IN the novel Cold Comfort Farm one of the characters is obsessed by the indefinable presence of "something nasty in the woodshed" if released, would wreak havoc on all in its path. This week publicly quoted dairy group Golden Vale, an organisation plagued by trading and management difficulties, opened the woodshed door and the beast lurched into view, sending shivers of apprehension among investors.
Half yearly results from the Charleville, Co Cork-based group were not a pretty sight. Although the market was braced for a disappointing performance the setback was considerably worse than expected. Pre-tax profits tumbled 49 per cent to £4.1 million with the group unlikely to make up lost ground in the remainder of the year.
Catastrophic overproduction of milk leaves Golden Vale facing cumulative EU superlevy arrears of £7.2 million which it hopes to partly recoup from suppliers. This hefty cost burden is further exacerbated by an estimated £1 million "golden goodbye" to former chief executive Jim O'Mahony who departed in the wake of the milk glut fiasco.
A prime factor behind the poor trading performance was the disparity in prices paid to farmers for their milk and the market price of butter and milk powder. A price reduction from the present 108p to 100p per gallon or below seems inevitable, adding another layer of distress to suppliers.
Analysts are understandably bearish on the short-term outlook, expecting annual profits to come in at a lowly £4 million, compared to £16.5 million previously.
It is hoped that by the end of the year a new chief executive would be in place. But with the board believed to be in disarray over what remedial action needs to be taken he - or she - face a formidable task in turning the group around and restoring investor confidence. Shareholders can draw some cold comfort from an unchanged interim dividend but their shares, at 61p, look decidedly vulnerable.
