ANALYSIS:Domestic demand falls for probiotic drinks but international division's sales look healthy, writes LAURA SLATTERY.

RECESSION CAN do funny things to a company’s earnings, and for Glanbia, coming down off the high of 2007’s dairy commodities spike, last year brought some interesting changes.

Group managing director John Moloney admitted yesterday that its Irish consumer foods operation was seeing “lower demand” for its range of “higher end” probiotic drinks, sold under the Yoplait brand.

Yes, that’s right, it seems Irish consumers are no longer willing to pay extra for that “good” bacteria that allegedly boosts our immune systems and are plumping for cheaper Lactobacillus-free “basic” yoghurts or slurping a good old warm bowl of soup instead.

Asked whether consumers would return to the joys of probiotics when their pockets are once again thickly lined, Glanbia group managing director John Moloney was not exactly brimming with optimism.

Consumers would weigh up the (perceived) health benefit versus the price point, he said.

“I think in the current climate you will have a core of users who will discontinue. They can’t justify it, because they don’t really believe the message.”

Luckily, for every probiotic sceptic at large there are countless more cash-deficient consumers downgrading to McDonalds, Burger King et al, to which Glanbia happily provides bucketloads of cheese. Approximately, 120,000-130,000 tonnes, to be precise, or 60 per cent of the output from its US cheese plant in Idaho is converted into processed cheddar slices, which are then destined to be sandwiched between the two beef patties of a double cheeseburger.

Meanwhile, Glanbia’s cheese joint venture in the UK makes mountains of mozzarella for those who prefer their low-budget treats to come in 12-inch form.

But while it is tempting to frame Glanbia’s revenue trends as a case of price-conscious consumers trumping health-conscious ones, the theory is undermined somewhat by the strong performance of its latest acquisition, Optimum Nutrition, the largest US manufacturer of whey protein-based sports nutrition products. If Moloney has any regrets about forking out €218 million for Optimum last August, he is hiding them well.

Rather, this is the story of Glanbia’s growing international footprint and the shrinking significance of its Irish operations to group profits. Almost 60 per cent of its revenues now come from the relatively financially healthy international division, a number that seems set to only increase.

GLANBIA: 2008 results

Revenue:€2.23 billion (up 1 per cent)

Operating profit:€134 million (up 15.7 per cent)

Pretax profit:€98.7 million (up 18.8 per cent)

Adjusted earnings per share (eps):35.86 cent (Up 18.5 per cent)

Dividend:6.51 cent per share (up 7.1 per cent)

SUMMARY

2009 will be a “tough” year for Glanbia as global dairy markets weaken, but the impact of recession on consumer food markets in Ireland is likely to be outweighed by its international businesses and overseas joint ventures, which are currently earnings-enhancing.