Monday 20 January 2020

Sterling slide will not be a game changer in Glanbia's acquisition strategy says Talbot

Siobhán Talbot, group managing director, and Mark Garvey, group finance director, at Glanbia's announcement of first-half results. Photo: Naoise Culhane
Siobhán Talbot, group managing director, and Mark Garvey, group finance director, at Glanbia's announcement of first-half results. Photo: Naoise Culhane
John Mulligan

John Mulligan

The slump in sterling since June's Brexit vote doesn't make the UK any more attractive for Glanbia's potential acquisition activity, according to group managing director Siobhán Talbot.

The pound has sunk about 12pc against the euro and nearly 15pc against the dollar since the day after the Brexit vote. That has bolstered interest in acquisition activity in the UK by foreign buyers.

Glanbia is active in the UK primarily through joint ventures and associates. The UK accounted for less than 10pc of its €3.6bn revenue last year.

Glanbia Cheese, which is a joint venture between Glanbia and US firm Leprino Foods, processes about 20pc of all milk produced in Wales.

"It would depend on the opportunity," Ms Talbot told the Irish Independent as Glanbia released first-half results yesterday.

"The UK isn't a major market for us. What Brexit has done for all corporates is dial up uncertainty that we never welcome," she added.

"The currency has moved, but I think it would be more on the edges of whether that makes what may already have been an attractive asset more attractive, rather than currency just driving a decision in itself."

Glanbia has committed debt facilities of about €1bn.

Its net debt rose from €577m at the end of June last year to €644m at the end of this year's first half. But its debt to EBITDA ratio fell to 1.83 times, from 1.97 times.

"We're interested (in acquisitions) across the group," said Ms Talbot.

"In recent times a lot of the opportunities have been in performance nutrition. But as an ingredients player, where our capabilities span both dairy and non-dairy, any interesting assets in that space, we're also interested in," she added.

Glanbia paid $217m last year to buy US energy bar business ThinkThin.

Ms Talbot said the group could make €300m of acquisitions and still remain within comfortable debt ratios.

"We believe that if the right opportunity came our way our shareholders would be supportive of something beyond our debt capabilities," she said.

Glanbia's group revenue slipped 2.1pc to €1.83bn in the first half, while group earnings before interest, tax and amortisation (EBITA) increased by 11.2pc to €176.5m.

At its wholly-owned operations, revenue edged 0.2pc higher to €1.43bn, and EBITA was up 13.6pc at €157.4m.

It confirmed that adjusted earnings per share are set to rise by between 8pc and 10pc this year, driven by its Performance Nutrition division.

Glanbia said its associates and joint ventures suffered due to a challenging dairy market.

In its Irish dairy division, revenue fell 3.3pc to €357m and EBITA rose 1.1pc to €17.7m.

Ms Talbot said that she remains "cautiously optimistic" on milk prices, but that price volatility will always be part of the dairy landscape.

"The sentiment is turning," she said. "I think that people are probably more optimistic now about price rises.

"We wouldn't see anything too dramatic for the rest of 2016, but we're cautiously optimistic as we look into 2017."

Shares in Glanbia were trading over 2.2pc higher by lunchtime yesterday.

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