Glanbia: Continued Good Growth in Global Performance Nutrition and Global Ingredients
21 Aug 2013 --- Glanbia plc, the global performance nutrition and ingredients group, announces its results for the six months ended 29 June 2013.
2013 half year results highlights
- Good first half operating and financial performance delivered 13% revenue growth, split 8% volume growth and 5% price growth. Adjusted EPS grew 11% on a constant currency basis;
- Global Performance Nutrition continued to outpace market growth rates delivering a 14% increase in revenue, 20% growth in EBITA and a 50 basis points improvement in EBITA margin to 10.5%;
- Global Ingredients also delivered a good performance. Revenue increased 17% and EBITA grew 8%. EBITA margin declined 90 basis points to 10.7% mainly due to lower margins, as expected, in the Ingredient Technologies business unit;
- Dairy Ireland’s performance was impacted by a very difficult first half in Consumer Products and EBITA and EBITA margin were lower than prior year;
- The Group’s two major strategic Joint Ventures & Associates, Glanbia Ingredients Ireland and Southwest Cheese in the USA had a steady first half overall;
- The full year outlook for the Group remains positive with forecast growth in adjusted EPS of between 8% and 10%, on a constant currency basis.
Commenting today John Moloney, Group Managing Director, said:
“The Group’s first half performance was driven by Global Performance Nutrition and Global Ingredients. These two business segments now represent over 70% of Group EBITA and are our core platforms for future growth. We expect little change in the external operating environment in the second half and with clear challenges remaining in Dairy Ireland we are maintaining our 2013 full year guidance of adjusted earnings per share growth of between 8% and 10%, on a constant currency basis. Our recently announced management changes put in place an excellent team to continue to drive the business forward and to evolve the long term strategy that will deliver the next phase of growth. Overall, Glanbia is in a strong position to capitalise on its unique portfolio of global businesses, development opportunities and strong balance sheet.”
2013 half year report
For the six months ended 29 June 2013
This half year report is on the basis of the new organisational structure of the Group, announced in May 2013. This new structure reflects the fact that Glanbia has built two very significant platforms in nutritional products and solutions. The first platform is business-to-consumer high quality performance nutrition with the largest global sports nutrition brand portfolio. This business segment is called Global Performance Nutrition. The second platform spans large-scale cheese manufacturing and value-added nutritional ingredient solutions. This business segment is called Global Ingredients and incorporates our US Cheese, Ingredient Technologies and Customised Premix Solutions businesses. The Group’s two other business segments are Dairy Ireland, comprising Agribusiness and Consumer Products, and Joint Ventures & Associates which encompasses the Group’s strategic cheese and dairy ingredients joint ventures.
Management changes
In May 2013, Glanbia announced that John Moloney, Group Managing Director since 2001, is to retire by the end of 2013. Siobhán Talbot, Group Finance Director, has been appointed as his successor and as Group Managing Director Designate to facilitate a seamless transition. Hugh McGuire has been appointed to the Board as an Executive Director with responsibility for Global Performance Nutrition. Brian Phelan has been appointed Chief Executive Officer of Global Ingredients, having been appointed to the Board on 1 January 2013.
2013 Outlook
The outlook for the business is positive despite some challenges for the remainder of the year in the Dairy Ireland business segment. The Board is reiterating the Group’s 2013 guidance of 8% to 10% growth in adjusted earnings per share on a constant currency basis. This reflects the business’ expectation of positive performances in Global Performance Nutrition and Global Ingredients, which will be partially offset by a year-on-year decline in Dairy Ireland. Joint Ventures & Associates are expected to be broadly in line with the prior year.
Glanbia delivered a good financial and operating performance in the first six months of the year driven by growth in Global Performance Nutrition and Global Ingredients. Total Group revenue including the Group’s share of Joint Ventures & Associates grew by 13.0% to €1,677.9 million (HY 2012: €1,484.8 million). This was split 8% volume growth and 5% price growth. Total Group EBITA increased by 6.4% to €123.9 million (HY 2012: €116.4 million). Total Group EBITA margin declined by 40 basis points to 7.4% (HY 2012: 7.8%), as margin growth within Global Performance Nutrition was more than offset by a decline in margins in the other business segments.
Global Performance Nutrition delivered strong results for the first six months of the year, building on a good performance for the full year 2012. Revenues increased 13.7% driven primarily by volumes. Branded revenues grew in excess of 20% in both the USA and international markets.
Consumer demand in the USA, the most developed sports nutrition market, continued to grow in the first six months of 2013. While competition in the sector remains strong, Global Performance Nutrition again outperformed the market. This performance was achieved by the continued popularity of Global Performance Nutrition’s sports nutrition brands combined with ongoing product innovation focused on taste and trends. Key new products launched in the first half included a ready-to-drink version of BSN’s market leading pre-workout product, N.O.-Xplode and Optimum Nutrition’s premium slow-release casein whey product, Platinum Tri-Celle Casein.
EBITA increased by 19.7% reflecting the increase in revenues combined with a 50 basis points increase in EBITA margins. Expansion in EBITA margin in the first half of 2013 reflected a favourable product and sales mix effect partially offset by higher overheads associated with strategic investment in future growth. While whey market prices have been on a downward trend over recent months, Global Performance Nutrition’s whey input costs in the first half were ahead of the prior year reflecting the timing of the impact of market price movements on the cost of goods sold.
