Glanbia Foods today (6 September) posted a 5% decline in operating profit due to increased costs and difficult market conditions.
The international dairy foods and nutritional ingredients group saw revenue for the first half of 2006 drop marginally to EUR922.8m (US$1.18bn), down from EUR926.1m reported for the first half of the previous year. Operating profit before exceptionals declined 5% from EUR38.3m in H12005 to EUR36.4m in H12006. Margins fell to 3.9% for the period, down 20BPS from 4.1% the preceding year.
The company increased earnings per share by 19%, from 7.66 cents to 9.12 cents. The interim dividend per share increased by 5% from 2.27 cents to 2.38 cents.
The company said that operating costs remained an ongoing concern, although Glanbia said rationalisation initiatives had supported an inproved performance in Ireland. In the US, improved cheese markets and volume growth facilitated the delivery of a positive result.
John Moloney, MD, said: “Undoubtedly these are challenging times for Irish Food Ingredients given the magnitude and timing of the impact of EU Mid Term Review (MTR) on dairy markets. However, all other aspects of the group performed satisfactorily including a strong performance from the newly formed property business unit. In what was a tough first half, the group accomplished a performance similar to the first half of 2005.”
The company said that it expects to meet market guidance for the full year and anticipates achieving double digit growth in 2007.
In a separate statement, Glanbia said that it is in the process of acquiring a California-based nutritional business, Seltzer Companies, for US$105m.
Glanbia has agreed to pay $80m in cash and a further $25m depending on specific performance targets. The business is being acquired on a debt free basis and the purchase will be funded through Glanbia’s existing credit facilities.
In 2005, Seltzer generated revenue of $52.6m, pretax profit of $6.4m and had gross assets of $17m.
Of the acquisition, Moloney commented: “Consumers world-wide are increasingly aware of the link between diet and health and as a result key sectors within the global nutritional market, such as functional foods and nutritional supplements, are growing very strongly.
“The acquisition of Seltzer Companies, combined with our existing Nutritionals business, extends Glanbia’s platform to develop a global Nutritionals business and will be earnings enhancing in 2007. It also advances the international development of the group into key global growth markets.”
On the back of the news, Glanbia shares were up 4.58% at time of press, rising to EUR2.51 from an open of EUR2.38.