In the first quarter, wholly-owned revenue increased 17.0%, constant currency. On a reported basis, reflecting the stronger US dollar to euro foreign exchange rate, revenue increased 20.2% when compared to the same period in 2019.
The drivers of the revenue increase, on a constant currency basis, were price growth of 9.2%, volume growth of 6.3% and the Watson acquisition representing 1.5%. Price growth reflected strong cheese markets in the period in Glanbia Nutritionals (GN) and volume growth was driven by a good performance across both GN and Glanbia Performance Nutrition (GPN).
Net debt on April 4, 2020 was €690.3m ($745.3m), a decrease of €119.5m ($129m) compared to the position at the end of the first quarter of 2019 with this improvement due to continuing strong operating cash flow.
Glanbia said it remains focused on delivering its group-wide strategic initiatives. GPN organizational changes and SKU rationalisation have been largely progressed, and the exit of contract manufacturing in North America remains on track.
However, the company said given the COVID-19 restrictions currently in place, the pace of some projects relating to group-wide initiatives and GPN route to market may alter.
The period since Glanbia gave financial guidance in late February has been marked by a rapid acceleration of the COVID-19 pandemic across the globe. A significant proportion of the global population is now in lockdown, which has impacted consumer shopping activity in a variety of ways and the company said it is difficult to model how those behaviors will evolve.
Although the group said it traded well in Q1 2020, demand became more volatile at the end of the quarter and into April particularly in GPN. It said as it is difficult to assess the impact and duration of COVID-19, it is withdrawing its 2020 full-year financial guidance issued on February 26, 2020.
As an organization, Glanbia said it is focused on navigating the current challenges and emerging strongly to capture growth opportunities that will become available. The majority of the Glanbia portfolio is exposed to health and wellness trends and in growing channels which is positive for long term growth.
Glanbia Performance Nutrition
GPN delivered revenue growth of 3.6% in the first quarter of 2020 compared to the prior year. This was driven by volume growth of 4.1% offset by a price decline of 0.5%. Like for like branded revenue growth was 6.0%, driven by volume growth of 6.8% offset by price decline of 0.8%.
Volume growth was driven by growth in the North American Performance Nutrition and Lifestyle portfolios while the price decline was driven by increased promotional spend in international markets and the direct-to-consumer business.
North America Performance Nutrition
The North America Performance Nutrition portfolio accounted for 39% of total global GPN sales in 2019 and encompasses the Optimum Nutrition (ON), BSN and Isopure brands. Overall sales momentum slowed at the end of the quarter. However, consumption in measured channels for the ON brand was resilient in the quarter with consumption of BSN and Isopure more adversely impacted by Covid-19 as they are more specialty and distributor based brands.
GPN’s strategy of developing in the online channel has helped mitigate challenges in other channels related to the current consumer environment, the company said. ON has developed and deployed digital content in the period, which helps consumers adapt their training and nutrition plans where they have to spend extended periods at home.
International markets accounted for 26% of 2019 total global GPN sales and are split evenly between European markets and the rest of the world. The quarter started well across international markets, but in March performance was impacted by Covid-19 disruption, as restrictions affected all markets where the route to market relies on third party distributors and the retail base is fragmented.
GN delivered revenue growth in the first quarter of 2020 versus prior year. Revenue increased by 24% versus prior year, driven by a price increase of 14.2%, a volume increase of 7.5%, and the Watson acquisition, completed in February 2019, delivering 2.3%.
Nutritional Solutions (NS)
NS provides customized nutrient premixes, advanced-technology protein solutions, functional beverages and flavors. NS revenue increased by 14.2% in the period, driven by volume growth of 7.6%, a price decline of 0.7% and the Watson acquisition delivering 7.3%.
All NS operations and supply chains continue to operate to plan. Volume growth in Q1 2020 was driven by a strong performance in vitamin and mineral premix and value-added dairy solutions. The price decline in Q1 primarily related to dairy market dynamics.
Demand in Q1 was underpinned by the depth of the portfolio within NS which reaches across multiple sectors many of which continue to grow despite the current Covid-19 restrictions.
US Cheese is a leading producer and marketer of American-style cheddar cheese in the US supplying brand owners and private label companies who in turn supply major retail and food service operators. US Cheese operates all of the dairy processing plants within GN and the Southwest Cheese JV plant, which produces cheese and whey ingredients.
All US Cheese operations and supply chains continue to operate to plan. US Cheese revenue increased by 28.6% in the period. This was driven by volume growth of 7.4% as increased demand from retail destinations compensated for lower demand from food service channels. Pricing increased by 21.2% as a result of stronger cheese pricing in the period versus prior year, a trend that has now reversed materially since the end of the quarter.
Glanbia share of Joint Ventures revenue grew by 10.0% in Q1 2020 versus prior year. This was driven by volume growth of 1.7% and price growth of 8.3%. Volume growth was primarily driven by Southwest Cheese, which more than offset a decline at Glanbia Ireland. Price growth was also primarily driven by Southwest Cheese, which was offset by a decline in Glanbia Cheese UK.
Construction of the group’s new joint venture project in Michigan, US, continues as planned, but construction of the new JV project in Portlaoise, Ireland, has paused due to Covid-19 restrictions in place currently in Ireland, which may delay the completion of this project.