FOOD GROUP Glanbia has reported a “challenging” first half to the year, with profits dragged down by its loss-making Irish ingredients division.

In a trading update to investors, Glanbia said the Food Ingredients Ireland division had become loss-making as a result of volatility in global dairy markets, and that this would have a “detrimental” effect on the group’s performance in 2009.

However, the company shrugged off the effect of supermarket price wars and lower consumer spending, saying that its Irish consumer foods business was performing “reasonably well notwithstanding increased competitiveness in food retail markets and weak consumer confidence”.

Revenues and profits from its agribusiness interests would be lower, reflecting pressure on farm incomes, the group said.

Its US food ingredients division was “performing in line with expectations”, but those would be lower than they were in the first half of 2008. Revenues from Glanbia’s international joint ventures were “performing satisfactorily”, it said.

Glanbia reiterated its guidance to investors that its adjusted earnings per share for 2009 remained at 30-32 cent for the year.

Paul Meade, food stock analyst at NCB Stockbrokers, said further losses in Ireland were likely in 2010 in the absence of a market recovery, but that sector-wide financial stress “might trigger opportunistic consolidation opportunities” for Glanbia.

“The current volatility highlights the importance of Glanbia’s strategy to diversify into value-added dairy ingredients and cheese to reduce dependency on Ireland and basic dairy commodity processing,” Mr Meade said.

Goodbody Stockbrokers food analyst Liam Igoe said Glanbia’s statement was “reassuring given the particularly difficult conditions in global dairy markets at present”.

Glanbia’s share price rose 9 per cent to €2.41 after the release of the trading update.

The company is due to issue its half-year results on August 26th.