First-half profits at Glanbia fall 28%

DEPRESSED DAIRY markets led to a 28 per cent fall in profits at Glanbia in the first half, but the food group expects the pace of decline to ease over the remainder of the year.

Glanbia posted a pretax profit of €38 million for the first six months, down from €53.1 million a year earlier. The drop came as revenue fell by €161 million to €944.9 million, with Irish dairy processing alone contributing €90 million of the decline.

Group managing director John Moloney said the confluence of changes in the Common Agricultural Policy and the global recession had created an “unprecedented trading environment”.

He described the company’s overall first-half result as “quite a reasonable performance”, acknowledging that the “key issue” for Glanbia was milk. His outlook for the full year was “cautious”.

Glanbia processes milk in the Republic for export to 40 countries, an activity that generates close to half of group revenue and has, before this year, been consistently profitable.

Analysts believe the business recorded a loss of about €16 million in the first half, with Mr Moloney yesterday signalling “aggressive” action to deal with the issue. He suggested the business may need to be viewed on a more seasonal basis, while all costs would be examined.

Milk prices paid to farmers, which farmers say are currently lower than the cost of production, are unlikely to rise until next year, according to Mr Moloney. The global dairy market had probably “reached a level of stability”, with losses in the dairy ingredients business easing in the second half.

Dairy weakness had a negative impact throughout Glanbia’s operations, with its US cheese business and its cheese joint ventures in the US and Britain all affected.

At home, Glanbia’s agribusiness outlets struggled against a backdrop of lower farm incomes and further branch closures are expected.

A bright spot came in the group’s global nutritionals business, which makes ingredients for products such as nutrition bars and healthy drinks. The division was boosted by inclusion of US sports nutrition firm Optimum Nutrition, which Glanbia bought last September.

Business also held up reasonably well at the company’s domestic consumer foods business, which includes brands such as Avonmore and Yoplait.

Across the group, margins were steady at 5.1 per cent. Despite its trading pressures, Glanbia is maintaining its dividend policy and will pay 2.89 cent per share, up 5 per cent on the previous year.

NCB analyst Paul Meade described the results as “better than expected”, noting they highlighted the benefit of Glanbia’s diversification.

Shares in Glanbia closed 10 cent weaker at €2.60 last night.