Food group Glanbia has posted solid underlying profit growth for the first half of the year, despite facing harsh conditions in the international dairy market and suffering a €1.5 million hit as a result of euro strength.
The Kilkenny-based company recorded a pre-tax profit of €37.56 million in the six months ending on July 5th, up 5.4 per cent on the previous year.
The result came after an exceptional charge of €26.85 million however, most of which related to the company's exit earlier this year from its UK fresh meat business.
The sale of the UK businesses also pushed down turnover, which fell by 15.7 per cent to €1.05 billion. Operating margins rose from 3.6 per cent to 4.4 per cent while operating profit was flat at €45.7 million after exceptionals.
The results met the expectations of most analysts, who were further reassured by the company's forecast of a "satisfactory" outcome for the year.
They were also positive on the progress made by the firm on its debt levels, which were cut by 18.5 per cent to €250 million over the period.
The company said it would pay a first-half dividend of 2.06 cents, up 5 per cent on the previous year.
Chief executive Mr John Moloney said Glanbia was now "tighter" and more focused on the dairy side of its business, and was well-positioned for growth in cheese, consumer foods and nutritional ingredients.
He warned that such development would not be achievable if Glanbia bowed to the will of a group of radical farmers who wanted to change the company's structure back to a co-operative. Such a move would mean "moving backwards", according to Mr Moloney, who says the interests of farmers must be balanced with pragmatism.
Success in the nutritional area, which includes both clinical and sports markets, is particularly appealing for Glanbia since it offers higher margins than most other activities.
Shares closed five cents weaker at €1.80 after the results, with some in the market expressing concern at the appearance of more exceptional charges at the firm.
After exceptionals, pre-tax profits came in at €10.7 million, up from a €39.9 million loss in the previous year when results were skewed by more significant restructuring costs.
The weak spot in the latest results came from Glanbia's dairy food ingredients business, where poor US cheese markets combined with euro strength to push down operating profits by 29 per cent to €13.63 million. Turnover dropped by 8 per cent to €428.1 million.
Mr Moloney said conditions in the US cheese market, where Glanbia is in the process of investing a further $170 million (€156 million), had picked up over the past few months.
Consumer goods, which include Irish liquid milk and chilled food operations and UK cheese activities, were the primary driver behind growth in the first half. Operating profit grew by 31.3 per cent to €22.74 million, despite "intensely competitive" conditions in the UK cheese market.
