Falling protein sales hit Glanbia earnings

Food group has been struggling to stem contraction in its sports nutrition business

Siobhan Talbot, Glanbia managing director,  said the group’s competitive position had worsened on the back of relative currency changes, increased tariffs and increased local competition. Photograph: Bloomberg

Siobhan Talbot, Glanbia managing director, said the group’s competitive position had worsened on the back of relative currency changes, increased tariffs and increased local competition. Photograph: Bloomberg

 

Irish food group Glanbia has reported a near 8 per cent fall in underlying earnings on back of a notable contraction in its performance nutrition business.

The Kilkenny-based group has been struggling to stem a fall-off in sales of protein powders linked to economic conditions globally and supply chain issues in several countries.

Publishing its full-year results for 2019, Glanbia said overall revenue rose by 16.6 per cent to €3.87 billion last year.

“The strong performance” was driven by its nutritionals business and aided by its recent high-profile acquisition of weight-loss brand Slimfast.

However, the company also reported a 7.8 per cent decline in underlying earnings, which totalled €276.8 million last year, on foot of a decline in earnings across the Glanbia Performance Nutrition (GPN) unit, which supplies protein products for gym-goers and dieters.

Glanbia said the unit had “encountered challenges in international markets throughout 2019 as well as lower sales in the North American speciality and club channels resulting in lower volumes and negative operating leverage.”

The company has now undertaken a number of corrective actions to address the problem, including a review of its brand strategy and a restructuring of its North American business.

Glanbia is a global leader in the €13 billion sports nutrition market mainly through its Optimum Nutrition brand, but the industry has become increasingly competitive with low barriers to entry. The company has also been caught out by the increased preference for buying product directly online rather than through retail outlets.

Managing director Siobhán Talbot said the group’s competitive position in the market had worsened on the back of relative currency changes, increased tariffs and increased local competition.

“We’re taking very clear actions in those markets where we were challenged to make us more competitive, streamlining our routes to market,” she said.

Share price rose

Glanbia’s share price rose nearly 4 per cent on the back of the results and the company’s actions to strengthen the business.

The fall-off in earnings nonetheless saw total group profit fall to €214.8 million, down from €234 million in 2018.

As a result of lower group profit, adjusted earnings per share was 88.10 cent which was 7.7 per cent lower than 2018 but within the previously issued guidance range.

Ms Talbot highlighted the increase in overall revenue, noting the Glanbia’s global nutrition arm “saw broad-based volume growth with notable performances in vitamin and mineral blends, and healthy snack ingredients, underlining the continued consumer shift towards health and wellness.”

“It was disappointing that earnings were impacted by challenges in the Glanbia Performance Nutrition (GPN) segment and to address these we have conducted a comprehensive business review and are taking actions to simplify our business, allowing us to concentrate on our core brands, and optimising our routes to market across channels and geographies,” she said.

“As a result, we expect GPN to regain branded revenue growth momentum in 2020,” she said.

Davy Stockbrokers said in a note: “The key takeaway from the 2019 results statement is the breadth of actions being taken to rebuild revenue and margin within GPN. The end-goal is for a more focused brand strategy and simplified operating model.”