Glanbia Revenues Soar in First Half
In the first half revenue increased 22.2% to €490.6 million (HY2009: €401.5 million) in US Cheese & Global Nutritionals, reflecting a strong performance from Global Nutritionals and improved US cheese prices.
Aug 26 2010 --- Glanbia has reported that in the first half, Group revenue increased 9.7% to €1,036.4 million (HY2009: €944.9 million). On a constant currency basis Group revenue grew 9.3% to €1,032.9 million. Total revenue (including share of Joint Ventures and Associates) grew 12.2% to €1,226.6 million (HY2009: €1,092.9 million). Revenue in US Cheese & Global Nutritionals was up 22.2% to €490.6 million (HY2009: €401.5 million). Revenue in Dairy Ireland grew marginally to €542.9 million (HY2009: €540.5 million). Revenue in Joint Ventures & Associates grew 28.5% to €190.2 million (HY2009: €148.0 million).
John Moloney, Group Managing Director, said: "Glanbia delivered an excellent first half performance driven mainly by a return to profitability in Irish Dairy Ingredients and a good performance by Global Nutritionals. Operating margin grew 130 basis points to 6.4% and adjusted earnings per share increased just over 50% to 18.62 cents per share.”
“Global dairy markets recovered somewhat unevenly in the first half of the year. Commodity prices declined in the early months, stabilised in March and improved throughout the second quarter. Markets now appear to have peaked and are expected to trend lower in the second half. While volatility continues to be a feature of global dairy markets, the full year 2010 forecast is for pricing to be broadly in line with five year averages but in most instances below the market peak of 2008. While weak milk supply was a dominant feature in the first half, milk production is beginning to increase in the main producing regions and is expected to continue to do so for the rest of the year and into 2011, easing supply constraints. Demand is stable, with Asian demand a key sustaining factor globally,” he noted.
Group operating profit increased 38.7% to €66.3 million (HY2009: €47.8 million). On a constant currency basis operating profit increased 49.4% to €71.4 million. Operating profit (including share of Joint Ventures & Associates) increased 43.1% to €77.4 million (HY2009: €54.1 million). A strong recovery and return to profitability in Irish Dairy Ingredients, compared with a significant loss in the same period last year, and a good performance in Global Nutritionals underpinned a strong first half for the Group. Group operating margin increased 130 basis points to 6.4% (HY2009: 5.1%). On a constant currency basis Group operating margin grew 180 basis points to 6.9% (HY2009: 5.1%). Operating margin (including share of Joint Ventures and Associates) increased 130 basis points to 6.3% (HY2009: 5.0%).
The constant currency amounts above reflect the translation of the performance of US Cheese and Global Nutritionals at 2009 exchange rates. In the first half the market average USD/EURO rate was broadly in line with 2009. However, the reported results of US Cheese and Global Nutritionals reflect a charge of €5.5 million being the effect of a mark to market of the hedging of a proportion of USD profits. The full year impact of currency translation is currently expected to be broadly neutral relative to 2009.
Financing costs declined €1.3 million to €11.2 million (HY2009: €12.5 million). EBIT to net financing cost interest cover improved to 5.9 times in the first half (HY2009: 3.8 times). EBITDA to net financing cost interest cover was 8.0 times compared to 5.6 times in the first half of 2009. The Group's average interest rate for the half year of 2010 was 4.3% (HY2009: 4.5%). Glanbia operates a policy of fixing a significant amount of its interest exposure with approximately 85% of the Group's net debt currently contracted at fixed interest rates for 2010 and approximately 65% contracted at fixed rates for 2011.
Glanbia's share of revenue from Joint Ventures & Associates increased 28.5% to €190.2 million (HY2009: €148.0 million). Glanbia's share of profits in the first half - post interest and tax - was €5.0 million (HY 2009: €2.7 million). These results were driven primarily by a solid performance in Glanbia Cheese UK and Southwest Cheese and an improved operating performance in Nutricima.
Profit before tax increased 58.4% to €60.2 million (HY2009: €38.0 million).
