Revenues up at Glanbia, but profits dip following acquisitions
Glanbia’s total 2019 revenue was up from 2018’s €3.17bn ($3.47bn), though its 2019 profit after taxes and exceptional costs were €180.2m ($197.1m), compared to 2018’s €234m ($256m).
The company said that its 16.6% increase in total 2019 revenues was driven by a strong performance from the Glanbia Nutritionals (GN) segment, with 6.6% coming from an increase in pricing and 9.9% from the key acquisitions of SlimFast and Watson.
But the Glanbia Performance Nutrition (GPN) segment had ‘significant performance issues’ in international markets last year, particularly in the North American specialty channel. Glanbia also had higher exceptional item costs relating to GPN and Brexit mitigation costs in 2019 that did not exist in 2018.
Siobhán Talbot, group managing director at Glanbia, said, “It was disappointing that earnings were impacted by challenges in the Glanbia Performance Nutrition segment and to address these we have conducted a comprehensive business review and are taking actions to simplify our business, allowing us to concentrate on our core brands, and optimising our routes to market across channels and geographies. As a result, we expect GPN to regain branded revenue growth momentum in 2020.”
Glanbia said GPN will now be managed as North America Performance Nutrition, North America Lifestyle, International and Direct-to-Consumer businesses. New senior talent will also ‘enhance capabilities and enable growth’ in these new segments.
GPN will reshape primarily with the Optimum Nutrition brand and the Body & Fit online platform. The majority of SlimFast is within GPN’s North America Lifestyle portfolio, and the brand grew to revenue of $325m in 2019.
More efforts to bolster GPN will include dropping low-performing SKUs and exiting the majority of its US contract manufacture business during the second half of 2020 and early 2021. Glanbia will also work to optimize its global supply chain and refine its approach to innovation.
Nutritionals, cheese and trade
In GN, Glanbia has had success in vitamin and mineral blends and healthy snack ingredients, which it believes underlines the continued consumer shift towards health and wellness products. This segment saw a revenue growth of 19.9% in 2019, with volumes up 5.5% and pricing up 10.8%.
The Nutritional Solutions brand within GN posted a 23.4% increase in revenue in 2019, supported by strong performances in dairy and non-dairy premix solutions. Volumes were up 7% and prices were up 3.8%, while the Watson acquisition contributed 12.6% growth.
The US market did well in dairy-based healthy snack ingredients. Glanbia’s US Cheese division in GN produces American-style cheddar cheese for food service, and it posted an 18.5% increase in revenue for last year. The cheese market in the US was strong in the second half of 2019.
Glanbia noted obstacles from the Brexit process, saying that tariffs and trade agreements remain unclear and difficult to quantify right now. The company sought to mitigate potential risks as much as possible, but they have incurred €2.3m ($2.5m) in exceptional costs thus far.
It identified increasing competition, tariffs, currency volatility, channel shifts, economic, industry and political risks, and effects on the supply chain from the novel coronavirus as potential impacts on Glanbia’s financial performance in 2020.
“While the risk from this element of the geo-political climate appears to be reducing following positive US/China trade negotiations other uncertainties such as the nature of the UK’s future trading relationship with the EU post the Brexit transition phase is still to be determined,” Glanbia said.
But Talbot said that generally, Glanbia is financially strong and “confident that the actions being taken will position the company to generate enhanced shareholder value in a growing healthy nutrition market.”
