Glanbia’s “complex” and “sprawling” corporate structure has failed to deliver for shareholders and is undervaluing the business, the company’s AGM heard on Wednesday.
In a tense meeting coming on the back of a recent profit warning and a near 50 per cent collapse in the company’s share price, Glanbia’s board came under fire from shareholders who claimed executives were paying themselves big salaries and bonuses while mismanaging the business.
Several called for a strategic review of the group in light of the recent share price slump while one said chairman Donard Gaynor’s retirement “couldn’t come soon enough”.
The head of activist investor Clearway Capital, Gianluca Ferrari, said Glanbia’s shares first hit the €11 mark 12 years ago and 12 years later, after one of the biggest bull runs in financial market history, “Glanbia shareholders are back where they started”.
“That’s not to say the individual businesses within the group haven’t done well but when your profits double and your shareholders see no return, it’s time to ask difficult questions,” he said, noting that analyst reports repeatedly valued the group’s assets at over €20 a share.
The problem is the company’s structure, Mr Ferrari said. “The sprawling corporate structure with a lot of moving parts, three very good, excellent but very different businesses make Glanbia very hard to value, complicated to understand and possibly and arguably difficult to manage.
“There’s an obvious solution to this, separate the businesses,” he said.
Mr Ferrari has written to Glanbia’s largest shareholder, Tirlán, the farmer-led co-op which owns Glanbia’s legacy dairy business, to get it to back his proposal for a strategic review of the group with the aim of splitting it up.
Kilkenny-based Glanbia has a complex mix of assets across three main sectors; sports nutrition, ingredients and dairy. Its Optimum Nutrition brand, which sponsors the McLaren Formula One team, is a leading player in the protein powder market.
Responding to shareholders, chief executive Hugh McGuire said the company was “acutely aware” of the disappointing share price.
“It’s very visible to all of us and personally speaking no one is more frustrated than I am, but our job is to be focused on execution and longer-term strategy,” he said.
Mr McGuire insisted that 2024 was a strong year for the group but it had been hit by two notable headwinds: the high-than-expected price of whey protein, the company’s biggest input and, more recently, US tariffs which he described as a “massive distraction for the business”.
But Kilkenny dairy farmer, Michael O’Carroll hit back at the company’s suggestion that it was caught out by the high cost of whey, saying that if Ryanair chief Michael O’Leary said the company’s share price had been halved “because he hadn’t hedged his fuel price, he’d be sacked in the morning”.
Glanbia earlier on Wednesday released an interim trading statement, showing that first quarter revenue grew by a better-than-expected 7 per cent. That saw shares rise by about 10 per cent to over €11.
Roland French of Penman Securities, another institutional investor, told the AGM that Glanbia’s market valuation had declined by over €2.5 billion since 2015 with the total shareholder return, including dividends, estimated at a negative 36 per cent.
“If you benchmark this globally whether that’s Euro Stoxx or S&P, that’s in the bottom decile in a 10-year performance context,” he said. “A 10-year performance window should be more than sufficient for any board of directors to conclude something is not functioning.”
He also blamed Glanbia’s “complex conglomerate structure” while noting the company had spent over €1.1 billion on acquisitions since 2011 that have failed to add value.
“This misallocation of capital has led to value impairment and more importantly has left the group overexposed to the powders category,” Mr French said, noting Glanbia should decomplex its operation and return to its core competency of ingredients.
Glanbia recently announced the sale of its SlimFast brand, acquired in 2018 for $350 million, following a steep fall-off in sales.
Analysts believe the company has failed to leverage its dominant position in the protein powder market to tap into the fast-growing protein drinks and bars segment.
Mr Gaynor defended the company’s M&A record, saying its return on capital deployed over the last three years was well within its own medium-term target.
