Glanbia predicts earnings growth

Food group Glanbia said its results would be at the upper end of predictions and backed approval of a plan to hive off its Irish dairy business as part of a joint venture with co-op members.

In an interim management statement this morning, the group said it was expecting adjusted earnings per share to grow by about 10 per cent on a constant currency basis this year, with positive trends in the global nutritionals business driving performance.

Total group revenue rose slightly in the nine months to September 29th, held back by a decline in revenue in the Dairy Ireland business. Operating profit and margins were also ahead of last year.

“2012 is expected to build on the excellent performance of Glanbia in the last two years and reflects both our successful international growth strategy and strong operational execution across the group,” managing director John Moloney said.

The Dairy Ireland sector saw revenue fall 4 per cent compared with the same period in 2011, as lower revenue in the Dairy Ingredients sector weighed on performance. “Despite this, a solid performance is expected for the full year in Dairy Ingredients Ireland,” Glanbia said, with overall profit performance expected to be just marginally behind last year.

Other sectors, including Consumer Products and Agribusiness were in line with expectations.

Glanbia’s global nutritionals business grew 20 per cent in the nine-month period, as prices grew across the sector. In the Performance Nutrition and Customised Premix Solutions businesses, volume rose, while the company’s Ingredient Technologies unit was lifted by higher whey prices. However, these whey price rises also present a key challenge as the business tries to manage cost.

The US cheese and global nutritionals grew by 9 per cent, but lower cheese prices in the first half of the year caused revenue to decline.

This also hit revenues for Glanbia’s joint ventures and associates, which were behind 2011 in the first three quarters of the year.

”While profits in Southwest Cheese are ahead of prior year, this is more than offset by the impact of higher milk input costs within Glanbia Cheese,” Glanbia said. “As a result, the group's share of profit after tax for joint ventures and associates for 2012 is expected to be below the prior year.”

Voting on the proposed joint venture with Glanbia Co-operative Society will take place in the coming weeks.

Under the deal, a new entity, Glanbia Ingredients Ireland (GII), would be created, which will be 60 per cent owned by the co-op and 40 per cent owned by the plc.

“This transaction offers a new model for post quota growth for Glanbia milk suppliers and underpins a potential 60 per cent expansion of our Irish dairy processing capacity,” Mr Moloney said.” I believe this is the best route to deliver the next phase of growth in both our Irish and international businesses and to create further value for shareholders, including Glanbia Co-operative Society.”