Glanbia and Connacht Gold Co-op have agreed to use one another's facilities for contract manufacturing in an effort to save on costs.

Glanbia will pack some of Connacht Gold's retail butter while Connacht Gold will manufacture a portion of the fat-filled milk powder Glanbia needs for a new joint venture in Nigeria.

The two companies will maintain separate commercial arrangements with suppliers and customers.

Connacht Gold chief executive, Aaron Forde, said the deal would allow both parties to maximise their "asset utilisation".

He said the move marked the start of the next phase of efficiency gains in dairy processing.

A similar deal was recently concluded on a larger scale between Glanbia and Dairygold.

Glanbia's annual report shows meanwhile that the firm's group managing director, John Moloney, received an 18.5 per cent pay increase last year.

Mr Moloney was paid a total of €748,000 in 2004. This included salary and fees of €399,000 and a bonus worth €221,000.

Billy Murphy, Glanbia's deputy group managing director, was paid a total of €488,000 last year, up 8.4 per cent on 2003.

The group's finance director, Geoff Meagher, received remuneration of €431,000, marking an increase of 13.5 per cent.

The largest director pay increase over the year went to Glanbia's group development director, Kevin Toland, whose remuneration jumped by 37 per cent to €594,00. A large element of the increase was due to an award under the firm's long-term incentive plan worth €137,000.

Glanbia's 17 non-executive directors shared total pay of €419,000 up almost 19 per cent.