Speculation that major structural changes could be in prospect at foods group Golden Vale has intensified after it emerged that financier Mr Dermot Desmond has increased his shareholding in the group from 8.3 per cent to 10.2 per cent after buying almost three million shares in the market.

Mr Desmond's stake in Golden Vale has doubled in less than a year. It is the second time that he has invested in the Cork-based goods group. Two years ago, Mr Desmond built up an 8 per cent stake in the foods group and then sold the shares to institutional investors at a £5 million (€6.4 million) profit.

While Mr Desmond's first foray into Golden Vale seems to have been simply an investment, some sections of the market believe his current interest is based on a belief that Golden Vale will, sooner rather than later, take steps to reduce further its dependence on milk processing and enhance its image as an added-value consumer foods manufacturer.

The consumer foods arm of Golden Vale generated operating profits of €34 million on sales of €442 million last year, but its butter and milk powder operations plunged into losses of €900,000 on sales of €277 million.

Chief executive Mr Jim Murphy said at last month's 1999 results briefing: "The performance of this [butter/powder] business is unacceptable and of serious concern to the board. The board is reviewing all options to correct this situation."

These options are thought to include: a severe cut in the milk price of around 4.75p a gallon; selling the Charleville plant to Golden Vale Co-op; a joint venture with another dairy processor or a departure by Golden Vale plc from milk buying.

Unlike Kerry and Glanbia, where the parent co-ops retain sizeable shareholdings in the plc, Golden Vale Co-op has no direct shareholding in Golden Vale plc. The 18-strong plc board, however, is heavily dominated by 14 farmer-directors with the only non-farmer shareholders being Mr Murphy, finance director Mr Liam Irvine and two non-executive directors, lawyer and investor Mr James Osborne and IWP chief executive Mr Joe Moran.

Analysts have few doubts that if the loss-making milk processing operations could be demerged from Golden Vale - either by selling them to the co-op or merging them with another dairy processor - the remaining Golden Vale consumer foods assets would warrant a higher rating in the market.