Morning business news - May 1Wednesday 01 May 2013 10.55
GLANBIA INVESTS €150M IN NEW DAIRY PLANT - Glanbia Ingredients made a big a move towards life after milk quotas, which end the year after next. Yesterday it said that work is due to start next month on a new dairy processing plant at Belview on the Waterford/Kilkenny border, which is expected to create about 450 construction jobs. The Government says more than 1,600 direct and indirect jobs will be generated over the next five years with the development of dairy processing in the south east. 76 people will be directly employed in the new Glanbia facility.
Jim Bergin, chief executive of Glanbia Ingredients, says that the company is going to invest €150m on the new site, which makes it the single biggest dairy facility in history of the state. It is estimated that the plant will contribute about €400m every year to the economy - with particular benefit to farm families and rural communities in around 16 counties. Mr Bergin said the new plant will make 100,000 tonnes of nutritional protein blends, all of which will be exported.
BATTLE LINES ON AUSTERITY BEING DRAWN ACROSS EUROPE - Each EU member state has to submit a Stability Programme Update to the European Commission every April. Ireland's plan was published yesterday, and the report included reduced growth estimates for the next three years. After the bank deal was struck in February we were supposed to have easier budgets - but that seems now not to be the case.
Peter Brown, from the Irish Institute of Financial Trading, says the Stability Programme Update is a continuation of Plan A - the austerity plan. He says that the forecasts includes lower growth, improving deficits and slightly reduced unemployment levels - based on more austerity budgets. But he argues that it has been shown across Europe that austerity on its own does not work - with countries like France, Spain and Italy starting to kick back on such measures. Describing tomorrow's ECB meeting as very important, he says that markets are looking to the bank to announce rates cuts to stimulate the European economy in an effort to create some growth.
Mr Brown says that battlelines are being drawn around Europe on the austerity-growth arguments. The Germans, Dutch and Finns want countries like Ireland and Portugal to continue down the austerity route, while countries like Spain and France would like to follow the UK, US and Japanese routes of printing more money in order to stimulate growth. He predicts that the euro zone is in for a very turbulent time over the next six months.
On the possibility of the European Central Bank cutting interest rates tomorrow, Mr Brown says that the bank is dominated by the Bundesbank, which does not want rates to be cut. ''If we get a quarter percentage cut, I will be very surprised,'' he states.
MORNING BRIEFS - An index, which measures the health of the manufacturing industry, showed its sharpest decline in since September 2011. The Irish manufacturing sector shrank again in April, with output and new orders each falling for the second month in a row, amid signs of deteriorating economic conditions. Falling workloads led firms to cutting jobs and spending less. This is according to the NCB Purchasing Managers Index, which said though that cost inflation was at its weakest in nine months.
*** Overnight Apple raised $17 billion via a bond sale, to help fund its plan for extra payouts to shareholders. It was the biggest ever bond sale by a by a non-banking company and was oversubscribed several times. It was Apple's first bond sale in nearly twenty years, and comes despite the firm having cash reserves of £145 billion. But most of that money is in accounts outside the US and would be liable for US taxes if repatriated. At the same time, interest rates in the US are currently near record lows - helping drive down the cost of raising funds for companies. That makes it cheaper for Apple to raise the money through a bond issue, even though it will attract interest payments. After a wobble last week, Apple has now regained the position of the world's most valuable company from ExxonMobil.
*** The forecast for Irish economic growth for the next three years has been cut back as recession elsewhere in Europe was seen as hindering the export-led recovery. Figures last evening from the Department of Finance predict the economy will grow for a third year in a row this year, but by 1.3% and not the 1.5% figure expected earlier. The figures also predict that the economy will grow by 2.4% in 2014 and 2.8% in 2015, also lower than previously thought. The fiscal plan outlined expectations for 2016 for the first time and showed it would bring an end to austerity, with no new tax hikes or spending cuts predicted, and also a wiping out of the deficit providing the economy grows by 2.7%.