Dairygold has announced it intends to exit the liquid milk business with the sale of the CMP dairy business in Cork city to Glanbia for €10.5 million.

The deal will see Dairygold's 130 milk suppliers continue to deliver to the co-op which will pass the 6.15 million gallon pool on to Glanbia. Both sides have agreed contract manufacturing arrangements.

Thirty-eight jobs will be lost while Dairygold will shed a further 50 jobs, including 20 at its butter-making facility at Mallow, which is to close. Some 58 CMP distribution and sales staff will transfer employment to Glanbia.

According to a Dairygold spokesman, yesterday's announ-cements bring to 920 the net number of jobs which Dairygold has shed since 2002, with a further 237 jobs transferred to other employers through the sale of various businesses.

Dairygold chief executive Mr Jerry Henchy said the sale of the liquid milk business was the right decision given the highly fragmented nature of the sector in Ireland, the growing volumes of imported milk and increasing pressure on margins.

"This is a very positive move in the Irish dairy sector. Calls for consolidation of the industry have been made for many years but progress to achieve meaningful rationalisation has been slow," said Mr Henchy.

"We have developed a pragmatic solution where we will be happy to co-operate with neighbours to share facilities and production assets to contract manufacture dairy products as cost-efficiently as possible." Glanbia group managing director Mr John Moloney said: "We view this mechanism as a sensible way forward for the industry."

In a separate development, Dairygold confirmed it would keep open its cheese plant at Mogeely in east Cork after it won a long-term contract with Norwegian cheesemaker Jarlsberg Cheese, to manufacture the cheese for the US market.