Glanbia shareholders ‘frustrated’ by distribution of dividend payment

Shareholders of the Glanbia Co-operative Society have raised concerns over the distribution of Glanbia plc’s special dividend to all members.

Despite the company’s recently announced “revised dividend policy” – targeting an increased dividend pay-out ratio of between 25% to 35% of adjusted Earnings Per Share (EPS) – a recent “invitation only” shareholders’ meeting heard that “frustrations” are growing over the level of dividend contribution being used to “prop up” supplier-targeted schemes.

Edmond Phelan, former beef committee chairman at the Irish Cattle and Sheep Farmers’ Association (ICSA), said the issue was tabled at a private “disgruntled” shareholder meeting at The Park Hotel in Dungarvan, Co. Waterford, last Thursday night.

“The co-op is going to get around €18 million or €20 million from Glanbia plc as a dividend; but instead of just handing that out to all shareholders they will receive less than €5 million.

The rest will be used as a slush fund to prop up all these trading bonus schemes such as 1c/L on all milk delivered in 2018; or a trading rebate of €10 per tonne on all feed or fertiliser supplied.

“It’s all being done to distort the market. They cut the price of milk 3c/L last month and they gave 1c/L back as a bonus which comes from shareholders’ funds,” he said.

Phelan said he expects the issue to be strongly contested by shareholders at the major processor’s Annual General Meeting in Kilkenny on April 25.

‘Upping the Model’

In the meantime, Phelan intends to approach more shareholders for support on “upping” the dividend; plus, to explore interest in moving towards a model where the dividend given to the co-op from the plc is passed on to shareholders “in full”.

“The Kerry model is that whatever the plc gives as a dividend to Kerry co-op; it is passed on to shareholders – and that’s it, full stop.

“Whatever amount they get in; they give out. They may have certain costs but they don’t use it to prop up any other schemes.

This has been going on for seven or eight years. We are always told that ‘next year’ or ‘in two years’ time’ that it will ‘all be grand’ and that it ‘won’t happen again’; but, that’s not the case, it just gets worse.

“I don’t know any other company in the world where the shareholder dividend is given to the suppliers. The board members’ responsibility is supposed to be to the shareholders,” he said.

Retired shareholders

Concerns are also mounting over the level of information that retired farmers, and shareholders that do not meet the company’s A1 “active milk supplier” criteria for voting, are receiving on the issue.

About 14 years ago the retired shareholder lost his vote; and unless you are an A1 supplier you have no knowledge or impetus into the decisions being made by the board.

“They are not even informed that a meeting is taking place,” Phelan claimed.

“Every shareholder should have a vote. But as it stands once you retire it seems no one cares; your opinion is just thrown on the scrapheap,” he said.

Double-digit growth

According to Glanbia’s annual report for 2017, the company experienced an eighth consecutive year of double-digit earning growth.

Following a successful year, group managing director Siobhan Talbot announced that an increase in target dividend pay-out ratio to between 25% and 35% of annual adjusted EPS is in the pipeline.

The group’s reported profit after tax of €329.4 million – up €117.3 million on 2016 – was reportedly driven by underlying performance and the profit arising on the disposal of 60% of the Dairy Ireland segment.

Wholly-owned EBITA (Earnings Before Interest, Tax and Amortisation) from continuing operations was reported as €283.2 million – up 5.8% on the €273.3 million recorded in 2016 based on constant currency rates.

The board has recommended a final dividend of 16.09c/share. This would give a full year dividend of 22c/share for 2017 – an increase of 65% on 2016.