Glanbia records improving trends for third quarter of 2020

Glanbia has seen an upturn in results for the third quarter of this year, as revealed in an interim management statement for the nine-month trading period ending October 3, 2020.

In the nine months ended October 3, 2020, wholly owned revenue on a reported basis increased by 1.0% when compared to the same period in 2019.

Excluding the impact of the 53rd week in 2019 and acquisitions, wholly owned revenues in the first nine months of 2020 were up 3.1% on a constant currency basis, the group says.

The drivers of this revenue increase were price growth of 4.8% offset by a volume decline of 1.7%, it was added.

Price growth reflected strong cheese markets in the period in Glanbia Nutritionals (GN) and volume decline in Glanbia Performance Nutrition (GPN), primarily as a result of the challenges experienced in the second quarter.

Acquisitions delivered 0.6% revenue in the Q3 year to date 2020.

Commenting, group managing director Siobhán Talbot said: “I am pleased to announce that in the first nine months of 2020 Glanbia grew like-for-like wholly owned revenues by 3.1% [up 1.0% reported].”

Outlook

In its outlook for the fourth quarter of 2020, Glanbia said it expects GN and joint ventures (JVs) to continue to deliver a resilient earnings performance in addition to further sequential improvement in GPN.

However, the group “remains vigilant of the continuing uncertainties arising from Covid-19”.

Good operating cash-flow is expected to continue in the fourth quarter with net debt to adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] ratio anticipated to be below two times by year-end.

Covid-19

In terms of the impact of the coronavirus, the group’s Covid-19 business continuity planning teams continue to focus on three priorities: protect employees; continue food supply; and maintain the strong financial position, “to ensure Glanbia can emerge safely and strongly from the pandemic’s impact”, the organisation says.

“To date there has been no interruption to the group’s operations globally,” Glanbia’s statement added.

All strategic projects across the group are on track which include the GPN Transformation programme, two major JV plant construction projects, the Foodarom acquisition (which closed in Q3) and a refinancing of the group’s key finance facilities which was recently agreed.

The group’s financial position has improved due to continued strong operating cash-flow with a rolling 12-month conversion rate well ahead of the targeted 80% and this has led to a reduction in net debt by €187.7 million versus Q3 2019.

GPN

GPN delivered a revenue decline of 13.9% in the first nine months of 2020 compared to the prior year. This was driven by a volume decline of 13.6% and a price decline of 0.3%.

Excluding the impact of the 53rd week and declines in the North America contract business (which is being exited), GPN like-for-like branded revenue declined by 9.0% in the first nine months of 2020 versus the prior year and by 2.3% in the third quarter.

Year-to-date decline was primarily driven by the disruption associated with the Covid-19 pandemic in the second quarter which reduced volumes in international markets and the specialty and distributor channels in North America.

Trends improved significantly in the third quarter, as routes-to-market in international regions gradually reopened. Price trends also improved and were positive in the third quarter, Glanbia says.

EBITDA margins in the third quarter were in double digits and this increase over margins in the first half of 2020 was driven by improved operating leverage, pricing and the realisation of benefits from the GPN Transformation programme.

Joint ventures

Glanbia’s share of JVs revenue declined by 4.3% in the period driven by price decline of 2.2% and by a volume decline of 2.1%. Excluding the impact of the 53rd week in 2019, like-for-like volumes increased by 0.3% in the first nine months of 2020 versus the prior year.

Commissioning of the new JV project in Michigan, US (MWC), commenced on October 21, 2020, and will take place over the next eight months.

When fully operational, the facility will process 3.6 million litres of milk per day into a range of superior quality block cheese and value-added whey products for US and international markets.

The new JV project in Portlaoise, Ireland (Glanbia Cheese EU), is at an advanced stage in its construction process with commissioning expected to commence in the first half of 2021.

Financing

The group’s balance sheet remains in a strong position. Glanbia’s net debt at October 3, 2020, was €628.1 million which represents a decrease of €187.7 million versus the prior year net debt position, when net debt in Q3 2019 amounted to €815.5 million.

The group’s net debt to adjusted EBITDA ratio at the end of Q3 2020 was 1.95 times (Q3 2019 ratio 2.25 times). This decrease in net debt was primarily driven by continuing strong operating cash-flow.

The group has recently completed the financing of US$555 million of debt facilities maturing between January 2024 and December 2031.

These new facilities will replace $507 million of existing facilities maturing in June and July 2021. The group has no other committed facilities due prior to January 2024. At October 3, 2020, the group had a total of €1.24 billion of committed facilities.