Glanbia Profits Up 18.5% in 2008

Revenue grew 1.0% to €2,232.2 million (2007: €2,206.6 million). Revenue growth was positive across almost all the business, with favorable pricing, organic volume increases in Food Ingredients USA and Nutritionals and the first time contribution from Optimum Nutrition.

04/03/09 Irish food group Glanbia has posted an 18.5 percent rise in full-year earnings but said 2009 would be tough, with profit growth in a low to mid single digit range.

John Moloney, Group Managing Director, said “Glanbia performed well in 2008, delivering a good set of results, completing a major strategic acquisition and achieving key financial targets. All businesses, including joint ventures, performed to or better than anticipated, with the exception of Food Ingredients Ireland which suffered a sharp decline in profits and margins in 2008.”

“2009 will be a tough year. Global dairy markets have weakened considerably from previous high levels with the outlook for 2009 deteriorating further in the last two months. Food Ingredients Ireland will be the most challenged in this context and we expect this business to breakeven this year. Food Ingredients USA is expected to deliver a resilient performance, albeit down when compared with a strong result in 2008. Reducing farm incomes will have implications for farm input sales and as a result for revenue and profits in Agribusiness. Consumer Foods, Nutritionals and Joint Ventures & Associates are expected to deliver robust performances.”

“Based on current market conditions, the Group now expects 2009 earnings to be in a range of low to mid single digit growth. Glanbia is continuing to maximise organic growth opportunities and aggressively manage costs to sustain the business through the current challenging environment.”

Revenue grew 1.0% to €2,232.2 million (2007: €2,206.6 million). Revenue growth was positive across almost all the business, with favorable pricing, organic volume increases in Food Ingredients USA and Nutritionals and the first time contribution from Optimum Nutrition, Inc. (Optimum). Positive revenue growth was offset by a decline in revenue due to the sale of the Group’s Pigmeat business in March 2008 and the effect of currency translation. Like-for-like revenue grew 8.9%.

Operating profit pre exceptional increased 15.7% to €134.1 million (2007: €115.8 million).

Operating margin pre exceptional increased 80 basis points to 6.0% (2007: 5.2%). All businesses in the Group increased margins in 2008, with the exception of Food Ingredients Ireland where the decline in global dairy markets resulted in a significant imbalance between market returns and raw material input costs.

Profit before tax pre exceptional grew 20.8% in the year to €120.3 million (2007: €99.5 million). Like-for-like profit before tax pre exceptional grew 21.4%.

Financing costs increased €3.8 million to €21.1 million (2007: €17.3 million) due mainly to the financing cost associated with the acquisition of Optimum. EBIT to net financing cost cover was 6.4 times in 2008 compared to 6.7 times in 2007. EBITDA to net financing cost cover was 7.9 times compared to 8.6 times in 2007.
In 2008, the average interest rate for the Group reduced by 70 basis points to 5.1% primarily due to lower US dollar rates. The Group operates a policy of fixing a significant amount of its interest exposure with approximately 80% of the Group’s net debt currently contracted at fixed interest rates for 2009 and approximately 70% contracted at fixed interest rates for 2010.

Glanbia’s share of revenue from Joint Ventures & Associates increased 4.9% to €370.3 million (2007: €353.0 million) with strong growth in Southwest Cheese. Glanbia’s share of profits post interest and tax grew strongly in 2008 to €7.3 million (2007: €1.0 million). Both Southwest Cheese in the USA and Glanbia Cheese in the UK improved profitability and margins. Nutricima, the Group’s Nigerian Joint Venture, consolidated its market position in 2008 but it was not possible in a developing economy to pass on all of the increases in raw material costs and as a result profits and margins were below 2007.

The 2008 pre exceptional tax charge increased €5.1 million to €21.5 million (2007: €16.4 million), reflecting growth in International profits which attract higher tax rates. The effective tax rate for the Group, excluding Joint Ventures & Associates, was 19.1% in 2008 (2007: 16.7%).

In 2008, Glanbia initiated a rationalisation programme costing €14.5 million. This is as a result of an imperative to remain cost competitive, particularly in relation to the effect the global economic downturn is having on consumer demand. This rationalisation programme is mainly focused on Consumer Foods, Agribusiness and Food Ingredients Ireland businesses and associated costs relate primarily to redundancy. An exceptional charge of €3.9 million was incurred in the year on finalising the Group’s exit from its Pigmeat business. A deferred taxation charge of €1.0 million arose in Glanbia Cheese due to a change in UK taxation legislation. Total exceptional costs for 2008 amounted to €19.4 million (2007: €22.8 million). Exceptional costs in 2007 arose due to a provision for the exit from Pigmeat and restructuring costs incurred in Consumer Foods.

Basic earnings per share increased 31.0% to 26.8 cents (2007: 20.4 cents) due to higher profits and lower exceptional costs, relative to 2007. Adjusted earnings per share increased 18.5% to 35.86 cents (2007: 30.25 cents).

In August 2008 the Group completed the acquisition of Optimum for a total consideration of €217.9 million (US$323.0 million). This was funded from the Group’s existing bank facilities.