Talks on sale of Donegal Creameries end

DISCUSSIONS TO sell Donegal Creameries’ dairy division to Connacht Gold have ended without agreement.

Talks between the plc and Connacht Gold, one of the country’s largest co-ops, had been ongoing for a number of months.

Donegal Creameries’ dairy division, which accounted for 46 per cent of the company’s turnover last year, has been struggling in recent times. Interim results for the company published last month, showed that the dairy division recorded an operating loss of €970,000 for the first six months of the year, compared to an operating profit of €350,000 in the first half of 2010 as the company found it hard to recover cost increases in a highly competitive retail market.

Donegal Creameries’ agri-inputs and seed potato business saw a strong improvement in profits during the same period.

The company, which has been listed on the Iseq’s junior exchange since 1997, already supplies milk to Connacht Gold and other co-ops, as well as manufacturing its own liquid milk and yoghurt products.

It has previously indicated its support for greater consolidation in the dairy industry, a policy endorsed by the Icos (Irish Co-operative Organisation Society).

Sligo-headquartered Connacht Gold is one of the largest co-operatives in the State. Formed in 2000 following the merger of two Connaught-based co-ops, it had turnover of €300 million in 2010, up from €264 million the previous year.

Pretax profits rose to €5 million in 2010 from €1.8 million in 2009, due in part to the disposal of property.

Connacht Gold has previously indicated its interest in pursuing acquisition opportunities in 2011.

Donegal Creameries closed unchanged at €3.20 yesterday evening in Dublin.