Glanbia’s ability to forecast under question after warning

The scale of the almost 16 per cent sell-off in Glanbia’s stock during trading on Wednesday was more than just a market revaluing the company to price in a lowered full-year earnings forecast. It reflected something more worrying: that investors are now questioning the nutrition group’s ability to make and meet projections.

Glanbia warned that its earnings per share (EPS) will fall to 88-92 cent this year, marking as much as a 3 per cent drop on the year and reversal of previous guidance that EPS would rise by up to 8 per cent. The source of the problem is its Glanbia Performance Nutrition (GPN) business, which supplies protein shakes and bars to gym-goers and dieters, outside of its main North American market.

Specifically, the group said geopolitical tension and supply chain issues hit sales in the Middle East; weaker economic conditions affected Latin American markets; supply chain tweaks in India in response to tariffs there have taken longer than planned; and European consumers are moving at pace to buying online.

Chief executive Siobhan Talbot insisted these were temporary issues and the group is sticking to its goal, set out last year, of growing EPS by 5-10 per cent annually over five years.

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Formed out of the 1997 merger of two dairy co-operatives Avonmore Foods and Waterford Foods, Glanbia has long since moved away from its roots, selling a 60 per cent stake in its dairy assets in 2017 to its main shareholder Glanbia Co-op. The focus for some time has been on GPN and its Glanbia Nutritionals – US cheddar cheese and value-added protein ingredients – business.

Investors have been handsomely rewarded. Its share price had soared more than 250 per cent in the past decade – compared to the wider Iseq’s 33 per cent gain – before the profit warning.

“Despite management’s strong track record, its ability to achieve its medium-term goals, which were outlined a little over one year ago, will now be questioned,” according to David Fahy, an analyst with Cantor Fitzgerald Ireland.

“Analysts will also be wary looking into the second half of the year, for which management have forecast a significant recovery.”