Richard Curran: 'Has Glanbia bitten off more than it can chew with CEO pay rise?'
The 6pc fall in Glanbia's share price during the week coincided with news that more than a fifth of shareholders had voted against the new remuneration package for chief executive Siobhan Talbot and finance director Mark Garvey.
Talbot is in line for a 22pc pay rise under a three-year multimillion euro remuneration package. Tempting and all as it is to link the share price fall with the vote against the pay hike, things don't really work that way in the market.
Glanbia said after its annual general meeting that it "noted" the vote against the remuneration package but I'll bet it more than just "noted" the share price fall which was more likely triggered by market disappointment at the trading update issued.
The Kilkenny-based group has built up a solid US business with global potential in sports nutrition. It has mopped up a series of acquisitions at chunky prices which have delivered stellar growth as more health-conscious Americans buy protein bars and drink nutritional shakes.
But the first quarter trading update showed that without its latest acquisitions, mainly Slimfast, its performance nutritional division declined by 16.5pc. When Slimfast is included, the division showed constant currency revenues up 4.9pc. This was made up of a 3.4pc fall in pricing and a 16.5pc fall in volumes but a 24.8pc increase from Slimfast.
Glanbia has got in early to a growing market segment and has very strong positions in an exciting sector. The problem is that its so good, everybody wants a piece of it.
Tougher competition, price discounting and the need to constantly innovate and offer new products can take its toll. Glanbia spent $217m buying Think Thin, a US protein bar maker in 2015. In 2017 it bought Amazing Grass, a US firm that makes powder based nutrition products, and Body & Fit, an online seller of performance nutrition goods for €181m.
Its big high-profile deal last year was the €350m acquisition of Slimfast. Glanbia has continued to do well in a very competitive consumer market and Slimfast looks like being very successful for it.
But the update raises questions about the growth trajectory of some of the other products. Think Thin is being rebranded as just Think.
Glanbia attributed some of the volume declines outside of Slimfast to supply chain configurations in non-US markets.
The company reiterated its guidance of a 5-8pc growth in adjusted EPS for this year on a constant currency basis. It believes growth is coming in the second half. And Glanbia's nutritionals division more than offset any slowdown elsewhere.
In the meantime, the remuneration publicity will be an unwelcome distraction. Some share advisory firms who opposed the remuneration package said it had been benchmarked against the market median in Europe and US.
Glanbia claimed that one of these firms, ISS, looked primarily at comparable salaries among client companies in Ireland and Europe. Glanbia itself looked at salaries in Ireland and US in determining pay because 80pc of its earnings are in US dollars.
All very well, but remuneration benchmarking is about what a person could earn doing a similar job elsewhere, partially to ensure they are not poached. Having earnings in dollars doesn't really impact the likelihood or not of losing your top executives to US companies.
New Central Bank governor will need more than gravitas
What does the Central Bank of Ireland need most in its successor to Philip Lane? The regulator has become a huge organisation with nearly 2,000 staff. Traditionally the role of Central Bank governor was filled from within or from elsewhere in the public service.
The last two governors, Patrick Honohan and Philip Lane were from academic economic backgrounds, which seemed fitting at a time when the country was cleaning up its banking and regulatory mess.
Big picture stuff was needed along large doses of credibility.
Surely now though, it needs someone with plenty of management experience. An organisation with that many staff will have multiple managerial challenges, as well as needing a big picture view on the economy and the housing market.
Names believed to be in the race for the job include the most senior member of staff at the European Central Bank, John Fell, and the deputy secretary general of the Department of Health, Colm O'Reardon.
Another person seen as a strong contender is Andrew McDowell, vice-president of the European Investment Bank and a former adviser to Enda Kenny. Also in there is likely to be Sharon Donnery, current Central Bank deputy governor and Robert Watt, secretary general of the Department of Public Expenditure and Reform.
There is a long tradition of having the big economic brain running things at many Central Banks, from Mario Draghi at the ECB to Alan Greenspan at the Fed, who had been an economic consultant and presidential adviser.
But even Draghi was a managing director at Goldman Sachs International, and Mark Carney, head of the Bank of England, spent over a decade at Goldman Sachs. Current Federal Reserve chairman Jerome Powell is a former lawyer and investment banker.
Whoever gets the job, they need to have credibility around the ECB table or at meetings of the Bank of International Settlements, but they have little power at either. The day job is really managing a 2,000-strong organisation that needs eyes in the back of its head.
Irish whiskeys in US are taking off like rocket fuel
Irish whiskey may be enjoyed by connoisseurs all over the world but it is quickly becoming financial rocket fuel. Industry reports suggest that Irish whiskey sales rose by another 12pc last year to top the $1bn mark in the US.
Figures from the Distilled Spirits Council say that nearly 4.7m nine-litre cases of it were sold in the US last year generating $1bn in revenues for distillers.
But the rapid growth in the Irish whiskey sector leaves things a little more complicated than that. Not everybody is selling their own whiskey. As more distilleries open up, often with big international backing, the whiskey has to be distilled in Ireland but also aged for a minimum of three years. So different sellers, including some American-based companies are buying somebody else's whiskey.
John Teeling has built up a large distilling operation in Dundalk, the Great Northern Distillery, without selling any of his own branded whiskey. It is purely a distiller which sells on to "whiskey companies".
Accounts for Teeling's Dundalk operation show that in the year to April 2018 it had a turnover of €13.6m. It generated an operating profit on that of €5.6m. In fact the distiller has generated pre-tax profits totalling €10m in the last two years with just 26 staff.
Just over €5.2m of the company's whiskey sales went to Teeling Whiskey Co which is run by John Teeling's sons Jack and Stephen. They are also directors and shareholders in the Dundalk distillery.
Elsewhere, Conor McGregor appears to be making solid inroads with his Proper Twelve whiskey brand. According to industry figures it has sold around 200,000 cases since it began.
Retails prices differ in markets and the total figures for the US market include premium products as well as cheaper varieties. Proper Twelve is a three-year old blended product which is sourced through Bushmills.
But if 4.7m cases of Irish whiskey in the US generated €1bn in sales, then 200,000 cases would generate close to $40m.
McGregor may have got a little lucky with the brand name because "Twelve" on a bottle conjures up images of a 12-year old single malt. It's a common age to have on a premium whiskey.
McGregor simply chose it because it refers to Dublin 12, the post code for Crumlin where he is from. Lucky or what?
Sunday Indo Business