Glanbia's forecast raised on first-half profit surge

GLANBIA YESTERDAY raised its earning forecast for the year after reporting a surge in profit and revenues for the first half of 2011.

Revenue grew by a third on a constant currency basis to €1.6 billion compared to the same period last year. While 5 percentage points of this 33 per cent of revenue growth was due to acquisitions, including sports nutrition company BSN, 17 percentage points reflected price increases (14.5 percentage points net of currency), while 11 percentage points were due to volume growth.

Operating profit was up 44 per cent compared to the first half of 2010, at €95.6 million.

The company raised its forecast for full-year earnings per share (eps) growth to between 18 and 20 per cent, having predicted eps growth of between 11 and 13 per cent in June. Earnings before interest, tax and amortisation (ebita) margin on a constant currency basis grew 50 basis points to 7.6 per cent.

The company’s US cheese and global nutritionals division, a key strategy focus in recent years, continued to be the main driver of growth, while its contribution to revenue is now almost equal to that of the Dairy Ireland division (€674 million). Margins in the division were 10.4 per cent compared to a 5 per cent ebita margin in Dairy Ireland.

Dairy Ireland also had a very positive first half, benefiting from a strong performance from global dairy markets.

Business continued to be tough for Glanbia’s consumer products division, which produces brands such as Avonmore and Kilmeaden, but this was offset by a very strong performance from its dairy ingredients division, which exports cheese and dairy-based ingredients to more than 50 countries.

Group managing director John Moloney said the company hopes to make further inroads into markets in North Africa, the Middle East, Eastern Europe and Asia, particularly after the abolition of milk quotas in 2015. The company said the 10 per cent milk supply volume growth experienced in the first half would be reversed in the second half as farmers respond to quota limitations.

The 37 per cent growth in revenues in Glanbia’s US cheese and global nutritionals business was driven by the growing market for whey protein ingredients in food products such as cereals, bars, sports drinks and weight management products. The company signed a number of contracts with US cereal manufacturers during the quarter. Mr Moloney said yesterday he was confident this industry would continue to grow, despite the continuing pressure on consumer demand globally.

Glanbia’s US cheese business also increased its exports to Latin American and Asian markets during the first half.

Glanbia’s net debt to adjusted ebitda (with depreciation) ratio reduced to 2.5 from 3.0 in the first half of 2010. The company also announced it was finalising a $325 million (€225.4 million) private debt placement with EU and US investors of 10-year notes with a fixed coupon of 5.4 per cent.

Yesterday’s results exceeded most analysts’ expectations.

Glanbia’s share price closed up almost 3 per cent at €4.17 yesterday in Dublin.