The 2009 first half tax charge increased €4.2 million to €11.6 million (HY2009: €7.4 million) reflecting the increased profitability of the Group. The Group's effective tax rate in the first half, excluding Joint Ventures & Associates, was 21% (HY2009: 21%).
Adjusted EPS is calculated as the profit for the year attributable to the owners of the Group before exceptional items and amortisation of intangible assets (net of tax). Adjusted earnings per share increased 50.8% to 18.62 cent (HY2009: 12.35 cent) driven mainly by the performance of Irish Dairy Ingredients and Global Nutritionals.
The Board is recommending an interim dividend of 3.03 cent per share (HY2009: interim dividend 2.89 cent per share), an increase of 5%. Dividends will be paid on Wednesday, 29 September 2010 to shareholders on the register of members as at Friday, 10 September 2010. Irish withholding tax will be deducted at the standard rate where appropriate.
The Group's net debt position improved by €7.2 million to €539.3 million relative to half year 2009 (HY 2009: €546.5 million). Relative to the year ended 2 January 2010, net debt increased by €96.7 million. The movement in net debt, which is after an adverse foreign exchange movement primarily on USD denominated bank debt of €31.1 million, is due mainly to the annual seasonal increase in the Group's working capital requirement of €113.0 million. This seasonal increase in working capital offset positive EBITDA inflows for the half year of €89.2 million. The remaining cash outflows for the half year were capital expenditure €19.3 million, interest, tax dividends and other payments of €22.5 million.
The Group has total committed debt facilities of €738.8 million maturing from 2012 to 2014, representing an average age to maturity of 2.7 years. Total committed debt facilities are made up of bank facilities of €675.3 million and €63.5 million of cumulative redeemable preference shares.
The equity of the Group increased €43.1 million in the first half from €297.4 million to €340.5 million at the half year. The key components of this change are retained profits at €48.6 million, an improved currency translation reserve benefit of €38.7 million offset by dividends paid of €11.6 million and adverse movements in the Group's pension deficit of €30.4 million.
In the first half revenue increased 22.2% to €490.6 million (HY2009: €401.5 million) in US Cheese & Global Nutritionals, reflecting a strong performance from Global Nutritionals and improved US cheese prices. Operating profit increased 5.8% during the first half to €47.5 million (HY2009: €44.9 million) with constant currency operating profit up 17.1%. Operating margins decreased 150 basis points to 9.7% (HY2009: 11.2%) with constant currency operating margins down 40 basis points to 10.8%. EBITDA increased 7.5% to €58.8 million (HY2009: €54.7 million). EBITDA margin was down 160 basis points in the first half to 12.0% (HY2009: 13.6%) with constant currency EBITDA margin down 50 basis points to 13.1%.
The US Cheese business unit had a reasonable first half. Good revenue growth was delivered as a result of improved cheese pricing, compared with historical lows in the same period last year. Underlying market demand was stable with good export demand and improvements in the foodservice sector. Production volumes were lower as a result of a refurbishment of the Twin Falls plant. In addition, milk production was tight in the first half, following very difficult farming conditions in 2009, which placed some pricing pressure on securing milk supply. Supply has eased in recent months with increases in milk production. Overall operating profit and margins for US Cheese were lower for the first six months of 2010.
In the first half, Global Nutritionals continued to see volume growth driven by new product development of customer/market-led science-based nutritional solutions and the expansion of Performance Nutrition. There is strong demand globally for sports nutrition and protein fortified products for key areas of weight management, healthy aging, infant formula and fortified bar and beverage markets. In addition, all of Glanbia's core nutritional sectors continued to exhibit strong structural market growth trends, with the Group outperforming market growth rates in key business segments. Overall revenue, operating profits and margins were good in the first half. Ingredient Technologies had a strong first half with increased demand coupled with favourable pricing delivering strong revenue, profit and margin growth. Performance Nutrition also delivered a good first half with further organic volume growth. While revenue and operating profit grew there was some margin pressure from higher input costs and ongoing investment in people and brand development resources. Customised Premix delivered good revenue growth momentum in key market segments and continued to develop further customer specific solutions for the US and international markets.
