Glanbia on Course to Meet 2011 Targets

Over the 10 month period to 31 October 2011, total Group revenue, including Joint Ventures & Associates, grew 28% when compared with the prior year. This reflects 10% underlying volume growth, driven primarily by Global Nutritionals and Dairy Ingredients Ireland.

Nov 18 2011 --- Glanbia plc, the international nutritional solutions and cheese group, is issuing this Interim Management Statement in accordance with the reporting requirements of the EU Transparency Directive, for the 10 month period to 31 October, 2011.

Commenting, John Moloney, Group Managing Director said: “Most aspects of the business are performing well in the second half. Strong organic top line revenue growth continues, building on excellent first half results. We are investing further in our growth strategy and continue to build a good science-based product innovation pipeline. Year-on-year we are experiencing some margin contraction principally centred on the impact of the significant increase in whey input costs on Performance Nutrition. As we exit 2011, there are some headwinds and global macroeconomic uncertainty to contend with but we are confident of a strong full year outcome. We expect earnings to be at the upper end of previous guidance and look forward to delivering circa 20% growth in adjusted earnings per share for the full year, on a constant currency basis.”

Global demand for dairy products has moderated somewhat in recent months but fundamentals remain robust. As anticipated, most product prices have softened as a consequence of growth in global milk production. Overall global dairy markets are expected to remain reasonably resilient for the remainder of the year.

Domestic demand for US cheese has been relatively soft as high prices impacted at the consumer level, but overall demand remains solid due to export-led growth. US Cheese prices remain higher than historic averages. Market demand is very good across all sectors of global nutritionals. Strong global demand for high protein whey combined with limited growth in supply in the short term has resulted in a market imbalance, leading to significant whey price increases in recent months.

Over the 10 month period to 31 October 2011, total Group revenue, including Joint Ventures & Associates, grew 28% when compared with the prior year. This reflects 10% underlying volume growth, driven primarily by Global Nutritionals and Dairy Ingredients Ireland. Higher pricing and an enhanced product mix contributed 13% to the increase in revenue while 5% of the increase related to acquisitions in the period, mainly Bio-Engineered Supplements and Nutrition (BSN), which was acquired in January 2011.

Revenue for US Cheese & Global Nutritionals to 31 October 2011 grew by 35% relative to 2010. US Cheese revenue increased, driven by higher US Cheese prices. The increase in revenue was offset by higher milk cost in the period. As a result, US Cheese 2011 performance is expected to be broadly in line with 2010. Revenue also increased in Global Nutritionals, reflecting strong organic volume growth, particularly in Performance Nutrition, and the positive impact of the BSN acquisition. Demand is very good across all key product categories and channels underpinned by high-quality product innovation across all Global Nutritionals’ businesses. The key performance challenge in Global Nutritionals is the management of increased raw material costs for Performance Nutrition where margins remain under pressure despite trade price increases. Overall Global Nutritionals is expected to show good growth for 2011.

Revenue growth for Dairy Ireland for the period to 31 October 2011 was 23%. After a very strong first half which included 10% milk supply volume growth over 2010 levels, the current trading environment for Dairy Ingredients reflects softer market prices and contracting milk supply in response to current EU production quota limits. This is, as anticipated, leading to somewhat lower levels of activity in the second half but the outlook remains solid for the full year. Consumer Products continues to address the very challenging food retailing market conditions in Ireland and underlying revenue is trending broadly flat year-on-year, although margins are squeezed. This business remains focused on consolidating its leading market position in liquid milk combined with rigorous cost management. The current rationalisation programme, outlined in the half year results, is delivering cost saving and productivity gains …
to plan. A year-on-year decline in the performance of Consumer Products is expected in 2011. Agribusiness is performing in line with expectations.

The performance of the three strategic joint ventures was in line with expectations to 31 October 2011. Revenue growth in each business remains solid leading to an expected improvement in overall results in 2011.

Glanbia has invested approximately €130 million on acquisition and strategic capital investment year to date, mainly on the €104 million acquisition of BSN. The Group has also commenced the development of a number of key capital projects including an expansion of the whey facility at Irish Dairy Ingredients and an expansion of the Customised Premix Solutions facility in Germany.

On 31 August, Glanbia announced that it had successfully completed a $325 million private placement of 10 year senior loan notes. The notes are unsecured, ranking pari passu with existing senior debt and have a fixed coupon rate of 5.4%. The proceeds have been used to repay existing bank debt. The Group has total committed debt facilities of €970 million of which €159 million is repayable within 12 months. Rolling 12 month adjusted EBITDA to net debt at 31 October 2011 was 2.5 times, consistent with the half year 2011.

Commentary in this announcement is based on constant currency. Glanbia’s financial results are exposed to movements in the Euro/US dollar currency exchange rate and the impact this has on the translation into Euro of the Group’s profits that are US dollar denominated. To reflect the underlying performance of the business, the Group uses constant currency as a basis for discussing financial results and providing earnings guidance. For the full year 2011, US dollar profits are expected to represent approximately 70% of the Group’s EBITA. The 2011 full year average exchange rate is forecast to be approximately €1=$1.40. This would compare with the reported average exchange rate for the year ended 1 January 2011 of €1=$1.326 and represents an appreciation in the Euro of approximately 6%. On this basis, there would be a negative translation impact on Group operating profit of approximately 5%.

Glanbia is confident of delivering 2011 adjusted earnings per share growth of circa 20%, on a constant currency basis, which is at the upper end of guidance. The Group will announce its full year 2011 results on Wednesday, 29 February 2012.