Glanbia plans Eur100m acquisitions

Glanbia is planning to spend up to €100 million on acquisitions in the nutritional market in the short term, group managing director, Mr John Moloney said yesterday.

Presenting the company's full-year results for 2002, Mr Moloney said Glanbia was actively examining a number of small-scale acquisition opportunities in the US, but would also consider projects in other locations.

The results showed a profit before tax and exceptional items of €71.8 million last year, an increase of almost 8 per cent on 2001. However, an exceptional charge of almost €80 million led to a pre-tax loss of €8.11 million, compared to a profit of €61.07 million previously.

Glanbia's nutritional food ingredients unit recorded a 17 per cent rise in sales last year, in line with growing consumer demand for healthy convenience products such as energy bars and yoghurt drinks.

The company has highlighted the area as a priority for development in 2003, as it seeks to offset difficult conditions in global dairy markets.

In a signal that Glanbia could be open to considering consolidation in the domestic dairy industry, Mr Moloney said it was crucial for the Republic's milk industry to be competitive on an international basis.

"I think there will be opportunities to look at consolidation in a number of areas," he said.

Mr Moloney's comments come just weeks before the publication of a landmark Government report on the dairy industry, which is expected to recommend the establishment of a body to handle 70 per cent of the State's milk pool.

Such a situation could see Glanbia, which currently accounts for about 30 per cent of all milk processing in the Republic, merging its operations with a rival player.

Mr Moloney said scope for consolidation could include anything from traditional mergers or acquisitions to smaller joint ventures.

Joint ventures would make particular sense at the lower end of the market, he added.

The €80 million net exceptional charge mainly related to the restructuring of its loss-making UK operations. Almost €50 million related to the write-back through the profit and loss account of goodwill previously written off against reserves, while €44 million was due to the write down of assets, set off by profit on asset sales of €13.75 million.

Cash flow was strong, with €66.35 million in net cash generated, compared to €51.3 million in 2001. This contributed to a significant reduction in borrowings, which fell by 27 per cent to €176 million. The interest charge fell 25.9 per cent to €19.73 million.

The restructuring in the UK and falling pork sales due to the fire in its Roosky plant were reflected in a 12 per cent drop in group turnover to €2.3 billion in 2002.

Mr Moloney said the drop in turnover was a "reasonable outcome" in the context of lower prices in the international dairy market and the UK restructuring. He highlighted consumer foods, where operating profits surged by 133 per cent to €47.6 million, and nutritional ingredients as a particular boost to margins.

Glanbia is to deliver a dividend of 4.76 cents, up 5.1 per cent on the previous year.

Shares in the company closed two cents higher at €1.28 last night after the results came in slightly above most expectations.

Ms Niamh Brodie of Merrion Stockbrokers said she would probably be upgrading her expectations for this year, based on management's focus on achieving future growth.

Mr John O'Reilly of company broker, Davy, said Glanbia's overall performance should be well regarded given an "anything but easy" trading environment.

"We like the Glanbia story in the making and we consider the shares good value," he said.