The investment to drive growth continues and includes building in-market capabilities in key geographies to underpin the delivery of our international expansion plans. We remain on target to have a direct sales presence in 17 countries by the end of the year. There is also a significant strategic capital investment programme underway in Global Performance Nutrition including:
- The introduction of SAP at a cost of $12 million, implementation of which began at start of 2013 and is due for completion in the coming months; and
- A $45 million capacity expansion in Chicago, USA due for completion in 2014 combined with a stg£3 million investment in the Middlesbrough, UK plant more than doubling capacity by the third quarter of 2013.
The outlook for Global Performance Nutrition remains positive. Key trends of branded revenue growth are expected to be sustained for the remainder of the year, supported by major ongoing investment in the business. Overall results for Global Performance Nutrition for 2013 are expected to be well ahead of 2012.
Global Ingredients delivered a good performance in the first half of 2013. Revenues increased 16.8% to €539.2 million (HY 2012: €461.8 million). This growth in revenue is attributable to underlying organic volume growth of 7%, higher pricing and an enhanced product mix of 6% and the impact of the Aseptic Solutions acquisition of 4%. EBITA increased 7.7% in the period reflecting a good performance across all businesses and the contribution of Aseptic Solutions, acquired in July 2012. While EBITA margin was a very robust 10.7% in the first half of the year, margin declined 90 basis points compared with the first half of 2012. This was mainly as a result of lower market prices for lactose and whey in Ingredient
Technologies. The full year outlook for Global Ingredients is positive with year-on-year revenue and EBITA growth expected to be in line with first half trends.
US Cheese
Average US cheese market prices for the period were ahead of the prior year. Market demand for American style cheese remains positive with both the retail and food service segments performing satisfactorily. Additional volumes, driven by good milk supply in Idaho and the acquisition of the Blackfoot, Idaho plant in March 2013, combined with higher market prices resulted in an increase in revenues versus the prior year. The Cheese Innovation Centre based in Twin Falls, Idaho, an investment of $11 million, opened this month. This facility, together with the more flexible production capabilities of the Blackfoot plant, significantly strengthens US Cheese’s innovation and new product development capabilities.
Ingredient Technologies
Revenues in Ingredient Technologies in the first six months of the year were ahead of the prior year reflecting the acquisition of Aseptic Solutions (“AS”) in July 2012 and higher sales volumes of WPC34 and lactose resulting from good production throughputs at the Idaho whey plants. The addition of further market capacity did result in some downward pressure on whey market prices over the course of the first six months of 2013.
Ingredient Technologies’ strategic focus on science-led functional and nutritional solutions led to another prestigious IFT Innovation Award, the second year in a row to win this award. This year’s innovation winner was Optisol 3000, which is used in bakery and other applications and acts a substitute for whole eggs, a product with a volatile pricing history. Optisol 3000, developed from a combination of whey protein and flax, highlights the complementary nature of these two ingredient categories. The flax and other speciality grain capabilities of Ingredient Technologies will be considerably enhanced with the commissioning, in October 2013, of the new $29 million value-added grain ingredients plant in South Dakota, USA.
Customised Premix Solutions
Revenues for Customised Premix Solutions for the first six months of the year were ahead of the prior year reflecting a combination of volume and price growth. While the level of volume growth has moderated compared with 2012, momentum has improved in recent months and indications are that this positive trend will continue for the remainder of the year. Market conditions and growth prospects are favourable across key end product segments and markets. Asian demand, in particular, remains strong and Customised Premix Solutions continues to expand its sales presence in the region to provide for this growth opportunity.
In the first half of 2013, Dairy Ireland revenue increased 9.2% to €383.2 million (HY 2012: €350.9 million). This revenue growth reflects 8% volume growth and 4% pricing growth offset by the 3% negative impact of the Yoplait franchise disposal completed in the first half of 2012. EBITA decreased by 24.4% to €12.1 million (HY 2012: €16.0 million) and EBITA margin declined by 140 basis points. These declines were driven by Consumer Products reflecting lower volumes and higher milk input costs for the business. The outlook for the Dairy Ireland segment for the remainder of the year remains challenging as a result of the operating environment for Consumer Products and full year EBITA and EBITA margin are expected to be well behind 2012.
Consumer Products
Consumer Product revenues declined in the period driven primarily by the sale of the Yoplait franchise. The business continues to be impacted by the challenging Irish retail environment. Consumers are heavily focused on price while retailers are focused on cost. As a result, promotional volumes continue to rise and private label products continue to gain market share at the expense of branded products. Furthermore, the increase in global dairy market prices over the first six months of the year resulted in a significant increase in input costs for the business, with only partial price recovery.
Agribusiness
Agribusiness revenues were ahead of the same period last year as a result of higher pricing and increased demand for fertilizer and feed. One of the key drivers of this higher demand was the unseasonably cold weather which prevailed for much of the first half of the year. Construction of the new oatmeal milling facility, which will cater for the recently signed supply contract with Sturm Foods in the USA, is running on time and on budget with commissioning due by the end of 2013.
