Weak international dairy markets took their toll on sales at Ireland-based food and ingredients group Glanbia in 2002, pushing down turnover from €2.6 billion to €2.3 billion. But the company said it had seen strong performances from its consumer foods operations during the year.
The decline in sales also reflects Glanbia's decision to sell its UK consumer meats and foodservice distribution in July 2002.
Improved profit margins from the convenience foods unit helped total group operating profit to remain only slightly lower than in the previous year (-1.8 per cent) at €91.5 million, Glanbia said, while pre-tax, pre-exceptional profits were up 7.8 per cent to €71.8 million as a result of lower interest costs.
But the sale of the UK consumer meats business and the foodservice distribution operations led to a one-off charge of €79.9 million.
Glanbia has been busy refocusing its operations in recent years, and its increasing emphasis on consumer foods is beginning to pay off, especially when compared to its exposure to the volatile dairy ingredients sector.
The consumer foods business operates in the UK, Ireland and Continental Europe, and performed particularly well last year. Operating profit improved significantly (+133.4 per cent) to €47.6 million but turnover declined to €1.2 billion as a result of the exit from the UK meat and foodservice markets.
The consumer foods business now accounts for just over 50 per cent of group turnover, and consists of the Glanbia Dairies and Glanbia Foods business in Ireland, the Glanbia Foods in the UK and Glanbia Cheese, a pizza cheese joint venture with Leprino Foods.
As well as providing a range of branded and value-added liquid milk products, cheeses, soups and spreads, Glanbia's consumer foods business has begun focusing increasingly on functional products, such as a new range of milk-based nutritional and functional beverages set for launch this year, the first of which - Milk Plus, a new probiotic milk drink - was launched in February. The company last year launched Yoplait Everybody probiotic yoghurt drink.
Nutritional products also helped boost sales at the food ingredients arm, which operates mainly in Ireland and the US. In the latter country, there was good progress in the whey technology-based nutrition business, which increased sales by 17 per cent, while US cheese volumes also grew strongly. However, weak international dairy markets throughout 2002, which contrasted sharply with the buoyant market conditions experienced in 2001, significantly reduced the profitability of Irish operations.
Divisional operating profit declined to €30 million while turnover was reduced to €910 million from €1 billion in 2001, Glanbia said. The Irish operations were boosted by sales of protein products, cheese, formulated products and cream base for the Baileys cream liqueur brand, but the US arm - one of the country's biggest producers of American cheddar-type cheese - was impacted by weakened cheese prices.
Cheese, nutritional ingredients and consumer foods will once again be the focus of growth at Glanbia in 2003, the company said, but the continued volatility of international dairy prices mean that at best the company expects to make "satisfactory progress" in the current year.