Any British cattle slaughter could benefit Golden Vale

 

ANY slaughter of British cattle as a result of the BSE crisis could benefit Charleville, Co Cork based agri business group Golden Vale, according to its chief executive Mr Jim O'Mahony.

Even a partial slaughter of the British herd would result in a severe shortage of milk supplies in Britain, and Mr O'Mahony said that Golden Vale would be in a position to export milk to Britain to meet some of that shortfall.

"Not wishing to dance on anybody's grave, but a slaughter of the British herd would present opportunities for Irish suppliers," he said.

Mr O'Mahony said Golden Vale could conceivably divert up to 80 million gallons of its 120 million gallon Irish milk pool to the British export market, and source milk elsewhere for its Irish processing operations.

Golden Vale itself has only a relatively small operation in Wales. But the group has extensive milk and cheese operations in Northern Ireland, which industry sources believe could suffer as a result of the BSE crisis and any slaughter of cattle.

The British government has rejected calls for special status for Northern Ireland cattle, which means that any slaughtering policy would also apply to the cattle in the North which supply Golden Vale's operations.

Mr O'Mahony was speaking after Golden Vale reported a strong recovery in 19,95 with pre tax profits up 29 per cent to £16.5 million and a recovery in group operating margins from 3.3 per cent to 3.8 per cent.

The group was also successful in reducing its debt, with strong cash to £70 million and cutting gearing from 101 per cent to 78 per cent.

On future acquisitions, Mr O'Mahony would not be drawn in detail but he said "We would tend to look in the food service and catering area within the EU for something that is complementary to our business"

He said Golden Vale had facilities for £40 million £50 million ahead of current borrowings and added that, if no acquisitions were made, cash flow could pull another £10 million of debt and push end 1996 gearing below 60 per cent.

Last year, Golden Vale benefited from the strength of dairy commodity markets, but the weakening of these markets in the first few months of 1996 means that the milk price paid to farmers is likely to fall from the current record level of 113p a gallon. Mr O'Mahony would not be drawn on cuts in the milk price, but it seems likely that the price for April milk deliveries will fall.

He did say, however, that if demand for milk from Britain increased as a result of cattle slaughtering, the pricing situation could be dramatically different.

And Mr O'Mahony added that lower law material costs would improve margins in the group's added value business. Last year, we had bumper profits from commodities but were squeezed a bit on the retail side. This year, the situation will be reversed with cheaper raw materials for manufacturing for the retail market. The positive thing in one side of the business affects the other side."

He added that the group's aim was to get a better balance to its business to "make the overall margins more secure".

Cheese volumes were 5 per cent higher last year while dairy spreads volumes were up 7 per cent, mainly due to increased business in Northern Ireland.

The Vejle business in Denmark suffered from the high cost of raw materials and additional competition which hit margins. "It's come right at this stage and should be profitable this year," Mr O'Mahony said.

Turnover in the commodity milk powder and butter business was up 20 per cent, reflecting the strength of dairy markets last year and increased volumes.

Overall, the increased price paid for milk was exceeded by the positive performance of both the milk powder and butter businesses.