The nutritional solutions and cheese group’s overall revenue rose 1.9% year-on-year in the first three months to March 31 (2011 full-year turnover: €2.734bn) but volumes fell 1.5% as lower volumes in dairy ingredients and the firm’s agribusiness offset strong growth in Global Nutritionals.
NCB Stockbrokers wrote in a note this morning: “Overall, an encouraging Q1 statement from Glanbia, particularly the Global Nutritionals performance. Five to seven percent adjusted earnings per share (EPS) growth for the full year and flat earnings in H1 implies a much stronger H2 (+circa. 20%) is expected year-on-year in 2012, albeit against easier comparables than H1."
Dairy ingredients spin-off
However, the stockbrokerage stressed the importance of discussions between Glanbia Co-operative Society (which owns 54% of the firm) and Glanbia PLC on the future of the firm's Dairy Ireland division were important, a point made by NCB analyst Darren Greenfield in a May 2 note.
“We…believe that Glanbia is sufficiently insulated from current global [dairy ingredient price] falls, assuming the falls are eventually passed on to farmers as expected. Any negative impact could be lessened by a Dairy Ingredients spin-off or stake reduction in preparation for the 2015 milk quota abolition," Greenfield wrote.
NCB added today: “A partial spin-off of this business will further reduce Glanbia’s exposure to volatile dairy markets and reposition the group as primarily a Global Nutritionals business.”
But a Glanbia spokeswoman declined to comment to DairyReporter.com on what she described as “speculation” and reiterated the firm’s position outlined in yesterday’s IMS that it expected the talks to reach a conclusion by the end of Q2 2012.
She said: “We haven’t said anything of that nature [NCB’s suggestion] at all. The group is reviewing options catering for the expansion of fresh dairy post-2015 in the context of quota removal, and people are speculating as to how that might play out but we have not got any definitive plan at this point.”
US Cheese and Global Nutritionals was Glanbia’s star performer in Q1 2012, with 9% growth driven by volume and price increases in the firm’s Ingredient Technologies and Performance Nutrition Business.
The spokeswoman said: “The performance nutrition business is performing very, very well – we’ve had [$144m US nutritional product acquisition] BSN Nutrition for over a year now - that's performing well. And we've said that we have capacity to invest in further acquisitions following our growth strategy in terms of Global Nutritionals. There is capacity to invest in that area in the region of €150m.”
Higher-end whey demand
But despite stable volumes, US Cheese revenues fell due to lower cheese prices, and Glanbia said that prices in most global dairy categories had weakened in 2012, due to an oversupply of milk as a result of good weather in producing regions. Nonetheless, it expects overall divisional revenue and operating profit in line with H1 2011.
“Robust demand for higher-end whey products continues, reflecting very good demand across all sectors of nutritionals, with prices firm in the face of tight short-term supply of these key ingredients,” Glanbia said.
Dairy Ireland revenues fell 4.6% in Q1 2012, largely due to lower volumes, with the firm blaming on-farm quota supply management; consumer product revenues in Ireland grew due to volume benefits of 2011 acquisitions.
Glanbia predicted H1 2012 revenues for this business in line with 2011, but lower operating profit and margins due to weakening dairy market prices and “some lag” in related reductions in input costs for dairy ingredients.