Downbeat was the word most commonly used to describe Glanbia's separate results presentation to the media and analysts. It wasn't so much that the 1998 results were bad - they weren't - but that the prospects for the next couple of years look difficult to say the least.

The doubts over earnings in 1999 and 2000 are linked directly to the dairy operations in Britain and the Republic, where milk prices and intense competition to supply the multiples have led analysts to claw back their forecasts to the extent that earnings growth in the current year may be negligible.

First to the Republic, where the price paid to farmers for milk looks like being a contentious issue once more. Pat O'Neill was pretty emphatic that on the basis of the price Glanbia is getting for its dairy-based products, a cut in Glanbia's milk price is warranted.

His comment, however, that he expects the price of milk at the end of the year to be little changed from the current level suggests that Glanbia is resigned to paying over the odds for its milk, with the consequent impact on its Irish margins.

One of the difficulties facing Glanbia is that two other major milk processors, Kerry and Dairygold, have historically paid over the odds for their milk. Kerry, with its huge overseas earnings from food ingredients and consumer foods, can afford to mollycoddle its farmer-shareholders with an extra couple of pence on the gallon. Dairygold - with no outside shareholders or the stock market to keep sweet - can equally afford to subsidise its milk price.

Glanbia is not in this comfortable position - and paying over what the market dictates as a reasonable price for milk will undoubtedly affect earnings and Glanbia's rating in the market.

In Britain, Glanbia is one of six dairy groups competing in the liquid milk market and conventional wisdom is that a market the size of Britain can accommodate at best three and at most four processors. Unigate, Express, Dairy Crest, MD and Wiseman are Glanbia's five competitors, with Wiseman in particular competing with Glanbia on its home patch in north-west England.

Takeovers are seen as unlikely and Pat O'Neill has said on many occasions that the big players in the industry are going to have to get together and rationalise into three or four powerful groups by sharing or swapping assets - not by acquiring one another. The problem is that rationalisation in the British milk industry happens at the same snaillike pace as in the Republic - with everybody apparently waiting for everybody else to make the first move.

Against that background, Glanbia's difficulties in the beef business pale into insignificance.

At €2.28 (£1.80), Glanbia shares have come back an awful long way from the €4.53 high of early 1998 - immediately after the completion of the merger between Avonmore and Waterford. With the co-op majority stake meaning that Glanbia shares will never enjoy a takeover premium, the short-term prospect for the shares are poor and they will probably do well to trade in line with the sector.