Glanbia Co-op “Glanbia Advance Payment” (GAP) Scheme 2018

Glanbia Co-operative Society Limited (Glanbia Co-op) has today launched the 2018 Glanbia Advance Payment (GAP) Scheme that will offer interest-free cashflow support of up to €38 million to milk supplier Members during periods of dairy market weakness.

First made available in 2016, this scheme is part of a suite of innovative mechanisms developed by Glanbia to help its Member suppliers cope with income volatility. Participation in this voluntary scheme allows Members to draw down cashflow support from the Glanbia Advance Payment (GAP) Scheme when the Glanbia Ireland market price for milk falls below specific levels or “price triggers”.

In effect, the GAP scheme involves Glanbia Ireland making an advance payment for milk to be supplied at a future date. The interest-free repayments to the GAP Scheme are triggered when markets recover above specific levels. It is one of a suite of innovative mechanisms developed by Glanbia to help its Member suppliers cope with income volatility.

Commenting, Glanbia Co-op Chairman Henry Corbally said:

"The Board of Glanbia Co-op is determined to take steps to protect our Members from the worst impacts of dairy market volatility. The 2018 GAP Scheme can provide vital cashflow to our dairy farmer Members with interest free repayments required only in better market conditions. It is a positive and practical response to price volatility that worked very successfully for our participating milk supplier Members in 2016.”

For participating milk suppliers who are members of Glanbia Co-op the voluntary Glanbia Advance Payment Scheme will operate for 2018 as follows:

• The GAP Scheme will automatically advance a payment of up to 2 cent per litre (cpl) on liquid and manufacturing milk supply (excluding volumes in current fixed milk price schemes) in any month where the base Glanbia Ireland (GI) manufacturing milk price (including VAT) falls below 30 cpl;
• For example, at a base Glanbia Ireland (GI) manufacturing milk price (including VAT) of 29 cpl, the GAP Advance would be 1cpl, while at a base price of 28 cpl, it would be 2cpl (see table 1);
• Participating member suppliers will not incur any interest charge for advance payments from the GAP Scheme;
• The trigger for commencing interest-free “return” payments to the GAP Scheme is a GI base manufacturing milk price of above 31 cent per litre including VAT. Return payments will be set at a maximum of 2cpl per month;
• For example, at a base Glanbia Ireland (GI) manufacturing milk price (including VAT) of 32 cpl, the GAP repayment would be 1cpl, while at a base price of 33 cpl, it would be 2cpl (see table 1);
• During the low-volume/high cost production months of November to February inclusive, participating milk suppliers will not be required to make any return to the GAP Scheme - regardless of the prevailing milk price;
• Any advance payments which are not recovered by the GAP Scheme by the end of 2019 will be recovered over the months of January to December 2020;
• The GAP Scheme is available to all Glanbia Ireland manufacturing and liquid milk suppliers that are (a) members of Glanbia Co-op and (b) have a valid Milk Supply Agreement (MSA) in place.

The Glanbia Advance Payment Scheme was funded by Glanbia Co-operative Society Limited through the launch of an Equity-Linked Exchangeable Bond in June 2016. The Co-op raised €100 million by issuing a five year Exchangeable Bond linked to a pledge of approximately 4.3 million Glanbia Plc shares.

Table 1: Summary of how GAP advances and repayments would operate in 2018 at various milk price levels.

First Published 01 May 2018