Irish food group Glanbia claimed this afternoon (20 April) that the “transformational” disposal of its Irish dairy ingredients, consumer products and agribusiness units will create a more focused business.
The company announced earlier today that it will sell its three Irish businesses to Glanbia Co-operative Society, its 54.6% shareholder, for an estimated EUR343m (US$463.4m).
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Glanbia said that the Society will pay cash of EUR49.7m as well as placing 102m of its shares. The sale is conditional on the disposal proceeds being at least EUR299.6m.
Speaking to investors and analysts during a conference call following the announcement, group MD John Moloney said that the deal would allow the plc to focus on its international cheese and nutritionals units.
According to Moloney, the ongoing company would also benefit from improved margins, reduced exposure to volatile commodities markets and a strengthened balance sheet.
“The strategy won’t change, but the ability to implement it at a better pace should,” he insisted.
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By GlobalDataMoving forward, the continued group anticipates achieving operating margins “north of 11%” and revenues of approximately EUR800m, Moloney revealed.
The cheese business is expected to generate 60% of revenues, while nutritionals will contribute around 40%. In terms of operating profit, this figure is likely to be reversed, with nutritionals contributing 60% of operating profits.
On a pro-forma basis, debt to EBITDA ratio is expected to drop to one times, the Irish dairy unit’s pension deficit will transfer with the disposal, while pro-forma profit on the disposal is expected to total around EUR80m.
“That financial flexibility will underpin the business strategy that we have been pursuing over recent years,” Moloney suggested.
The company intends to drive future growth by expanding the geographical footprint of its cheese and nutritionals units. Currently cheese sales primarily derive from the US, while the nutritionals business is focused on the UK. Glanbia intends to expand its presence to include markets in continental Europe, the Middle East and Africa.
The group also intends to drive market share growth by stepping up its innovation and R&D drive, Moloney revealed.
Meanwhile, margins in cheese are expected to improve as the group moves away from cheddar to focus on more value-added products.
Finally, Moloney added that the deal will allow Glanbia to seek out complementary acquisitions moving forward.
“We would expect to have an enhanced ability to acquire. In the short- to mid-term we see that being in the performance nutritionals space,” he said.
