Glanbia publishes FY 2020 results

In FY 2020 Glanbia wholly-owned revenue was €3.823bn ($4.63bn), an increase on prior year of 0.6% constant currency (down 1.4% reported). Like-for-like wholly-owned revenue was up 1.8% constant currency compared to FY 2019. The drivers of this were growth in price of 3.8% offset by volume decline of 2.0%. GN (Glanbia Nutritionals) delivered like-for-like volume growth, which was more than offset by declines in GPN (Glanbia Performance Nutrition).

Both GN and GPN delivered price improvement compared with the prior year. Revenue from acquisitions made within 12 months delivered 0.6% revenue growth in FY 2020. Acquisition revenue related to Watson and Foodarom, which were acquired by GN in February 2019 and August 2020 respectively.

Wholly-owned EBITA pre-exceptional was €209.6m ($254.1m), down 22.6% constant currency (down 24.3% reported). Wholly-owned EBITA margins were 5.5%, down 160 basis points on a constant currency and reported basis due to margin declines in both GPN and GN. The decline in wholly-owned EBITA and margin was primarily driven by the impact of Covid-19 on GPN where lower revenue drove significant negative operating leverage in the second quarter of 2020 and GN margins were primarily impacted by dairy market dynamics. GPN margin improved materially, with double-digit EBITA margins in the second half of the year.

GPN pre-exceptional EBITA decreased by 36.2% constant currency to €91.2m/$110.6m (2019: €146.4m/$177.5m), a decrease of 37.7% on a reported basis. GPN pre-exceptional EBITA margin at 8.0% was 270 basis points lower than prior year reported, due to lower volumes and resulting negative operating leverage arising from the impact of Covid-19 restrictions, which resulted in temporary closure of key sales channels globally during the height of the pandemic in the second quarter.

GN pre-exceptional EBITA declined 7.4% constant currency to €118.4m ($143.5m), a decrease of 9.2% on a reported basis. GN pre-exceptional EBITA margin was 4.4%, down 80 basis points from 2019, due to the impact of product mix and unfavorable dairy margin dynamics.

Total Group profit (pre-exceptional items) for the period was €175.3m ($212.5m), down €39.5m ($47.9m) on prior year.

Adjusted earnings per share was 73.78 cent. This was a decrease on prior year of 14.9% constant currency (down 16.3% reported). Including exceptional costs basic earnings per share was 48.72 cent (2019: 61.04 cent).

Capital investment

Glanbia’s total investment in capital expenditure (tangible and intangible assets) was €64.2m ($77.9m) in FY 2020, of which €47.7m ($57.9m) was strategic investment. Glanbia’s capital investment program continued in key strategic projects throughout the year including investment in the direct-to-consumer (DTC) e-commerce platform and production plant reconfiguration in GPN as well as extending solutions capabilities in GN. Total capital expenditure for 2021 is expected to be €80m to €90m ($97m to $109m).

GPN transformation program and growth strategy

GPN commenced a transformation program in late 2019 to realign operating and supply chain structures in support of growth ambitions, sharpen focus on brands and optimize routes-to-market across non-US markets to drive greater efficiencies, improve margin and deliver top line growth with progress made during 2020. The project is delivering against its plans and is on target to deliver an overall GPN EBITA margin ambition by 2022 of between 12% and 13%, an increase of 400 to 500 basis points on FY 2020 margin. The project will continue through 2021 as the onset of the pandemic led to a further broadening and deepening of its scope.

GN revenues rise

GN recorded a good performance in FY 2020 with revenues up 9.0% on prior year. Like-for-like revenue was up 10.0% which was driven by volume increases of 4.2% and favorable pricing of 5.8%. Volume increase was across both Nutritional Solutions (NS) and US Cheese as the broad sectoral reach of the business resulted in robust end-market demand through the year. Favorable pricing was driven by US Cheese due to higher average market prices in the period versus prior year. Acquisitions added a further 0.9% to revenues in 2020. GN EBITA decreased in FY 2020 versus prior year by 7.4% as a result of lower EBITA margins which declined by 80 basis points. EBITA margins were impacted by dairy market dynamics.

NS volume growth

NS revenues increased in FY 2020 by 2.0% versus prior year. Like-for-like revenue increased by 0.8% driven by a 2.4% increase in volume and a 1.6% decrease in price. Volume growth was broad based across the portfolio in essential micro-nutrients as well as dairy solutions as a result of good end-market demand. The price decrease primarily related to reduced dairy ingredient pricing year-on-year. The Watson and Foodarom acquisitions delivered a further 3.1% of revenue growth.

NS pre-exceptional EBITA in FY 2020 was €90.5m ($110m), 7.7% lower than prior year due to lower margins. Margins declined by 130 basis points versus prior year to 12.1% driven by reduced margins in dairy solutions which were impacted by negative price and some adverse business mix.

US Cheese

US Cheese revenue increased in FY 2020 by 11.9%, with like-for-like revenue increasing 13.8%. This was driven by a 5.0% increase in volume and an 8.8% increase in price. Volume growth reflected good demand from customers with retail end-market exposure, a category which was strong as a result of Covid-19. Pricing was volatile throughout the year and averaged at higher levels than prior year as a result of higher category demand. US Cheese operates a business model which helped to negate the majority of the impact of significant price volatility in the period.

US Cheese delivered a 6.4% decrease in pre-exceptional EBITA in FY 2020 versus prior year. This was driven by reduced EBITA margin which declined by 30 basis points as a result of higher operating costs in the second half of the year.

New JV project in Michigan, US

The new large-scale MWC-Southwest Holdings JV plant in Michigan is on track and commenced commissioning in October 2020. Commissioning is expected to be completed by the second quarter of 2021. With the support of milk-supplying partners the project is progressing well and when fully operational, the facility will further consolidate the group’s position in the US American-style cheddar cheese and value-add whey markets. On a full year basis, the plant will increase Glanbia’s US Cheese production capacity by more than 30%.

Glanbia Cheese EU

The new Glanbia Cheese EU JV plant in Portlaoise, Ireland is on track with construction largely completed at the end of 2020 and commissioning expected to be completed by the second quarter of 2021.

Covid-19 update

Glanbia said it expects the disruption to its markets associated with the pandemic will abate gradually during the course of 2021 and this has been the basis on which the group’s plans have been developed. It said it is confident that as Covid-19 related restrictions are reduced GPN’s trading performance can recover quickly.

After delivering good growth in Q1 2020, Q2 was challenging and during the second half of 2020 GPN's sales trends recovered in markets where restrictions were eased. GPN now has leading positions in the destinations where consumers are shopping for better-for-you nutrition products with 70% of sales in FY 2020 in the e-commerce and the food, drug, mass and club (FDMC) channels.

Outlook

The Group currently expects pandemic-related restrictions to ease in key regions during 2021, assuming the widespread rollout of vaccines is successful in reducing Covid-19 infection rates, however the duration and impact of the pandemic 'remains volatile.

In FY 2021, Glanbia expects to deliver adjusted earnings per share growth of 6% to 12%, constant currency, driven by revenue and EBITA growth in both GPN and GN. Glanbia’s focus on the GPN transformation program will provide an opportunity to build on the achievements delivered in the second half of 2020 and drive further margin improvement in FY 2021 over FY 2020.