Glanbia shares slide 7.5% on outlook

Glanbia shares slide 7.5% on outlook

By Joe Dermody

Glanbia shares slid 7.5%, stripping around €300m from its market value, as investors showed disappointment at the company’s 2018 earnings outlook, despite it unveiling 2017 figures which showed an eighth successive year of strong growth.

The shares drop means that Glanbia shares have now lost over a fifth of their market value in the past year — and have significantly underperformed Kerry Group and the Iseq index since late last summer.

Ian Hunter, a senior analyst at Investec Ireland, said the main reason for the drop in the share price was that investors were looking for a higher level of earnings growth than the company had provided in its outlook for the current financial year. The firm had hit the market’s earnings targets in 2017 and was signalling “strong volume growth” this year, said Mr Hunter.

“While the core business is performing well with both divisions recording strong volume growth and pricing in line with expectations, the profits from the JV (joint venture) were below expectations,” said Investec.

Glanbia shares were now “oversold” and Investec has retained its buy recommendation, said Mr Hunter.

The foods giant now generates 75% of its sales from the US — and the fluctuating dollar can have outsized effects on its earnings when translated into euro. Davy said it expects the company to see growth in the second half of 2018.

Glanbia’s full-year results showed 9.2% growth in revenue, to almost €2.39bn on a constant currency basis. Net profit rose by €117.3m to €329.4m, boosted by a disposal.

“We are seeing very good growth across all segments,” said Siobhan Talbot, Glanbia group managing director.

“On a pro-forma basis from continuing operations adjusted earnings per share was up 10.2%, constant currency, and wholly owned revenue was up 9.2%, constant currency. Growth was broad-based across Glanbia Performance Nutrition, Glanbia Nutritionals, and joint ventures.”

The sales were strong for the group’s two main global operations. Glanbia Performance Nutrition delivered revenue growth of 13.7%, with like-for-like branded sales growth of 6.3% and earnings before interest, tax and amortisation (ebitda) of €169.7m. Glanbia Nutritionals delivered revenue growth of 5.4% on a constant currency basis and ebitda of €113.5m, with a particularly strong performance from Nutritional Solutions.

The company’s net debt was reduced by €69.8m to €367.7m at year-end 2017. “The outlook for 2018 is positive and I expect Glanbia will deliver between 5% to 8% growth,” said Ms Talbot.

Plan to grow via sales and purchases

The shares slide has increased the pressure on Glanbia — but the foods giant has ambitions to continue to grow its nutritional and ingredients products by acquisition, according to its group managing director Siobhan Talbot.

The company has reported profit after tax of €329.4m for 2017, up €117.3m on 2016. These figures are due to a mix of a good sales performance and the profit arising on the disposal of 60% of the Dairy Ireland, creating a new joint venture with the group’s co-op shareholders. It is the eighth successive year of double-digit growth.

“Our double-digit growth was due to strong sales and good volume growth across all segments,” said Ms Talbot.

“We believe that dairy markets are going to be weaker in 2018 than in 2017, but as we are a net buyer that shift will tend to be in our favour. We would like to continue to expand our business through organic growth, investment and through mergers and acquisition activities. We are very ambitious, and open to acquisitions in nutritional, performance and ingredients markets.” During 2017, Glanbia acquired Amazing Grass in the US and Body and Fit in the Netherlands, for around €181m in total. Glanbia now focuses mainly on the sports and performance nutrition market and is the largest cheese producer in the US. The 2017 figures were impacted by adverse currency moves, notably the dollar.

Nonetheless, the company saw strong growth in most markets globally, with sales in India, China, Brazil and the UK being particularly strong.

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