Glanbia sees 23% rise in operating profit last year

GLANBIA BEAT analysts’ expectations yesterday with a full-year set of results which showed a 23 per cent rise in operating profit to €136.5 million in 2010, and an 18 per cent jump in revenue to €2.2 billion, excluding the company’s joint ventures.

The upturn in world dairy markets, particularly towards the end of the year, together with solid demand from the burgeoning nutritional industry, underpinned the robust performance of the company, allowing it to pay a dividend of 7.52 cent to shareholders.

Glanbia’s 2010 adjusted earnings per share (eps) rose 24 per cent to 38.07 cents, while the company reiterated its forecast of eps growth of 11-13 per cent for 2011.

Pre-tax profits before exceptional items were €124.48 million, compared to €97.457 million in 2009 when exceptional items related to pension costs are taken into account.

Glanbia’s strong performance was driven by growth across its two main divisions – its Dairy Ireland business which accounts for 44 per cent of Glanbia’s revenue and 28 per cent of cash earnings as measured by ebita, and US Cheese and Global Nutritionals and Joint Ventures which together generate 72 per cent of Glanbia’s earnings and 56 per cent of revenue.

Following an extremely challenging 2009, Dairy Ireland rebounded last year, with revenues up 11 per cent to €1.14 billion and ebita increasing by 74.2 per cent to €47.9 million despite higher milk costs. Operating profits jumped by 81 per cent to €43.5 million.

The turnaround was due to a combination of rising demand for dairy ingredients and cost savings in the dairy business. However, consumer products underperformed with revenues, profits and margins all lower than in 2009 as the sale of Glanbia’s best known brands continued to be hit by the economic climate in Ireland.

While overall the company’s US Cheese and Global Nutritionals division performed well, with revenues up 22.6 per cent on a constant currency basis, this was mainly due to a strong performance by its global nutritionals businesses.

Profits and margins in its US cheese business were lower than in 2009, although this was offset by good revenue growth driven by better cheese market prices.

The company’s global nutritionals business outperformed the general market, boosted by increasing demand globally for sports nutrition and protein-fortified products. The company said it expects the division – which recently acquired Florida sports nutrition business BSN – to continue to drive growth in 2011.

The plc, which is 54.5 per cent owned by Glanbia co-op, said the proposed sale of its Irish dairy and agri-businesses to the co-op which failed to gain member approval last year is “unlikely to be revisited by the society in the medium term”. Chief executive John Moloney said yesterday that this could refer to anything between three and five years.

Net debt was down by €34.5 million from €442.6 million to €408.1 million last year, with a net debt to adjusted ebitda figure of 2.1 times, compared to 2.6 in 2009.

Glanbia’s shares ended the day flat yesterday at €4.30 following a strong run-up in recent days.

Glanbia: 2010 results

Revenue: €2.2 bn (+18%)

Operating profit:

€136.5m (+23%)

Adjusted earnings per share: 38.07 cent (+24%)

Dividend per share: 7.52 cent (+10%)

SUMMARY

A recovery in international dairy markets, coupled with continued growth in lucrative nutritionals, ensured that Glanbia turned around its performance in 2010, delivering better-than-expected growth in revenues, operating profit and earnings per share.

Full-year results beat analysts' expectations, with the company receiving a boost from a strong second-half revenue performance in particular.

Glanbia chief executive John Moloney said the 21.4 per cent revenue growth comprised a 7.3 per cent rise in volumes, an 11 per cent price rise, while 3.1 per cent was due to currency exchange rates.

The dramatic turnaround of the dairy ingredients business was perhaps the main surprise yesterday, with revenues and profits soaring, due primarily to the strong recovery in global dairy prices last year. However, nutritionals is likely to continue to be Glanbia's key area of focus.