Glanbia is facing into a couple of tough years with pressure on its Irish and British dairy businesses. The new managing director, Mr Ned Sullivan, is facing into a challenge to generate the sort of growth for which the Avonmore-Waterford merger was meant to be the platform.

Analysts were downbeat yesterday, not so much because of the 1998 results which were in line with forecasts, but more as a result of expected pressure on margins in the dairy businesses in Ireland and the UK.

An expected recovery in the meat business may not be sufficient to balance lower earnings from its Irish and British dairy interests. As a result, existing 1999 earnings forecasts of nearly 30 cents a share have been pulled back to 26 cents.

And even this revised forecast depends on Glanbia pushing through a lower milk price for its suppliers. If that cut in the milk price is not forthcoming, further downgrades seem likely.

The outgoing managing director, Mr Pat O'Neill, said there was downward pressure on milk prices but did not seem confident that the current 100p a gallon paid by Glanbia would be much different by the end of the year. If Kerry and Dairygold keep their milk prices above the 100p a gallon mark, Glanbia may find it difficult to force through any meaningful cut in its own price.

In the UK, with severe competitive pressure in both cheese and liquid milk, the market will be looking for Glanbia to become involved in the badly-needed rationalisation of the liquid milk business - with six producers operating in a market where, at best, four producers can expect to make a serious living.

Mr O'Neill expects some movement on rationalisation in the current year, probably through swapping or merging of assets. "Margins in liquid milk are not enough for anybody to go writing cheques for £300 million," he said. "We have to wait to see how 1999 milk prices settle and the MMC report on Milk Marque, but I'll be surprised if there isn't activity this year," he said.

One analyst was more blunt: "Glanbia needs to merge its liquid milk in Britain or sell it," he said

Elsewhere, while it may only account for 3 per cent of its turnover, some of the biggest interest at yesterday's presentation was in what Glanbia plans to do with its troubled meat business in the light of the speculation that the two beef factories may be sold. The outgoing and incoming managing directors, Mr O'Neill and Mr Sullivan, did not attempt to minimise the problems in the beef business but emphasised that the overcapacity problems, which decimated the pigmeat business, were now largely overcome.

On the beef business, Mr O'Neill said: "Nobody can regard the beef industry as being in good shape. The industry has to put itself on a firmer footing. There are too many meat plants, that's painfully obvious and we need to get closer to European consumers."