000 tonnes. Noting the over capacity, Mr Murray stressed that stock levels are high throughout Europe with low growth in demand projected for the medium term. In addition, the global nature of the drinks industry has resulted in traditional cross-border barriers being breached in both bottling and sourcing of bottles. Mr Murray said the objective now is to secure its competitive position by ensuring that it is "among the most efficient and flexible glass bottle manufacturers in Europe". The board, including the representative of Rockware Group which has a 21.5 per cent stake in Ardagh, voted unanimously in favour of the development. Ardagh will now be competing with Rockware in the UK market. Mr Murray said Ardagh had not been in contact with Rockware about its planned development. Ardagh has been a cash-rich company for many years and has, up to now, come in for strong criticism for not using the cash resources to make acquisitions. It had cash of £14 million in 1996/7.

Payment for the new plant will come from existing resources and there will be no recourse to shareholders. It plans to seek a grant from Forbairt. The investment in the new plant, said Mr Kilty, will make Ardagh one of the "strong protagonists in both niche and volume glass bottle markets and will optimise shareholder value in the medium-to-long term. "

The latest results show a rise in sales from £35.8 million to £36.65 million. Net interest receivable, reflecting the strong cash position, increased from £788,000 to £942,000. A final dividend of 4.05p net per share has been declared, making a total of 5.205p, or 11.9 per cent higher than the previous year. Earnings per share increased by 9.7 per cent to 16.25p.

Trading in the first few months of this year has been "satisfactory and ahead of the corresponding period last year".