Glanbia publishes third quarter 2019 results

Global nutrition group, Glanbia plc, has published its results for the nine month period ended 5 October 2019 and reiterated its outlook for the full year.

Results summary for the first nine months of 2019:

• Revenues up 16.9% driven by volume up 2.4%, price up 3.2% and acquisitions adding 11.3%;
• Strong performance from Nutritional Solutions (“NS”) growing revenue 25.4% with the Watson acquisition adding 12.2%, volume up 9.3% and price up 3.9% with good growth across dairy and non-dairy solutions globally;
• Watson acquisition performing well with the integration on track within NS;
• Glanbia Performance Nutrition (“GPN”) increased revenue by 16.5% with the SlimFast acquisition adding 25.8% offset by a price decline of 1.4% and a volume decline of 7.9%. In the third quarter, a price increase was successfully implemented as planned in the US.
• GPN like-for-like volumes were weaker than expected in the third quarter as key non-US markets in Brazil, Middle East and India remain challenging. A series of actions are underway to address these issues which will continue into 2020;
• SlimFast growth accelerated in Q3 with YTD like-for-like sales , on a pro-forma** basis, up 34.8%; and
• Guidance reiterated for full year 2019 adjusted earnings per share on a reported basis being in a range of 88 cent to 92 cent.

Full year 2019 outlook

Glanbia reiterates its full year guidance of adjusted earnings per share on a reported basis being in a range of 88 cent to 92 cent, assuming foreign exchange rates remain at current levels.

In 2019, NS and US Cheese are expected to deliver good revenue growth along with a positive contribution from the Watson acquisition. GPN is expected to deliver good overall revenue growth as like-for-like revenue declines of mid-to-high single digits are countered by a strong performance from the SlimFast acquisition. The like-for-like revenue decline in GPN reflects on-going challenges in EU, Middle East, Brazil and India as well as lower activity in the Club channel in the US in 2019 versus the prior year. The SlimFast acquisition is expected to have a very strong year as a result of growth across multiple product formats and successful innovation.

Commenting today, Siobhán Talbot, Group Managing Director said:

“Glanbia delivered 16.9% growth in wholly owned revenues on a constant currency basis in the first nine months of 2019 versus prior year. This was driven by a strong performance from Glanbia Nutritionals as it meets demand from its global and regional customers for dairy and non-dairy solutions, as well as a good contribution from acquisitions.

“In GPN while we are very pleased with the performance of the SlimFast acquisition our like-for-like volume performance is disappointing. This is largely driven by specific challenges in key non-US markets. We are actively addressing the issues in these markets as they represent a compelling long term growth opportunity for the Group. We reiterate our full year guidance of adjusted earnings per share on a reported basis of being in a range of 88 cent to 92 cent, assuming foreign exchange rates remain at current levels.”

Performance update

In the nine months ended 5 October 2019, wholly owned revenue increased 16.9%, constant currency. On a reported basis, reflecting the stronger US Dollar Euro foreign exchange rate, revenue increased by 23.4% when compared to the same period in 2018. Revenue increase, on a constant currency basis, was driven by volume growth of 2.4%, pricing growth of 3.2% and acquisitions which delivered 11.3%. Volume growth was driven by Glanbia Nutritionals (“GN”) and pricing mainly reflected stronger year-on-year dairy markets in North America as well as a price increase in GPN in the third quarter.

Glanbia Performance Nutrition

GPN delivered revenue growth of 16.5% in the first nine months of 2019. This was driven by the SlimFast acquisition adding 25.8% revenue, offset by a volume decline of 7.9% and a pricing decline of 1.4%.

Volume decline in the first nine months of 2019 primarily related to the continued challenging environment in some non-US markets. As previously noted, key territories experiencing head winds were Europe, Middle East, Brazil and India.

GPN is actively addressing these issues. In Europe, where channel shift to online has accelerated, the direct-to-consumer online platform has been enhanced and the Body & Fit brand is being rolled out across the region.

In Brazil, Middle East and India local market conditions for imported brands remain difficult as a result of currency and tariff headwinds. The actions required to address these challenges differ by market and are focused on moving further down the value chain to ensure that GPN’s brands are supported by the right infrastructure and resources to compete locally. In Middle East and Brazil the route to market is currently being assessed to drive further optimisation while in India GPN is well advanced in developing alternate supply chain options. These initiatives will continue into 2020.

In North America despite on-going declines in the specialty channel consumption has remained positive throughout the year.

Glanbia Nutritionals

GN delivered revenue growth of 17.1% in the first nine months of 2019. This was driven by a volume increase of 7.9%, a price increase of 5.7% and the Watson acquisition delivering 3.5% revenue.

Nutritional Solutions

NS revenue increased by 25.4% in the first nine months of 2019. This was driven by volume growth of 9.3%, as a result of a strong performance across both dairy and non-dairy solutions, a pricing increase of 3.9%, which was primarily related to relatively higher year-on-year dairy markets in North America and the Watson acquisition delivering 12.2% revenue.

Watson, which closed in February 2019, is performing well with integration on track.

US Cheese

US Cheese revenue increased by 13.8% in the first nine months of 2019. This was driven by volume growth of 7.4% as a result of a strong operational performance. Price increased by 6.4% due to higher year-on-year cheese markets in North America.

Joint Ventures

Glanbia’s share of Joint Ventures (“JVs”) revenue increased by 8.6% in the first nine months of 2019. This was driven by volume growth of 9.0% as a result of production growth. This was offset by a pricing decline of 0.4% due to comparatively lower year-on-year dairy markets in Europe.

Financing

Glanbia's net debt at 5 October 2019 was €815.8 million, which represents an increase of €418.0 million versus the net debt position at the end of the third quarter of 2018. This has been primarily driven by the acquisitions of SlimFast and Watson, JV investments and timing of the interim dividend payment. Glanbia expects to deliver over 80% operating cash conversion of EBITDA in 2019. Total 2019 capital expenditure is expected to be approximately €70 million to €80 million. On this basis Glanbia expects its net debt to adjusted EBITDA ratio to be under 2 times at the 2019 financial year end.

First Published 31 October 2019