Golden Vale is to close its Dutch cheese manufacturing operation and transfer production to Ireland as part of a £19 million rationalisation plan.
The restructuring will lead to the loss of 188 jobs - 148 in the Netherlands and a further 40 in Ireland, both North and South - and should yield savings of £4 million in a full-year. It will involve concentrating processed cheese production at two sites - Charleville, Co Cork and Coleraine, Co Derry and the closure of Golden Vale's site at Roermond in the Netherlands.
"Historically, the performance of the Roermond facility has not been adequate and in recent months this has been compounded by difficulties in certain non-EU markets," Golden Vale said.
Managing director Mr Jim Murphy said the Roermond facility, which was acquired in 1993, was loss-making in 1996, made a small profit in 1997 but was suffering because of difficulties in markets like Russia in the current year.
"But the major issue was that we had three sites and we decided we could do it in two," Mr Murphy said.
Following the reorganisation, cheese slice production will be concentrated in the Coleraine facility while the Charleville factory will focus on Cheestrings, cheese spreads and industrial cheese lines.
However, Golden Vale plans to retain and develop its sales and marketing presence of eight staff in Roermond.
The company also announced plans to cut costs in its butter and milk powder business. An efficiency programme, leading to lower labour and transport costs and greater flexibility in dealing with seasonality of milk production, will be undertaken at its Artigarvan, Co Tyrone factory in Northern Ireland and at its Baileboro, Co Cavan and Charleville facilities in the Republic.
Some 30 jobs will be lost in butter and powder division in the Charleville factory while the remaining job losses will be in the milk procurement area and will be dotted around the country.
An exceptional provision of £19 million - including an estimated cash cost of £7 million - will be made in the current financial year to cover the costs of the rationalisation such as the write-down of assets and reducing the number of employees. "The actions now being taken will contribute significantly to improving performance in future years," Golden Vale said. The company, which is aiming to double profits from the 1997 level of £16.2 million in the next couple of years, also said it expected 1998 operating results before the exceptional charge to show "satisfactory progress".
Analysts said the company should just about break even in 1998 after the exceptional charge. However, they welcomed the rationalisation plan and upgraded their 1999 earnings forecasts to reflect the impact of the cost savings which should start to feed through next year.
Dolmen Butler & Briscoe is now expecting earnings per share (EPS) of 11.6 pence next year, a 14 per cent increase on its previous forecast of 10.2p while Goodbody Stockbrokers is looking for EPS of 11.4p.
Golden Vale's share price, which slipped to 83p after the rationalisation plans were announced, later recovered to close unchanged on the day at 88p.
