Glanbia directors expected to come under fire from farmers

Shareholder advisory group urges investors to abstain from re-electing co-op directors

Glanbia last month cut its base milk price by 3 cent a litre amid warnings of oversupply in the marketplace, undercutting the price offered by rival processors. Photograph: Drew Nash/Times-News

Glanbia last month cut its base milk price by 3 cent a litre amid warnings of oversupply in the marketplace, undercutting the price offered by rival processors. Photograph: Drew Nash/Times-News

 

Glanbia directors are expected to come under fire at the group’s annual general meeting (agm) in Kilkenny on Wednesday over the price it pays farmers for milk and how it funds various supplier support schemes.

The company last month cut its base milk price by 3 cent a litre amid warnings of oversupply in the marketplace, undercutting the price offered by rival processors.

Farmers claim the group’s co-operative arm is paying them below-market prices for milk while utilising the co-op’s resources – the farmers’ own money – to fund various support schemes.

The company denies the allegation, claiming milk prices are decided by the co-op and not the plc, and that it offers a comprehensive package of supports for suppliers to help them cope with market volatility.

Glanbia chairman Henry Corbally is expected to divert questions about milk prices to the co-op’s agm, which takes places next month.

Separately, Glanbia investors have been urged to abstain from voting to reappoint a number of directors at the agm.

Shareholder advisory group, Institutional Shareholder Services (ISS), said Glanbia Co-op Society, the company’s largest shareholder, had a disproportionate representation on the board of the plc.

Currently 10 of the 14 non-executive directors on Glanbia’s board are co-op nominees.

Election

As a result, ISS recommended that shareholders abstain from the the election and re-election of eight directors – Eamon Power, Patrick Murphy, John Murphy, Martin Keane, Brendan Hayes, Tom Grant, Vincent Gorman and Patsy Ahern.

All eight are members of the Glanbia Co-op, which holds a 31.5 per cent stake in the group.

ISS said while the board continues to undergo changes in relation to Glanbia Co-op members, “there is still a significant number of society nominees on the board particularly given the society’s stake has dropped to 31.5 percent”.

“An abstention on the re-election of the society representatives is considered warranted to reflect that more needs to be done to address the board balance,” it said.

Glanbia declined to comment on the ISS note. However, it has previously stated it plans to reduce co-op representation on the board of the plc from 10 to eight this year and to six by 2022.

Glanbia sold off a controlling stake in its dairy business to Glanbia Co-op last year.

Controlling stake

The deal saw Glanbia’s consumer foods and agribusiness units hived off into a new group, known as Glanbia Ireland, which is now jointly controlled by Glanbia plc and the co-op.

The co-op is understood to amassed close to €70 million from the spin-out of co-op shares in the plc.

After the latest spin out of shares, the co-op’s stake in the plc fell to 31.5 per cent but it funded a controlling stake in the group’s new dairy business, which will hold brands like Avonmore, Kilmeaden and Premier.

At the time, insiders insisted the arrangement was a win-win for both sides, giving the co-op, and therefore farmers, a majority ownership of the businesses closest to them and the one that directly affects their pay cheques.

The plc benefited from having the heavy-lifting processing side of the business wrapped up in joint ventures, which allowed it focus on the higher-margin consumer trend products and the performance nutrition side of the business.