Glanbia's first-half earnings suffer

Tougher than expected trading conditions depressed first-half profits at dairy and food ingredients business Glanbia, the company said yesterday.

Chief executive John Moloney said that the company now expects earnings per share (eps) to be in line with last year's out-turn of 20.6 cent (adjusted for new international financial reporting standards). This will be below previous forecasts for the group.

Its results for the first six months of 2005 show that turnover grew by close to 5 per cent to €926.1 million from €880 million during the same period last year.

Operating profits were down €3.1 million to €38.3 million from €41.4 million. This included an exceptional €6.3 million charge for the rationalisation of its Yoplait yoghurt manufacturing facility in Waterford.

The company is letting go 60 staff - 40 have gone and the remaining 20 are set to leave in the second half of the year. The terms were agreed with trade unions at the plant.

Mr Moloney said yesterday that the company incurred the bulk of the cost in the first half. However, it was offset by a €3.9 million foreign exchange credit, leaving it with a net charge of €2.4 million for the rationalisation.

The current low interest rate environment saved the group €2 million in financing costs, leaving it with a total bill of €7.7 million under this heading.

The group increased total financing by €25.7 million to €286.6. This included the cost of investment in its powdered and condensed milk manufacturing facility in Nigeria and its takeover of CMP in Cork.

Mr Moloney said that the company had also incurred a once off €5.3 million charge through the early repayment of $100 million (€81.1 million) in preference shares. This was associated with the refinancing of group debts. It now has a total facility of €400 million up to July 2010.

A one-off tax credit of €7.7 million associated with the closure in the late 1990s of facilities in Wisconsin, USA boosted pretax profits to €30.6 million from €22.9 million.

Stripping out the exceptional tax gain, pretax earnings were actually down €0.8 million at €22.1 million.

Earnings per share were slightly off at 9.01 cent. In line with its policy of recent years, the company increased the interim dividend by 5 per cent to 2.27 cent from 2.16 cent.

Glanbia's Nigerian joint venture with PZ Cousins has already begun selling powdered milk in the local market. Mr Moloney said initial sales were positive.

Construction of its whey and cheese processing facility in New Mexico,USA, a joint venture with local dairy co-op South West, is on schedule and on budget.

Mr Moloney predicted that commissioning would begin in October. It will be one of the largest plants of its kind in the US.