Glanbia: Costs keep agri-business margins low

Despite the agriculture sector booming in Ireland, there remains very little margin in the agri-business sector, according to Glanbia’s latest financials, due to the cost of materials.

The report noted that the agri-business sector had achieved modest growth but was operating in a very challenging market. “Agri-business revenue growth was positive as higher feed pricing and volumes offset revenue declines in the fertiliser and retail categories. EBITA (earnings before the deduction of interest, tax and amortisation expenses) margins were lower, mainly due to input cost pressures and a change in the business mix,” the report stated.

The sector only achieved growth as farmers were dependent on buying feed due to the poor weather but the profit from feed was offset by losses on fertiliser. “Poor weather conditions resulted in increased demand for feed but this was offset by lower demand for fertiliser. Higher input cost prices in both of these product categories contributed to margin pressure across the sector in 2012,” the report said.

The consumer market also remains difficult for producers. Glanbia offers a premium brand and consumers are intent on value.

“Consumers are still focused on price which benefits discount retailers and private label products at the expense of mainstream retailers and branded products. In this context, consumer products delivered a satisfactory performance in 2012,” the report noted. The outlook for consumer and agri-business sectors is not expected to improve dramatically soon.


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