Glanbia explains strong results

By Jim Cornall contact

- Last updated on GMT

Expansion at Southwest Cheese in New Mexico, one of Glanbia's joint ventures, will increase milk processing capacity by up to 30%.
Expansion at Southwest Cheese in New Mexico, one of Glanbia's joint ventures, will increase milk processing capacity by up to 30%.

Related tags: Glanbia, Milk

Glanbia released its financial results recently, as well as plans to expand its cheese factory in Wexford. DairyReporter took the opportunity to go a little deeper behind those financial results with the company.

Glanbia recorded double-digit growth for the sixth consecutive year, with earnings before interest, depreciation, tax and amortization (EBITDA) up 10.5% to $298m (€214m) for the 52 weeks to January 2 2016.

The strong results were, in part, driven by Glanbia’s performance nutrition business, which showed an increase of 52% over 2014 for EBITDA. Dairy Ireland’s revenues were up 2.7%.

US cheese revenues decreased in 2015, which Glanbia said was due to market related pricing declines. On average, cheese pricing in the US was down 25% year on year.

GI division restructuring

Global Ingredients (GI) EBITDA decreased 11.6%, blamed on tough trading conditions in the dairy market. The company said that over the next 12 months, the GI business structure will be reorganized into a single commercial team focused on its nutritional ingredient portfolio. This will be supported by centres of excellence across areas such as product supply, innovation and strategy. The total cost of this project will be approximately $16.5m-$22m (€15-20m).

DairyReporter: ​How has Glanbia managed to succeed with its dairy division where other companies have had more of a struggle?

Glanbia:Despite a difficult year for dairy markets, Dairy Ireland delivered a good margin recovery in 2015, driven primarily by Consumer Products, which saw increases in added value milk and cream sales.

Global Ingredients also delivered a resilient result despite difficult market conditions. These results are testament to the resilience of the Glanbia model. Within our Joint Ventures, Glanbia Ingredients Ireland’s performance in 2015 was slightly ahead on the prior year.

A challenging dairy market environment reduced margins in the business and this was offset by higher volumes and cost reduction. GII milk suppliers responded to the abolition of EU milk quotas in April 2015 with an increase in production in 2015 by 18.1% versus the prior year.

While there are challenges ahead in 2016 in terms of international dairy markets, with Glanbia’s broad portfolio and global footprint, we are well placed to take advantage of the long term trends that shape the global environment for food and nutrition.

DR:​ How will Glanbia respond in 2016 to what seems to be continued higher milk production?

Glanbia:It has certainly been a challenging year with the combination of increased supply and decreased demand in certain economies. Looking ahead, we believe that the medium terms prospects are good, based on sound market fundamentals and positive demand outlook. We can’t be any more prescriptive at this point.

DR:​ The US cheese market shows a decrease in revenue for Glanbia, how is that being addressed?

Glanbia:US cheese revenues decreased in 2015 due to market related pricing declines. The outlook for 2016 is impacted by global dairy markets, which we expect to remain challenging throughout the year. We are focused on innovation and quality in our cheese business, which will help performance in the medium term.

DR:​ Connected to this, what will be necessary for the GIobal Ingredients decrease in revenues to be turned around?

Glanbia​: In 2016, our Global Ingredients business will benefit from improved product mix following capital investment in 2015 and continued development of higher-value nutritional systems business with customers. Our investment focus on high end, value added whey will help mitigate Global Ingredient’s exposure to dairy price volatility.

We also benefit from lower input costs, higher cheese volumes and better capacity utilization for our cheese plants. Our supply chain investment will also deliver on-going benefits.

DR:​ Into the future, what will the positive impacts be of the new plants in Kilkenny, Ireland, expansions at Wexford, Ireland, and in New Mexico, US?

Glanbia:The new dairy nutrition plant in Belview, Co. Kilkenny, Ireland is designed to produce a range of value-added ingredients.  This plant processed over 300m liters of milk in 2015 and has additional available capacity to support the growth ambitions of the business and its supply base.

The facility allows for the manufacture of specialised milk powder products and nutritional ingredients to meet the demands of global customers.

The expansion at our Wexford facility will double peak milk processing capacity at the plant. This investment will also enable further growth in our highly popular Wexford Cheese brand, which is being marketed in Ireland, the UK, the US and, most recently, the Middle East.

The expansion with our Joint Venture partners of the cheese and whey production plant in Southwest Cheese at Clovis, New Mexico, will increase milk processing capacity by almost 30% when complete.

The joint venture between Glanbia and the dairy cooperatives of the Greater Southwest Agency, including Dairy Farmers of America and Select Milk Producers, currently processes over 220 truckloads of milk per day, making it one of the largest single site manufacturers of premium quality cheese and whey protein in the world. The plant will supply some of the world’s leading food companies and meet cheese and whey demand both domestically and internationally. 

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DR:​ How will the GI reorganization take place, and what are the ‘centres of excellence’?

Glanbia:The reorganisation of Global Ingredients is progressing according to plan and we are on track to deliver the new structure of one commercial team focused on GI’s nutritional ingredient portfolio. We will be in a position to announce more details on the reorganization later in the year.

DR:​ Clearly, Glanbia Performance Nutrition (GPN) is doing very well, how was this achieved?

GPN delivered a strong performance in 2015. The improvement in margins was driven by operating leverage, improved branded product mix and raw material price deflation.

Branded revenue growth, excluding the impact of acquisitions, was 5.6% in 2015. The business remains focused on branded revenue growth and GPN saw renewed momentum in the US.

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