Dairy Ireland had a good first half, compared with a very difficult first half in 2009. Revenue in the first half was broadly similar at €542.9 million (HY2009: €540.5 million). Operating profit increased €13.2 million to €19.1 million (HY2009: €5.9 million) and the operating margin increased 240 basis points to 3.5% (HY2009: 1.1%). The return to profitability in Irish Dairy Ingredients after a major loss in the first six months of last year is the most significant performance issue in the first half results. This more than offset the impact of ongoing challenges in the operating environment at Consumer Products. EBITDA increased 73.6% to €30.2 million (HY2009: €17.4 million) with EBITDA margin up 240 basis points to 5.6% (HY2009: 3.2%). In 2010, the Group continued a significant strategic cost saving programme across its Irish operations. This went to plan in the first half and is well on track to achieve targeted annualised cost savings.
In the first half, Irish Dairy Ingredients' performance improved in line with the recovery in global dairy markets, which were severely impacted by product price falls and volatility in the first half of 2009. Revenue grew half year-on-half year and this business unit returned to profitability as expected.
Consumer Products had a difficult first half. Branded product volumes declined in low single digits, although Avonmore Milk and Kilmeaden Cheese continued to deliver good performances. Price reductions implemented at wholesale level late in 2009 and higher input costs put significant pressure on margins in the first six months. The trading environment continued to be driven by the impact of the recession in Ireland with consumers focused on value, shopping more often and in a wider number of retailers. Sterling competition also intensified during the first six months, although on a positive note the value of the total grocery market grew in May, for the first time since 2008. Overall revenue, operating profit and operating margins were lower in the first half.
Overall Agribusiness was marginally down as good demand across all farm inputs was more than offset by very competitive pricing undertaken in the first half.
In the first half of 2010, revenue, operating profit and margins in Joint Ventures & Associates recovered as a result of improved pricing in US Cheese and European Mozzarella markets. Glanbia's share of revenue grew 28.5% to €190.2 million (HY2009: €148.0 million). Operating profit increased 76.2% to €11.1 million (HY2009: €6.3 million) and operating margin improved 150 basis points to 5.8% from 4.3% in the first half of 2009. Glanbia's share of the EBITDA of the Joint Ventures & Associates increased 50% or €4.7 million to €14.1 million (HY2009: €9.4 million) with EBITDA margin increasing 100 basis points to 7.4%. The Group's share of profit after interest and tax - as reported in the income statement - was €5.0 million, up 85.2% from €2.7 million in the first half of 2009.
The 40% expansion of Southwest Cheese continued to ramp-up successfully, having been completed on time and on budget in the first half. Production volumes grew and cheese pricing recovered from the historical lows of the first half of 2009 driving an improved operating profit and performance.
Glanbia Cheese in the UK, the Group's European Mozzarella cheese Joint Venture, had a strong first half as demand and pricing improved delivering increased revenue, operating profits and operating margins. Nutricima delivered an improved operating performance in the first half compared to a difficult 2009. Sales from the new UHT factory are encouraging and further new product developments are planned. The outlook for the Nigerian economy is healthy with positive GDP growth rates forecast.
For the full year 2010, US Cheese & Global Nutritionals is expected to deliver reasonable year-on-year growth, underpinned in particular by the performance of Global Nutritionals. In Dairy Ireland, performance will be somewhat mixed with Irish Dairy Ingredients strongly ahead, compared with a loss in 2009; Consumer Products behind in the context of a very tough trading environment and Agribusiness marginally ahead of a difficult 2009. International Joint Ventures & Associates are expected to have a good full year, underpinned by a solid performance from Southwest Cheese in the USA and Glanbia Cheese in the UK, and an improved operating performance at Nutricima in Nigeria.
While the global economic environment remains uncertain, the Board, taking current trading conditions into account is confident Glanbia will achieve strong revenue, operating profit and margin growth for the full year. As a result the Group has revised adjusted earnings per share guidance upwards and is now expecting approximately 20% adjusted earnings per share growth for the full year.
