Glanbia tasting success like never before

GLANBIA has certainly got the recipe right. The giant global food company based in Kilkenny city has astounded the business community and beat market expectations, by announcing a 33% year-on-year revenue growth to just under €1.4 billion.

GLANBIA has certainly got the recipe right. The giant global food company based in Kilkenny city has astounded the business community and beat market expectations, by announcing a 33% year-on-year revenue growth to just under €1.4 billion.

And it has a war-chest of 150 million for potential further acquisitions next year while no more major purchases are likely this year.

Better still, it announced a 44% increase in operating profit to €95.6 million and a 55.3% rise in adjusted earnings per share to 28.91 cents.

It means that the share price is now at €4.17 and that represents a huge turn-around in the last five years. Many Kilkenny people not just farmers and suppliers to Glanbia have the shares but many other people around Kilkenny also invested in them and in recession they have paid off handsomely as world food prices look like staying stable for the medium term future. This follows much better than expected

As a result of the figures announced last week, Glanbia has upgraded its full-year earnings forecasts for 2011, on the back of a strong first half performance driven by acquisitions and its Global Nutritionals business, to increase by between 18% and 20%. Which is an incredible performance. This is significantly up on the group’s initial forecast of a growth scale of 11%-to-13% for the year.

Figures

As for the figures themselves: They include pre-tax profits of over €82 million, for the six months, up from €60.2 million for the same period last year. The interim dividend amounted to 3.33 cents, a 10% increase on last year.

Group managing director John Moloney said that global dairy markets were strong during the period, with growth in dairy consumption in developing markets underpinning sustained demand and higher prices. US dairy markets were also up, on a year-on-year basis. Dairy Ireland also had a very positive first half, benefiting from a strong performance from global dairy markets. Business continued to be tough for Glanbia’s consumer products division, which produces brands such as Avonmore and Kilmeaden, but this was offset by a very strong performance from its dairy ingredients division, which exports cheese and dairy-based ingredients to more than 50 countries.

When the contribution of joint venture businesses is included, the US has now overtaken Ireland as Glanbia’s primary revenue source. Ireland still, however, contributes 43% of annual revenue and an evaluation is underway to assess the potential of the expansion of milk output, here, when the EU milk quotas are eliminated in four years time.

Mr Moloney said the group continues to perform well. “The overall trading environment remains positive and, while global dairy market prices appear to have peaked in the current cycle, indications are for a relatively modest softening in prices for the remainder of the year,” he said.

‘Calibre’

“The calibre of the group’s first half performance, leading market positions and the strength of our global portfolio positions Glanbia strongly for the full year.”

Management expects global dairy markets to remain “relatively positive” for the remainder of this year. The first half figures included a five month contribution from BSN, the US-based nutrition business acquired in January; but there were also strong year-on-year revenue increases in the Dairy Ireland (up 30%), US Cheese and Global Nutritionals divisions.

Debt

Meanwhile, funds raised from the drawing down of a $325 million (€225m) private debt placement, a process due to be completed by the end of next week, will be used to pay down debt.

While revenues were healthy in Glanbia’s Irish division; the consumer products sub-section of the Dairy Ireland business saw challenges persist during the period under review. The further rationalisation of the consumer products section of the business resulted in a net exceptional charge of €7.6 million in the first half.

“Consumer confidence is fragile and declined again in recent months as a result of the difficult domestic economic situation. This challenging trading environment is expected to persist in the second half of the year,” a spokesperson said.