Operating costsDairygold chief executive Mr Jerry Henchy yesterday warned that the company may cut further jobs as part of its bid to return to profitability. He was speaking after it announced that it was exiting from the pig slaughtering business in Ireland with the closure of plants in Mitchelstown and Roscrea and the loss of 270 jobs aimed at saving around €10 million per annum.
Mr Henchy announced that Dairygold was closing its Galtee Meats slaughtering and boning plant in Mitchelstown at the end of October with the loss of 170 of the 210 jobs there. The other 40 workers will be redeployed in its consumer foods division. It will close its Roscrea plant by the end of September with 100 job losses.
But he warned that Dairygold would have to continue to address its operating cost base across its entire business. He mentioned the staff costs in the co-op's Consumer Food business which are currently 10 per cent higher than the Irish industry norm and 25 per cent higher than the co-op's leading competitors in Northern Ireland and Britain.
The closure of the Roscrea plant and the slaughtering operation at Mitchelstown will reduce the co-op's overheads including staff and management costs, said Mr Henchy, adding that Dairygold needs to achieve similar competitiveness across all its manufacturing operations in co-operation with its staff.
Mr Henchy repeated that Dairygold's approach since last year has been to "fix it, shut it or sell it" and he accepted that "a lot of painful decisions" will be taken in other areas of the business in the drive to further efficiency. While he wouldn't specify which areas, he is on the record as saying that rationalisation will have to take place in the company's five milk processing plants.
Mr Henchy told the inaugural meeting of Dairygold's 60-member committee yesterday that the move to end Dairygold's involvement in primary pig processing was aimed at safeguarding the survival of the remaining 585 jobs in its consumer foods divisions which would prepare and package bought-in pig meat as well as continue to produce dairy and cheese products.
Last autumn, Dairygold exited from primary beef processing when it sold its plants at Mitchelstown and Kilbeggan with the loss of 250 jobs. Yesterday's announcement is in line with its policy of ending slaughtering and concentrating on added value products for the consumer market.
According to a Dairygold spokesman, the company will continue to source its pork from Irish producers but will simply buy the 35 per cent of the pig that it uses for its product.
Mr Henchy said yesterday that the move was forced upon Dairygold by increased competition and downward pressure on prices in the retail markets, particularly given the increasing rate with which lower cost international consumer food producers are using their own products to grow market share in Ireland.
He pointed out that the Mitchelstown plant is currently slaughtering 8,000 to 10,000 pigs per week but that this is less than half the size of the average plant in countries such as Denmark, Holland, Germany and France where operators are producing their own label brands that are competing with Dairygold for pig meat sales in Ireland.
"Clearly scale, or lack of it, is an issue for the Irish industry and unfortunately pig production is falling with current production levels some 20 per cent below 2000 levels," he said.
He said there is currently a 25 per cent over-capacity in the Irish pig slaughtering sector.
"Unfortunately, there is no alternative to the rationalisation and closures announced. To survive for the future and preserve the remaining 585 jobs in Consumer Foods, we must reduce our cost base and reposition the business so that we can compete in key international markets," said Mr Henchy.
Glanbia yesterday confirmed it has the capacity to process the Dairygold pig supply at its plants at Roscrea and Edenderry which are currently undergoing refurbishments which will allow Glanbia to process 25,000 pigs per week.
