Glanbia recovery being maintained

The pace of recovery at foods group Glanbia has picked up after the group turned in 2000 results ahead of market expectations. Glanbia was assisted by a strong performance in its second half after the poor first half.

Chief executive Mr Ned Sullivan said the strong second-half performance had continued into the first three months of 2001.

But, although Glanbia was able to reduce its debt by €43 million during the year to €294 million, the group still has a very heavy debt load and interest cover remains tight at 2.9 times. This year, however, sees the final €25 million payment to the vendors of Beni Foods and the end of the 3p a gallon milk price guarantee. This, said Mr Sullivan, would generate free cash of around €30 million.

"Glanbia has made good progress in the second half of 2000, with profits 25 per cent ahead of the same period in 1999. Improved results across the rest of the group largely offset the impact of difficulties in our British food service and consumer meats business," said Mr Sullivan.

Glanbia's incoming chief executive Mr John Moloney - who takes over from Mr Sullivan in July - said: "The debt is a critical issue but we have made progress. Over the past two years we have taken €250 million off the debt."

Profits before exceptional items fell 8 per cent to €53.7 million, but the group made an exceptional profit of €28.6 million on the sale of 49 per cent of Glanbia Cheese to Leprino, the sale of the Camolin sheepmeat business and other assets offset by a €2.8 million restructuring charge.

Glanbia's food ingredients business, which takes in the Irish and American cheese business and dairy ingredients, increased sales 21 per cent to €928 million but strong prices and higher volume sales allowed operating profits to rise 58 per cent to €56.5 million. There was particularly strong sales growth in the American cheese business where the commissioning of the new plant in Idaho and strong demand boosted sales from €324 million to €414 million.

The consumer foods business in Ireland and Britain had mixed fortunes, with satisfactory results in Ireland being offset by losses in the British food service and consumer meats operations. As a result operating profits fell to €12.1 million from €30.6 million. Mr Moloney said, however, that the problems in the food service business and consumer meats in the UK had been addressed and that, in food service, the group was in negotiations for a very large contract.

With the results coming in over a cent higher on the earnings side, company broker Davy has increased its 2001 earnings forecast to 12.8 cents. The shares have recovered in the past few days after being sold down to €0.42 on foot and mouth fears. After the results they edged ahead slightly with a better tone in the market to the shares.