GOLDEN Vale chief executive, Mr Jim Murphy has firmly ruled out merging with another Irish dairy processing group and has stated that the group will expand its own operations organically and through acquisition.

Mr Murphy's comments came as the focus once more moved to rationalisation in the Irish dairy industry, with the proposed Avonmore-Waterford merger likely to lead to further mergers if the two giants of the south-east are successful in their plans.

Speaking after the Golden Vale annual general meeting in Limerick, Mr Murphy said: "Milk processing represents less than 50 per cent of our operations and it's not growing.

"Basic milk processing is becoming an increasingly pressurised business; market prices for commodities will be institutionally reduced and milk prices will have to follow.

"We have sufficient scale to process the milk in our catchment area. Being bigger is not necessarily a competitive advantage," he said. Earlier at the meeting, Mr Murphy responded negatively when one shareholder inquired ff Golden Vale would consider merging with Kerry or Dairygold. "We're in a different business to the others," he stated.

In a detailed presentation to shareholders at his first annual meeting since he was appointed chief executive last February Mr Murphy said he was confident the group would meet market expectations for 1997.

He did not make a formal forecast, but analysts expect Golden Vale to report profits between £11 million and £13 million for the current year.

He also expressed hope that the group would regain the confidence of investors, suppliers and its own staff after the events of 1996 where profits collapsed and the group was hit with a £4.1 million superlevy payment.

He told shareholders that after receiving a detailed report from Coopers & Lybrand, Golden Vale had tidied up its milk quota management. The need for an improvement in this area was made clear by the group's admission that its records were inadequate to pursue those farmers who over-produced milk and who were responsible for the superlevy.

Mr Murphy said that one major priority was to get a better performance from the Vonk cheese business which sank back into losses last year. "We will be appointing a new managing director soon and we need to develop a clear strategy for the Dutch business," he said.

He added that Golden Vale aimed to use the success of its Cheesestrings product as the launch pad for a range of consumer products. In butter and skim milk powder, he said that Golden Vale had achieved a better balance between market price and milk prices.

Mr Murphy also stated that there would be a rigorous approach to cost efficiencies, but would not be drawn on whether this would involve asset disposals. There has been speculation that Golden Vale might sell off one of its cheese plants or one of its three butter/powder plants.

Last year's events which led to the dismissal of former chief executive, Mr Jim O'Mahony were hardly mentioned at the meeting, which attracted about 150 share-holders. Mr O'Mahony, who received £500,000 compensation for loss of office as well as his pension entitlements, attended yesterday's meeting as an ordinary shareholder but did not speak.