Sports nutrition becomes top earner for Glanbia

Glanbia’s performance nutrition business, which is based on the once-discarded byproduct of cheesemaking - whey, has become the most profitable segment of the group.

The company’s latest full-year numbers show it generated €135.6 million in earnings before interest, tax and write-offs last year, up 28 per cent on the previous year on a constant currency basis.

This was the first time profits from sports nutrition have outstripped its larger global ingredients division, which posted earnings of €106.6 million, down 11.6 per cent as a result of the global slump in dairy.

On the back of best-selling brands such as Optimal Nutrition, BSN and Isopure, Glanbia is now largest player in the global sports nutrition market.

"Some of the flip side of this dairy market pressure has been lower input costs," Glanbia's managing director Siobhan Talbot told The Irish Times, noting the company's performance nutrition division had benefited as a net buyer of dairy.

“There are some natural hedges of activity within the business, where in certain aspects we’re a seller and in certain aspects we can be a buyer,” she said.

Overall revenues

The Kilkenny-headquartered firm reported overall revenues of nearly €3.6 billion for 2015, up 4.1 per cent on a reported basis due to the strength of the dollar last year, but down 7.4 per cent on a constant currency basis reflecting the fall in dairy margins.

Ms Talbot said the company did not expect a pick-up in dairy prices until at least the end of 2016 “for the simple reason that global milk production has continued to grow across the key producing regions”.

“As the same time as this supply growth, you have sluggish demand in some of the key regions like China and Russia . . . but ultimately this is a cycle and we remain fundamentally positive about dairy for the longer term, but it can be volatile,” she said.

Glanbia predicts adjusted earnings per share growth for 2016 of between 8 and 10 per cent with performance nutrition expected to be main driver of growth.

Sectors

A breakdown of the various sectors of the business shows the latter generated sales of €923 million in 2015 while the company’s global ingredients division commanded revenues of €1.2 billion, down nearly 13 per cent.

This was linked to a decline US cheese revenues, which suffered from a near 25 per cent fall in pricing. However, the company reported that volumes improved in 2015 as cheese plants operated at close to full capacity throughout the year.

“Although the US cheese business model has a robust mechanism to manage dairy price volatility it did not provide full protection from dairy markets due to the scale of price declines year on year which resulted in a decreased financial performance,” the company noted.

The group’s Dairy Ireland division which produces consumer brands such as Avonmore milk – recorded earnings of €28.8 million as margins recovered to 4.5 per cent.

Glanbia said it was recommending a final dividend of 7.22 cent per share, bringing total dividend for the year to 12.10 cent per share, up 10 per cent.