Unigate sells US unit for dollars 75m

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The Independent Online
UNIGATE, the St Ivel food, dairies and distribution group, has sold its US cheese-making operations for dollars 75m (pounds 37.5m), marking another stage in the reshaping of the company under Ross Buckland, chief executive.

Frigo Cheese and Gardenia Foods, based in Wisconsin and California respectively, had net assets of dollars 57m at the end of March and made operating profits of dollars 7.5m. The buyer is Stella Foods, the much larger cheese operation of Artal, the Dutch food group.

Profits from Unigate's US cheese operations have been extremely volatile in recent years. As a commodity business it has suffered from bouts of drought, milk shortages and soaring milk costs that it could not pass on to the customer.

US operating profits from cheese operations halved from pounds 4.9m to pounds 2.3m in 1989/90 and dropped to pounds 400,000 in the year to March 1991, before recovering to pounds 4.5m.

Since then milk prices have moved unfavourably and local currency profits will be lower in the first and second halves of the present financial year, according to Mr Buckland, even before the effect of a weakened dollar.

Mr Buckland said that proceeds from the disposal, which is subject to regulatory approval under the US Hart Scott Rodino Act, would be used to reduce net borrowings.

At the end of March these stood at pounds 54.3m or 15 per cent of shareholders' funds. He did not expect the sale to reduce Unigate's profits in the current financial year. Unigate shares rose 4p to 231p on the news.

Unigate's US interests now consist of two restaurant chains, Black-eyed Pea and Taco Bueno, which made operating profits of pounds 13.3m last year, and Giltspur distribution. Mr Buckland said there were no plans for their disposal in the foreseeable future although some analysts believe the restaurants could fetch pounds 100m.

Since joining Unigate from Kellogg two years ago Mr Buckland has taken the company out of a disastrously expanded JP Wood chicken business, has closed vehicle contract hire and has sold Giltspur distribution in the UK.