Glanbia is in talks with a UK dairy co-operative over establishing a joint venture within the UK retail cheese market. The firm confirmed the discussions with Milk Link in a statement to the Irish Stock Exchange yesterday but said no conclusions had been reached.

The announcement came after a dairy industry newsletter reported that Glanbia's UK cheese interests would be sold to Milk Link, one of the country's largest milk producers.

The company's statement played down the sale report, referring instead to "potential opportunities for partnership".

"Glanbia is committed to continuing to have an ongoing role in the UK cheese sector notwithstanding the outcome of these discussions," it continued.

A Glanbia spokesman declined to go beyond the stock exchange statement but it is understood the talks focus on the firm's retail cheddar operations rather than its pizza cheese business.

It is believed the discussions began within the past few weeks and are likely to conclude before the end of the year. The cheese division at the centre of the talks has been in the Glanbia stable since 1995 which paid about €150 million for it.

It is the second-largest supplier of cheddar and other cheeses to the UK retail sector and is active principally within the highly competitive own-brand market. The firm produces some 70,000 tonnes of cheese each year and is known to be profitable, despite facing harsh pressures on margins.

Glanbia told investors recently that it wanted to enhance returns on its UK cheese operations. The UK cheese market in general has seen significant upheaval of late as farmers seek to protect the diminishing returns available to dairy suppliers.

Milk Link, which accounts for about one-tenth of all UK milk production, is a major Glanbia supplier. The co-operative is the fourth-largest dairy business in the UK, and has an annual turnover exceeding €500 million. It represents some 2,400 farmers.

Glanbia said it would make further announcements in due course "if necessary".