Business Irish

Saturday 24 August 2019

Glanbia shares slump 14pc as global tensions hit outlook

Glanbia’s Siobhán Talbot remains upbeat. Photo: Tony Gavin
Glanbia’s Siobhán Talbot remains upbeat. Photo: Tony Gavin
Ellie Donnelly

Ellie Donnelly

Shares in Glanbia tumbled more than 14pc at one stage yesterday after it lowered its full-year guidance.

In interim results released a week earlier than scheduled, the Kilkenny-headquartered group said it expects to report adjusted earnings per share for 2019 in the range of 88-92 cents, a decline of between 3pc-7pc on last year.

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The updated outlook is being driven by geopolitical and trade tensions, which impacted its global performance nutrition business outside of the US.

In addition, it was affected by an acceleration in consumers in northern Europe shopping online rather than through its traditional distributors.

Siobhán Talbot, managing director of Glanbia, said the performance was "disappointing".

"What we have found is trade issues such as higher tariffs and foreign exchange movements making products more expensive on shelves. Those results have come together and our revenue in those regions [Europe, the Middle East and Latin America] will be back," Ms Talbot said.

"It is a very profitable business for us because of the low levels of fixed costs, [but] our margins for the short term in those regions will be under pressure."

The problem, Ms Talbot said, would only be a 2019 issue.

"It will take into 2020 to fully rebalance. We are maintaining long-term growth ambitions of 13-15pc," she added.

In order to manage the situation, the group has raised prices to help recover its margin and will continue to evaluate potential hikes.

Glanbia is also looking at shifting manufacturing to the countries in question, and it will "actively continue to do that".

"Our focus is very much about regaining top-line momentum in these regions," Ms Talbot said. It is also investing €10m in updating its technology to improve its online sales offering.

The company said it has no plans to dispose of any assets, and is continuing to look at potential acquisitions.

"We could spend a few hundred million and be comfortably within our covenance," Ms Talbot said. "There are a number of opportunities in our pipeline; it is hard to be descriptive on when they might land."

Overall earnings before interest, tax and amortisation (ebita) fell 15pc year-on-year in constant currency to €111.4m, according to interim results.

Performance nutrition ebita declined by 30.2pc in constant currency in the six months to June 29.

However, group revenue was up 12pc year-on-year to €1.76bn. This was driven by volume growth of 1.6pc, price declines of 0.2pc and acquisitions of 10.6pc.

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