Glanbia sticks to profit target despite one-off charge

The weakness of the Irish economy has put pressure on Glanbia’s consumer business, which produces dairy staples like yoghurt and butter for the Irish market.

In its fist half trading statement, the company said weak consumer sentiment and high input costs have led it to continue cost cutting work at the business. This shows up in the half year results as an exceptional change of about €8m.

Another area of some weakness for Glanbia has been US cheese, which supplies food processors. Sales volumes from the business unit are expected to be somewhat lower than in the first half of 2010.

Liam Igoe, an analyst at Goodbody Stockbrokers, explained that the price that Glanbia pays farmers is based on a basket of dairy goods and because cheese prices have been lagging other products, the analyst said the business unit has been squeezed.

Igoe said things should pick for US cheese as the current situation is unlikely to continue for long. The price of one commodity can fall out of line for a while but normally moves with the overall basket.

Good start to 2011 ​

Despite these areas of weakness, the group as a whole enjoyed a good start to 2011.

Igoe said: “Things have been going well for Glanbia. The strong international dairy market has benefited the commodities business and the nutrition business shows strong momentum with double digit organic growth, which is pretty good by any standards.”​

Glanbia has stuck with its full year earnings per share forecast of 11-13 per cent growth, on a constant currency basis. Its full half year results will be published on 24 August.