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Dairy woes dent Glanbia’s full year results

By Sarah Hills , 05-Mar-2009

The Irish food firm Glanbia has reported an 18.5 per cent rise in profits for the year but its performance was hit by a struggling dairy sector and it predicts tough times ahead.

The group’s profit after tax and before exceptional items was €98.7m in 2008 compared to €83.1m the previous year. Revenue increased by one per cent from €2.206.6m in 2007 to €2,232.2m in 2008. Like-for-like revenue increased 8.9 per cent.

 

John Moloney, group managing director, said that all businesses performed to or better than anticipated. However, the exception was Food Ingredients Ireland which suffered a sharp decline in profits and margins in 2008.

 

Food Ingredients Ireland processes butter, cheese, milk proteins and whey derivatives, marketing dairy products and ingredients to customers in more than 40 countries, mainly European as well as Africa and Asia.

 

But it has been a challenging year as Glanbia said that global dairy markets were volatile.

 

A Glanbia spokesperson told DairyReporter.com: “They (dairy markets) have weakened due to a number of factors including overstocking and weak demand.”

 

The decline in dairy markets led to a sharp imbalance between raw material input cost and market prices for products.

 

The spokeswoman said this meant there was a “time lag between reflecting market returns in the form of milk pricing to suppliers”.

 

As a result, while revenues remained robust, profits and margins were back significantly compared with 2007.

 

Meanwhile the outlook for Food Ingredients Ireland in 2009 is gloomy as Glanbia said: “While a realignment of raw material costs and market pricing is expected, given current conditions we expect this business to breakeven this year.

“We continue to drive efficiency and cost improvements in the business through the rationalisation programme and other initiatives.”

 

The spokeswoman said that the other initiatives refer to investments in automation and improvements in work practices. The rationalisation includes job cuts.

 

Group results

 

The group’s full year results for the year ended 3 January 2009 showed that revenue growth was positive across almost all the business, with favourable pricing, organic volume increases in Food Ingredients USA and Nutritionals and the first time contribution from the nutritional supplements company Optimum Nutrition, which the group acquired in August 2008.

 

Although positive revenue growth was offset by a decline in revenue due to the sale of the Group's Pigmeat business in March 2008 and the effect of currency translation.

 

The Nutritionals business supplies advanced technology whey proteins and fractions, flax and customised micro-nutrient, vitamin and mineral premixes. Glanbia said its position in the global premix market was strengthened in 2008 with the commissioning of a new wholly owned and operated plant in Suzhou, China.

 

Food Ingredients USA, which has two cheese plants and is also a manufacturer of whey-based nutritional ingredients, benefited from high cheese prices and strong demand during the year.

 

Moloney said that Food Ingredients USA is expected to deliver a resilient performance in 2009, albeit down compared to 2008. Consumer Foods, Nutritionals and Joint Ventures & Associates are also expected to deliver robust performances. Reducing farm incomes will have implications for farm input sales and as a result for revenue and profits in Agribusiness.

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