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Monday 25 March 2019

Glanbia stockpiling materials in UK as it prepares for hard Brexit

Glanbia stock surged following a forecast of continued growth for the company (stock photo)
Glanbia stock surged following a forecast of continued growth for the company (stock photo)
Impact: Glanbia CEO Siobhan Talbot said Brexit had caused protracted uncertainty. Photo: Tony Gavin
John Mulligan

John Mulligan

Glanbia has contingency plans to deal with a hard Brexit next month, but said that the impact of such an exit on the group would be marginal.

The group generates about 3pc of its revenue in the UK, and also manufactures products there that are exported to mainland Europe.

"We're making sure as we work with our customers that we have some inventories in the right place so we can work through, depending on how a transition would occur," said chief financial officer Mark Garvey.

Speaking to the Irish Independent, Glanbia CEO Siobhan Talbot confirmed that the group had been positioning its UK activities to deal with a possible hard Brexit.

"We have a team that is effectively taking a co-ordinated approach across the entire group, mindful obviously of the facility that we have in the UK for performance nutrition," she said.

"We have two Glanbia cheese plants in the UK and clearly, as we all know well, it's an important route to market for Irish dairy, not least Irish cheese.

"The big issue for us, like any corporate, is the level and the protracted nature of the uncertainty," she said. "That's what makes the planning most difficult - will it be an orderly transition, or a disorderly Brexit, and neither do we know what tariffs might look like post either event.

"We are ensuring as best we can that we have raw materials in the right place, that we have finished product in the right place. That involves warehousing, we've had discussions with our customers on supply chain issues and constraints they might have."

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Ms Talbot was speaking yesterday as Glanbia reported full-year results for 2018 that beat expectations, sending its shares more than 10pc higher during the day.

It also announced a significant board reshuffle, and the $89m (€78m) acquisition of family-owned US firm Watson, a non-dairy ingredient-solutions business that generated revenue of $101m last year.

Glanbia's revenue from wholly-owned units rose 4.5pc on a constant currency basis to €2.38bn last year, and was flat on a reported basis. Earnings before interest, tax and amortisation were up 5.2pc on a constant currency basis, at €284.9m.

Revenue at its performance nutrition (GPN) division jumped 9.5pc on a constant currency basis to €1.17bn, and was up 5.2pc on a reported basis.

At its nutritionals arm, which includes cheese-making operations in the United States, revenue dipped 0.6pc on a constant currency basis to €1.2bn, and was down 4.7pc on a reported basis. Glanbia said that a chunk of that decline was a result of lower dairy markets.

North America accounted for 61pc of GPN's revenue last year, versus 65pc in 2015. Ms Talbot said that the North American share in some ways overshadows what she said was a strong performance in other markets, including India, South East Asia and Mexico.

In order to limit the impact of tariffs, she said Glanbia was also involved in planning a co-manufacturing arrangement in India. "We're well advanced on what I would call a supply-chain solution to help us mitigate some of the tariff increases that we've seen in the region," she said.

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