Glanbia suffers marked fall in sales and profits

Glanbia, the food group created through the merger of Avonmore and Waterford Foods, has announced a drop in profit before tax and exceptionals, to #58.5 million (£46 million) in 1999 from #95.7 million (£75.4 million) in 1998 A loss of #84.2 million on the sale of operations and rationalisation costs of #9.1 million pushed the group into a loss of #93.3 million.

The results are broadly in line with brokers' predictions and follow grim interim figures announced last September. Despite the losses, the group has declared a final dividend of 4.126649 cents, making a total of 7.110533 cents, an increase of 4.7 per cent. Glanbia is confident that profit growth will resume this year. Its strategic review had bee completed and it now had a clear strategy for its future, he added. The focus would now be two-pronged - on cheese, where it holds strong positions in the US, EU, Britain and Ireland and on nutrition, "where the group is a leader in the development of advanced technology dairy ingredients".

This strategy "will be the basis for sustainable future growth", group managing director, Mr Ned Sullivan, said. The latest results were achieved "despite a difficult trading environment in some sectors which is continuing", said Mr Sullivan. Two of the group's main divisions, consumer foods and food ingredients, had contractions in both sales and operating profits. Agri-business was the only area to show growth, albeit marginally. Group sales fell to #2.32 billion (£1.83 billion) from #2.49 billion Adjusted earnings per share dropped to 11.43 cents from 23.49 cents. Gearing has fallen to 123 per cent from 177 per cent.

Sales in food ingredients fell by 4.8 per cent to #762.8 million, mainly due to the disposal of the Wisconsin, US businesses. Operating margins declined by 17.1 per cent to #35.7 million. Profit margins fell to 4.7 per cent from 5.4 per cent, reflecting high Irish industry average milk prices and lower international market returns, the company said. Turnover in the US fell to #324.2 million from #362.5 million. Turnover of food ingredients in Ireland fell fractionally to #438.6 million. Glanbia Ingredients was profitable but the general market environment for internationally traded products was difficult and, "combined with high relative industry average milk prices, resulted in reduced margins".

Turnover in consumer foods fell to #1.5 billion from #1.9 billion, while operating profit fell to #41.5 million from #83 million. These contractions are mainly attributed to the disposal of the British liquid milk operations and a delay in completing the Irish liquid milk reorganisation, which more than offset an improved performance by the Irish and British pork businesses. Operating margins fell from 4.4 per cent to 2.8 per cent.

Turnover of consumer foods in Ireland fell to #547.9 million from #648.4 million. The liquid milk supply operations have now been consolidated into three processing facilities. The chilled foods business had a "satisfactory profit performance". While pork recovered, it remained below expectations.

Turnover in agri-business rose to #231.1 million from #224.4 million and operating profit increased to #15 million from #14.2 million. Glanbia said, despite competitive pressures, this business enhanced its market share.