Glanbia tanks as international arm struggles

Glanbia’s share price plummeted up to 13% yesterday after the dairy and nutrition group said it is continuing to face challenges with its sports nutrition business in key international markets.

The Glanbia Performance Nutrition division, which is aimed at athletes and fitness enthusiasts, increased its revenues 16.5% in the first nine months of the year.

However, this was largely driven by the contribution from weight-control brand SlimFast, which was acquired for €300m last year.

The division’s main market is the US, but it has suffered this year from a near 8% fall in sales volumes and a 1.4% decline in prices and growth has been hampered by a “continued challenging environment” in a number of international markets outside of the US.

In its latest trading update, Glanbia said key territories in which it is experiencing challenges include Europe, the Middle East, Brazil, and India. Its shares finally closed down just over 9.3%.

For 2019, Glanbia said it expects Glanbia Performance Nutrition’s branded revenue to decline by mid-to-high single digits, mainly as a result of the ongoing headwinds in non-US international markets.

Glanbia said it is actively addressing its international issues relating to the Glanbia Performance Nutrition unit, but that improvement initiatives including developing alternate supply chain options will continue into 2020.

“We are actively addressing the issues in these markets as they represent a compelling long-term growth opportunity for the group,” said Glanbia managing director Siobhán Talbot.

Glanbia shares are down 35% in the past year. They also tanked in July when the group’s second-quarter results highlighted a 30% drop in core earnings in the Glanbia Performance Nutrition division.

“The core issues, some unique to the respective markets, remain consistent with the first half — currency/ tariff headwinds, channel shift in Europe and route to market adjustments in the Middle East,” said Davy Stockbrokers.

Glanbia’s nine-month trading update juxtaposes a strong delivery for its nutritionals and joint- venture activities against a branded business, excluding SlimFast, that is underperforming relative to stated ambitions and category fundamentals.

Overall, Glanbia said it increased group revenues almost 17%, year-on-year, in the first nine months of the year, boosted heavily by its nutritional solutions business, its US cheese business which saw 14% revenue growth, and acquisition contributions.

The strong performance in these other areas enabled Glanbia to keep its full year 2019 guidance for adjusted earnings per share of 88c to 92c.

“Our 2019 adjusted earnings per share [forecast] of 88c is unlikely to change, albeit the mix of profit contribution is likely to change — lower Glanbia Performance Nutrition, higher US cheese and joint ventures,” warned Goodbody Stockbrokers analyst Jason Molins.

However, with non-US Glanbia Performance Nutrition challenges continuing into 2020, we consider the risks to be skewed to the downside for our 2020 forecasts.”

Glanbia’s net debt was just shy of €816m at the start of October, up by nearly €420m on the same quarter last year.