Glanbia revenue fall in the first half of 2016, nutrition remains key earnings driver

Total Group Revenue at Glanbia PLC including the Group’s share of Joint Ventures & Associates, was €1,837.1m, a decrease of 1.7%.

Glanbia announced its results for the six months ended 02 July 2016 this morning, which also showed wholly owned revenue steady at €1,434.8m, an increase of just 0.4% constant currency (up 0.2% reported).

Meanwhile, total Group earning was €176.5m, up 11.4% constant currency (up 11.2% reported) while adjusted earnings per share for the half year were 44.87 cent, up 10.8%, constant currency (up 10.5% reported).

Glanbia reiterates its guidance for 2016 of 8% to 10% growth in adjusted earnings per share, constant currency.

If the full year 2016 average Euro US dollar exchange rate remains at similar levels to the first half of 2016, Glanbia expects the 2016 reported adjusted earnings per share growth to be broadly in line with the constant currency result.

Highlights

  • Adjusted earnings per share 44.87 cent, up 10.8% on prior half year, constant currency (up 10.5% reported);
  • EBITA from wholly owned business €157.4m, up 13.7% on prior half year, constant currency (up 13.6% reported);
  • EBITA margins from wholly owned business 11.0%, up 130 bps on prior half year, constant currency and reported;
  • Strong result from Glanbia Performance Nutrition with EBITA of €81.7 million, a 35.0% increase on prior half year, constant currency (up 34.6% reported);
  • Glanbia Nutritionals1 delivered a satisfactory result with EBITA of €58.0 million, a 4.0% decrease on prior half year, constant currency (down 3.8% reported);
  • Dairy Ireland in line with expectations with EBITA of €17.7 million, a 1.1% increase on prior half year;
  • Joint Ventures & Associates EBITA declined 4.5%, constant currency, (down 5.4% reported) in the first half; and
  • Recommended interim dividend of 5.37 cent per share, an increase of 10% on prior year.

Glanbia Performance Nutrition (‘GPN’) is expected to be the main driver of 2016 earnings per share growth.

Favourable input costs, mix improvement and operational leverage are expected to drive margin improvement and earnings for 2016 versus prior year.

Glanbia Nutritionals expects to deliver modest EBITA improvement versus prior year. This will be driven by increased sales of value-added nutritional ingredients offset somewhat by reduced performance from US Cheese as a result of weak markets.

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Dairy Ireland and Joint Ventures & Associates are expected to be broadly in line with prior year.

Commenting today Siobhán Talbot, Group Managing Director, said Glanbia delivered a strong performance in the first six months of 2016 driven by Glanbia Performance Nutrition.

“Total Group earnings before interest, tax and amortisation for the half year grew by over 11%. Sales of performance nutrition brands and value-added nutritional ingredients showed good growth in the first half of 2016 delivering on our vision to be a leading nutrition business.

“Global dairy markets remain weak and continue to be a challenge for parts of the business, however the diversity of the Glanbia portfolio has enabled us to navigate this and we reiterate guidance for the full year of adjusted earnings per share growth of 8% to 10% on a constant currency basis,” she said.

Capital investment and corporate development

Glanbia’s total investment in capital expenditure was €41.7 million in the first half of 2016, of which €27.8 million was strategic investment reflecting the on-going focus on the organic growth potential of the business. Key strategic projects undertaken in the period were the investments in value-added ingredient processing technologies at the Glanbia Nutritionals sites in Idaho and California, USA.

Board changes

On 09 May 2016, Tom Grant, Brendan Hayes, Patrick Hogan and Eamon Power retired from the plc Board as part of the agreement in place with Glanbia Co-operative Society Limited to reduce its director representation on the plc Board by four in 2016.

Dividend per share

The Board is recommending an interim dividend of 5.37 cent per share (HY 2015: interim dividend 4.88 cent per share). This represents an increase of 10% on the prior year interim dividend.

The dividend will be paid on 07 October 2016 to shareholders on the register of members as at 26 August 2016. Irish withholding tax will be deducted at the standard rate where appropriate.

Dairy Ireland

Dairy Ireland had, it says, a satisfactory performance in the first half of 2016. Revenues decreased 3.3% reflecting a 1.1% increase in volumes, a 4.9% decline in price and a 0.5% revenue contribution from acquisitions. A 30 bps improvement in margin drove an increase in EBITA of 1.1% versus the prior half year.

Consumer Products delivered an improved performance versus prior year. This was driven by an improvement in sales of value-added branded products and input cost reductions. Consumer Products continues to focus on improving its cost base.

Agribusiness delivered a somewhat reduced performance in the period. Increased animal feed sales volume was more than offset by lower pricing across animal feed and fertiliser which led to a decline in margin.