Glanbia sees 3.7% revenue growth for first 9 months of 2018

Glanbia plc has recorded wholly-owned revenue growth of 3.7% for the first nine months of 2018, the firm has announced in its interim management statement for the period ending September 29, 2018.

On a reported basis, reflecting the weaker US dollar euro foreign exchange rate, revenue decreased by 2.6% when compared to the same period in 2017.

Revenue increase, on a constant currency basis, was driven by volume growth of 6.7% and acquisitions which delivered 1.1%.

Pricing declined by 4.1% versus the same period in the prior year driven by relatively weaker dairy markets and brand investment.

Siobhan Talbot, group managing director, commented on the report saying: “The year is progressing as planned and good delivery in the third quarter resulted in volume growth of 6.7% in the first nine months of 2018 from our wholly-owned continuing operations.

“This reflected good demand across Glanbia Performance Nutrition (GPN) and Glanbia Nutritionals (GN).

Pricing declined by 4.1% largely as a result of lower year-on-year dairy markets, which is also benefiting input costs and we expect full year margins in GPN and GN will be in line with the prior year.

“We reiterate our full year guidance of 5% to 8% growth in adjusted earnings per share, constant currency, for the continuing group in 2018.”

Glanbia Performance Nutrition (GPN)

GPN delivered revenue growth of 4.7% in the first nine months of 2018. This was driven by volume growth of 6.7%, the Body & Fit acquisition delivering 2.4%, offset by a pricing decline of 4.4%.

Volume growth was broadly based and underpinned by successful innovation in key markets. Pricing decline reflected reinvestment of input cost savings in brand investment, foreign exchange headwinds, in certain non US markets, and innovation support.

The full year 2018 outlook for GPN is good. Guidance is reiterated for the delivery of like-for-like branded volume growth in the mid-to-high single digit range.

EBITA margins for the full year are expected to be broadly in line with 2017.

Acquisition of SlimFast

After the period end, on 11 October 2018, Glanbia announced that it had reached a $350 million acquisition agreement with the owners of KSF Holdings LLP and HNS Intermediate Corporation who collectively own SlimFast and other brands.

Weight management and wellness brand SlimFast will be part of the GPN segment and participates in the growing $8 billion global weight management nutrition category which is incremental to performance nutrition and fulfils a key consumer motivation for GPN’s lifestyle consumers.

The transaction is expected to close before the end of 2018 and is expected to be earnings accretive from 2019.

Glanbia Nutritionals delivered revenue growth of 3.0% in the first nine months of 2018. This was driven by a volume increase of 6.8% offset by a price decline of 3.8%.

Nutritional Solutions (NS) revenue increased by 0.7% in the period. This was driven by volume growth of 7.3% as a result of a strong performance across all regions in the third quarter.

Price declined by 6.6% which was primarily related to relatively lower year-on-year dairy prices.

US cheese revenue increased by 4.8% in the period. This was driven by volume growth of 6.4% due to the timing of customer off-takes versus the prior year. Pricing declined by 1.6% as a result of reduced year-on-year cheese markets.

Glanbia Nutritionals expects moderate EBITA growth in full year 2018 to be driven by non-dairy ingredients and US cheese which will be offset by a reduced performance in dairy ingredients as a result of lower year-on-year whey markets.

Joint Ventures

Glanbia’s share of Joint Ventures (JVs) revenue from continuing operations increased by 5.0% in the first nine months of 2018.

This was driven by volume growth of 8.4%, primarily as a result of the capacity expansion at the Southwest Cheese JV, which was completed in the first half of 2018 and milk supply growth in the Glanbia Ireland JV. This was offset by a pricing decline of 3.4% due to comparatively lower year-on-year dairy markets.

The lag between dairy market price movements and milk input costs is likely to reduce margins in JVs and as a result JVs are expected to deliver a somewhat reduced share of profit after tax in full year 2018 versus prior year.

Financing

Glanbia’s net debt at 29 September 2018 was €398 million, which represents a decrease of €84 million versus the net debt position at the end of the third quarter of 2017.

This improvement has been primarily driven by good cash conversion. Glanbia expects to close the SlimFast acquisition before the end of 2018 and will use available banking facilities to finance the transaction in full.

Glanbia expects to deliver over 80% operating cash conversion of EBITDA in 2018. Total 2018 capital expenditure is expected to be approximately €65 million to €75 million.

On this basis Glanbia expects its net debt to EBITDA ratio to be under two times at the 2018 financial year end.

Full year outlook

Glanbia reiterates its guidance that on a pro-forma basis adjusted earnings per share for the continuing group is expected to grow between 5% – 8% constant currency for full year 2018.

If the average Euro US Dollar foreign exchange rate for the full year remains at similar levels to the average rate for the first nine months of 2018, Glanbia expects an approximate 5% translational headwind to full year reported results.

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