Monday 22 January 2018

Glanbia will look for new takeovers, Talbot says

Glanbia Group managing director Siobhán Talbot and finance director Mark Garvey at the results announcement
Glanbia Group managing director Siobhán Talbot and finance director Mark Garvey at the results announcement
Gavin McLoughlin

Gavin McLoughlin

Glanbia will look to acquire more businesses after posting a 6.9pc increase in revenue on a constant currency basis in 2014.

Group managing director Siobhán Talbot told the Irish Independent that the company was "very pleased" with its acquisition of sports nutrition companies Isopure and Nutramino last year.

"We are a nice blend of both organic development and acquisitions, so I think our stakeholders have liked the fact that our growth trajectory is coming from both sides," Ms Talbot said.

"It's hard to be prescriptive about the timing of [future acquisitions] as it's about getting all of the variables lined up."

She said any acquisitions would probably be in either the global performance nutrition or the global ingredients arms of Glanbia's business.

"Performance nutrition has been a focus for us recently, and we may well see more opportunities coming in that regard, but if there was an interesting opportunity to increase our capabilities on the global ingredients side, we would be interested."

She said the company had €250m of debt capability to use as firepower for takeovers. "Clearly for something bigger than that, if it was the right opportunity, we would believe that we would get shareholder support for equity," Ms Talbot said.

The Glanbia boss said she thinks the removal of milk quotas on April 1 will give a "very strong opportunity" to the Irish dairy industry.

Glanbia Ingredients Ireland, a joint venture between Glanbia and Glanbia Cooperative Society that exports milk products, recently finished building a €150m milk processing factory in Co Kilkenny.

"We're very ambitious for the growth of that business...we're very much investing behind that," Ms Talbot said.

"I think the fact that we've recently announced another €5m spend is a measure of our confidence, dairy volatility is going to be there and isn't going to go away, but fundamentally we think global consumers respond to the nutritious profile of dairy products, and that gives us opportunities in what will be a really good new facility.

"We'll be ultimately in a position to supply product to discerning sectors, such as infant formula."

Ms Talbot said it was hard to predict how volatile the milk market would be after the quotas are lifted.

"I think the important thing to remember in that context is that Ireland's output would grow quite dramatically and we would still be a small player on a global scale.

"So global dairy prices are going to be more responsive to things like weather events, various supply dynamics across the big milk-producing regions such as Oceania or the US.

"That's all with the assumption that underlying demand, which is largely driven by the developing world will continue."

Ms Talbot said Glanbia Ingredients Ireland is trying to limit the volatility by giving suppliers and customers three-year fixed milk price contracts.

"It gives options to our supply base and we hope to do more of that as we look forward," Ms Talbot said. Dairy Ireland, the arm of Glanbia's business that includes Avonmore products and Kilmeaden cheese, posted a 5.4pc drop in revenue in 2014, but profits rose because of an increase in margins.

Glanbia said it will look for more efficiencies to improve the division's performance.

The company's shares have reached record highs this week and were up more than 6pc yesterday afternoon.

Glanbia said next year it expects to achieve growth of 9pc to 11pc in adjusted earnings per share on constant currency basis, with growth weighted towards the second half of 2015.

Goodbody analyst Liam Igoe said the results were better than expected in terms of earnings per share, which increased 2.4pc more than forecast.

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