Glanbia sees profits dip

Glanbia sees profits dip

Irish food group Glanbia said today (10 March) that it is in talks to sell its Irish dairy ingredients, consumer products and agribusiness units.

The company, which posted a 19% drop in pre-tax profits for fiscal 2009, said that its majority shareholder the Glanbia Cooperative Society – which holds 54.6% of shares – is in talks to buy its Irish businesses.

The move would leave Glanbia to focus on its US and international cheese and nutritionals businesses, while the Glanbia Cooperative's farmer shareholders would take full ownership of the units that relate most directly to them.

Glanbia said discussions were progressing well, although any final decision would require shareholder approval.

“The discussions are underpinned by a clear strategic rationale and represent a unique opportunity to transform Glanbia,” the company said.

In its earnings update this morning, Glambia said that the recession and resultant “extreme volatility” in global dairy markets in the first half of the year hit the company's sales and profits.

Glambia revealed that pre-tax profits fell to EUR97.4m (US$132.6m) for the 12 months to 2009, from EUR120.3m last year. Revenues declined by 18% to EUR1.83bn.

“We contained the decline in our financial results with a strong performance by global nutritionals, a resilient performance by US cheese and the benefits of strategic cost reductions. This cost competitiveness focus will continue into 2010,” CEO John Moloney said.

Revenues at Glanbia's Dairy Ireland operations fell by 23.3% to EUR1.02bn and operating profits slumped by 51.7% to EUR24m. The division is made up of three business units - dairy ingredients, consumer products and agribusiness.

While Glanbia emphasised that there is "no guarantee" that the disposal will be concluded, the news has been welcomed by analysts who have suggested that the sale would also increase financial flexibility and enhance the company's growth strategy.

"We expect that the market will view these as a strong set of results and anticipate a positive share price performance, driven by the positives attributable to the disposal of the Irish dairy business," Goodbody Stockbrokers analyst Liam Igoe wrote in a research note.

He added that the full-year results were "in-line" with expectations, with adjusted EPS of 30.7 cents compared with the company's 31 cent per share forecast.