Glanbia cites growth in global unit as factor in turnaround of fortunes

FOOD group Glanbia cites strong growth in its global nutritionals unit and a return to profitability in the Irish dairy ingredients sector as key factors in its turnaround of fortunes over the past 12 months.

In its results for the first six months of 2010, issued yesterday, Glanbia unveiled a 58% rise in pre-tax profits to €60.2m, with revenue for the half-year to July 3 up by 9.7% to €1.03bn. This compares with €38m and €945m respectively for this time last year.

The group has upgraded its earnings guidance to 20%, predicting 37c adjusted earnings per share for 2010. Its stock opened at €3.38 per share yesterday, and rose to €3.44. Its previous 52-week high was €3.42, and it has stayed consistently within a few cent of this price for the past 12 months, closing at €3.40 yesterday.

Glanbia group MD John Moloney said: “US Cheese & Global Nutritionals is expected to deliver reasonable year-on-year growth, underpinned by the performance of Global Nutritionals. In Dairy Ireland, performance will be somewhat mixed, with Irish Dairy Ingredients strongly ahead compared with a loss in 2009.”

Mr Moloney said Glanbia was making “satisfactory” progress in its talks with the Pensions Board, which has asked Glanbia to bring its pension deficit under control within 10 years. Glanbia had previously sought to spread this over a 17-year timeframe.

The group has decreased its pension deficit from €200m last year down to €116m this year, achieved largely by a reduction in benefits for members of the Irish defined benefit pension schemes. Overseas staff are all members of defined contribution pension schemes.

Mr Moloney said: “There has been a fair bit of pain in reducing the pension deficit. Employment has been reduced by about 300 people over the last two years. We are on target for a further €10m in cost cuts planned for the Irish business. We have already achieved an €84m reduction.

“Our talks with the Pensions Board have been satisfactory, and we hope to conclude those shortly. We have already agreed these changes with employees.”

Mr Moloney described as “dormant” any notion of Glanbia reviving its attempts to sell its Irish dairy and agri-businesses to Glanbia Co-op, a move earlier rejected by farmers.

Farmers recognised the benefits of separating the group’s Irish and international businesses, but wanted their concerns over the deficit in the Irish pension fund resolved first.

Demand for fast food products

GLANBIA’s profit gains in the US have in part been driven by a surge in consumer demand for the group’s fast food and body-building nutritional products.

Group managing director John Moloney, said: “Even if people are unemployed they seem to be looking after themselves despite the economic difficulties.”

Glanbia is Europe’s biggest supplier to the US of mozzarella cheese for pizzas.

It also makes cheese for Burger King and McDonald’s. Glanbia member, US Cheese & Global Nutritionals, also turns the group’s byproducts into protein powders used by body builders.