WATERFORD Foods is looking at various rationalisation options, including merger, partnership or other forms of strategic alliance, chief executive Mr Matt Walsh told shareholders yesterday.
The statement that Waterford is once again looking at possible merger is the latest in a series of comments from senior industry figures, including Avonmore chief executive Mr Pat O'Neill and Kerry chief executive Mr Denis Brosnan, that has put the question of rationalisation once again on the agenda for the Irish dairy sector.
"There have been more and more smoke signals from people in the industry in the past few weeks that rationalisation is now more of it priority than it ever was," said one industry source, who added that the difficulties facing any major rationalisation were still enormous.
Five years ago, Waterford and Avonmore came close to a merger but failed to agree on price although personality differences between some of the main players in those negotiations are also thought to have played a part in the collapse of the negotiations.
One highly successful merger was that between Ballyclough and Mitchelstown Co ops to create Dairygold. Many in the industry believe that Dairygold chief executive Mr Denis Lucey, having seen the success of his own merger, is open to negotiation on further mergers.
At yesterday's Waterford a.g.m. in Dungarvan, Co Waterford Mr Walsh prefaced his comments on possible merger or alliance with a strong reference to the changes facing the dairy industry as a result of GATT, EU enlargement and general liberalisation of.. world trade.
He warned the future for the Irish industry was grim "if we don't get levels of competitiveness and scale".
But Mr Walsh chose his words carefully and said that the planned review "will be comprehensive, painstaking and necessarily time consuming".
"We will be reviewing the options which will best serve the strategic interests of the group and the interests of all stake holders in this era of tremendous change. These options may include merger, partnerships or other forms of strategic alliance, he said.
"The options will be carefully evaluated by the board in the context of the scale, levels of innovation and strength of market positions necessary to progress in a world of global food businesses.
"The key issue is to objectively determine the option Which offers. the group and its shareholders the greatest operational and strategic. benefits. However, the boar would only advance this agenda if it proved demonstrably advantageous to the interests of the group," he told the a.g.m.
Mr Walsh warned his milk suppliers that further cuts in the milk price are likely following the 3p a gallon cut for April milk supplies.
He did not elaborate but industry sources believe that a further 3p cut for June milk, followed by a further 2p cut later in the year, is likely to bring the milk priced back closer in line with prices on world markets.
