Glanbia shares slide despite double-digit growth

Glanbia saw the value of its shares fall 7.5 per cent on Wednesday despite reporting double-digit earnings growth for an eighth successive year on the back of strong sales across its performance nutrition unit.

A softer-than-expected earnings guidance for 2018 linked to falling dairy prices and planned investments spooked investors and resulted a sell-off of the Kilkenny-based company’s stock.

After being down over 9 per cent at one stage, with more than four million shares traded, the stock strengthened a touch to close the session down 7.46 per cent at €13.53.

Announcing its full-year results for 2017, which showed revenue on a constant currency basis rose 9.2 per cent to nearly €2.4 billion , managing director Siobhán Talbot said the company was making “ a very clear, strategic and intentional decision” to invest in the company’s brands and capability to ensure long-term growth.

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As a result, she said she expected growth to be delivered in the second half of 2018 “as comparative dairy dynamics and planned investments will adversely affect performance in the first half of 2018.”

Glanbia is targeting “mid-to-high single digit like-for-like volume growth” in its branded portfolio, she said, while joint ventures are expected to deliver a reduced profit this year “as a result of more challenging dairy markets.” The company earning guidance for 2018 was put at 5-8 per cent.

The company’s latest full-year numbers show adjusted earnings per share rose by 10.2 per cent to 87.11 cent in 2017, which was in line with previous guidance of 7 - 10 per cent growth .

Glanbia's profit jumped 55 per cent to €329.4 million last year, helped by the sale of its 60 per cent stake in Dairy Ireland to Glanbia co-op, the group's largest shareholder.

Nutrition division

The company’s Glanbia Performance Nutrition division saw revenue grow 13.7 per cent to €1.12 billion on a constant currency basis with like-for-like branded sales growth of 6.3 per cent.

While the other core element of the group’s business - nutritionals - saw revenue grow by 5.4 per cent to €1.26 billion.

An increase in the share of joint ventures also boosted Glanbia’s profits in the year as net finance costs, before exceptional items, increased by €200,000 to €23 million driven by the higher costs resulting from the recent acquisitions of Amazing Grass and Body & Fit brands.

Net debt at the Kilkenny-headquartered company dropped from €437.5 million to €367.7 million in the year, again helped by the disposal of the Dairy Ireland stake.

That deal, a scaled-back version of Glanbia plc’s failed attempt in 2010 to sell the dairy business entirely to the farmers’ co-op, resulted in the co-op cutting its stake in the plc.

Following the “strength of the group’s balance sheet”, the company’s board reviewed its dividend policy and has set an annual dividend pay-out ratio between 25 per cent and 35 per cent of annual adjusted earnings per share.

“The strategic evolution of the group portfolio continued in 2017 with the acquisition of two highly complementary businesses to the GPN performance nutrition] portfolio, Amazing Grass and Body & Fit as well as the disposal of 60 per cent of Dairy Ireland,” said Ms Talbot.

“These initiatives demonstrate the ambition of the group to build on its existing strengths, drive future sustainable growth and deliver on our vision to be one of the world’s top performing nutrition companies,” she added.