Arla Foods: UK's top dairy

Happy new year.

A few thoughts on previous postings; the deals still on, with the delay being related to fiscal tidying up rather than concrens over pension liabilities. Amba are fully aware of the pension requirements, and include them in their 04/05 accounts, so nothing has surprised them in htat regard.

Notwithstanding the financial numbers posted by tiredoldbroker, i do believe the val;ue is strategic for amba. ARU is the biggest producer, by volume, but they've yet to translate that into the profits of RWN and Dairy Crest, or the rising sp ot those 2; if one says that these three have the market, then one has to ask if RWN, Dairy Crest have run ahead of themselves or ARU is lagging behind(or both!). As has been said the CC will not allow a takeover amongst the three, although a European co. would probably get the nod. there could also be consolidation amongst the coops, Milklink, Dairy Farmers of Gt. Britain etc. so there will always be 3/4 major players.

I don't see anywhere that amba have a stated mission vis-a-vis ARU to make it member owned (AFMP would facilitate this greatly), although this could be a reason for takeover delay if they are trying to tidy it all up at the same time.

An article on Farmers Weekly (last Nov.)interested me, synopsis below:

'The UK could be facing a shortage of milk by November 2011, which raises the prospect of milk imports, a new report has projected. Kite Consulting's Milk Forecasts report has warned that the UK is heading for its largest ever under quota position. "The exodus from the dairy industry is running at 7% and accelerating," said the report's co-author, dairy industry consultant John Allen. "In the next three years one in five dairy farmers will quit."

Supply decline

At that rate of attrition just 12,300 dairy farmers will be left in the UK by 2012. And with annual demand at 12.6bn litres if the decline continues supply will be as low as 12.68bn by 2011. This means by November of that year, when the seasonal downturn of supply is at its lowest, the UK could see a real milk shortage.

"Less milk would be manufactured into cheese, butter or powder, drawing in imports to fill the shortfall and exposing us to world market prices and exchange rate fluctuations," Mr Allen warned. But Arla Chief executive Tim Smith said that importing liquid milk was unlikely. "Anyone contemplating importing milk is contemplating financial suicide. The eye-watering costs of transporting liquid milk from abroad make it unviable."'.........

The last paragraph interests me most; Amba has a surplus of liquid milk, so if the above report is realised (surely supply and demand will kcik in?), UK milk will be used to meet liquid commitments, and the cheese/butter/powder could all be imported, with Amba/ARU best equipped of the three UK groups to take advantage. Thats one reason why id rather have amba 'shares', or have ARU kick about for another 18 months.

Finally, until i see Amba's 05/06 ac's posted (still waiting?) with negative news on ARU, i believe the deal is very much on. Good luck all for the year ahead. D.