Glanbia plc, the international nutritional solutions and cheese group, has issued an Interim Management Statement (IMS) in accordance with the reporting requirements of the EU Transparency Directive and in conjunction with the Group’s Annual General Meeting. The IMS covers the three month period to 31 March 2012.
Commenting, John Moloney, Group Managing Director, said:
“The Group is performing in line with expectations in what is a more challenging operating environment this year. We expect to deliver earnings in the first half of 2012 which are broadly similar to an exceptionally strong first half in 2011. We are successfully driving growth in nutritionals and the depth and strength of the portfolio in these dynamic growth sectors positions Glanbia well for the future. We remain focused on strong cost management and operational execution across the business. We reiterate our full year guidance of 5% to 7% growth in adjusted earnings per share, on a constant currency basis, for 2012.”
International demand for dairy products remained solid in the first three months of the year, supported by demand from developing economies. Prices for most dairy categories have weakened year to date, mainly due to an oversupply of milk resulting from sustained good weather in most milk producing regions. Similarly US cheese prices have also declined in response to strong US milk production. Robust demand for higher end whey products continues, reflecting very good demand across all sectors of nutritionals, with prices firm in the face of tight short-term supply of these key ingredients.
In the first quarter, to the period end 31 March 2012, total Group revenue (including share of Joint Ventures & Associates) grew 1.9% when compared with the first three months of 2011. Volume was down 1.5% as lower volumes in Dairy Ingredients and Agribusiness more than offset growth in Global Nutritionals. Overall pricing was up 3.4% driven by higher year on year pricing in Global Nutritionals.
US Cheese & Global Nutritionals
Revenue for US Cheese & Global Nutritionals grew 9% in the first three months of the year. Revenue in US Cheese declined as a result of lower US Cheese prices; however volumes were stable in the period. Revenue growth continued in Global Nutritionals driven by both volume growth and the impact of price increases in the Ingredient Technologies and Performance Nutrition businesses. The outlook for the first half for US Cheese & Global Nutritionals is positive with revenue and operating profit expected to increase and operating margins expected to remain broadly in line when compared with the first half of 2011.
Revenue for Dairy Ireland declined 4.6% in the first quarter of 2012. Revenue in Dairy Ingredients was down due largely to lower volumes, in part as a result of on-farm quota supply management but particularly when compared with a strong performance in the prior year. Consumer Products revenue grew in the period as the volume benefits of 2011 acquisitions countered the continued challenges in the Irish food retail environment. Revenue in Agribusiness was down in the first quarter of 2012 with feed and fertilizer volumes lower when compared with a strong first quarter in 2011. The outlook for the first half for Dairy Ireland is that revenue will be broadly in line with the first half of 2011 with somewhat lower operating profit and operating margins as global dairy market prices continue to weaken and there is some lag in related reductions in input costs in Dairy Ingredients.
Joint Ventures & Associates
The performance of Joint Ventures & Associates is behind when compared with the first quarter of 2011, due to lower US cheese and global dairy markets. The forecast for the Group’s share of profit after tax for Joint Ventures & Associates for the first half is expected to be lower than the first half of 2011.
As outlined at the announcement of the full year results on 29 February 2012, Glanbia plc and its largest shareholder, Glanbia Co-operative Society Limited, are working with their respective advisers to evaluate how best to address the expansion of dairy output in Ireland post the abolition of EU milk quotas in 2015. This process continues and, as previously stated, a conclusion is expected to be reached by the end of the second quarter.
Rolling 12 month adjusted EBITDA to net debt at 31 March 2012 was 2.4 times which was an improvement on the same period in 2011 of 2.8 times. Current committed debt facilities amount to €985.7 million with €162.6 million maturing in July 2012, €510 million maturing in July 2013, €63.5 million maturing in July 2014 and €249.6 million maturing in June 2021. The Group is currently reviewing its overall financing as part of the normal debt facility renewal cycle.
Constant currency basis
Commentary in this announcement is based on constant currency. Glanbia’s financial results are exposed to movements in the Euro/US dollar currency exchange rate and the impact this has on the translation into Euro of the Group’s profits that are US dollar denominated. To reflect the underlying performance of the business, the Group uses constant currency as a basis for discussing financial results and providing earnings guidance.
For the first half of 2012, Glanbia expects to deliver earnings broadly similar to an exceptionally strong first half in 2011. Glanbia remains focused on strong cost management and operational execution across the business. Glanbia is successfully driving growth in nutritionals and the depth and strength of the portfolio in these dynamic growth sectors positions Glanbia well for the future. The Group reiterates its guidance of 5% to 7% growth in adjusted earnings per share, on a constant currency basis, for 2012.