Glanbia Nutritionals publishes financials and acquires Canadian-based Foodarom

Glanbia has also published its financial statements for the six-month period ended July 4, 2020.

Foodarom has a flavor library of more than 15,000 recipes and produces liquid and powder products for a variety of applications.

Foodarom was founded in 2006 as a private company by Pierre Miclette (CEO) and John Murphy (COO) and two shareholder investors. It is headquartered in Montréal, with additional production facilities in Salt Lake City, US and Bremen, Germany and with culinary laboratories in San Diego, US and Milan, Italy. The business employs 130 people.

Glanbia said Foodarom is complementary to Glanbia Nutritionals’ solutions-based customer approach and focus areas, strengthening its capability in flavors and nutritional solutions.

“We recently shared our ambition to scale the flavors area of our business and we are very pleased to announce this acquisition of Foodarom,”​ said Brian Phelan, CEO of Glanbia Nutritionals.

“We are excited to welcome their 130–strong team to Glanbia with their exceptional reputation and commitment to flavor excellence. I am delighted with the significant additional capabilities we will be able to offer the customers of both organizations by joining our great teams together.”​

Glanbia HY 2020 results

In the first half of 2020, Glanbia wholly-owned revenue was €1.837m ($2.172bn), an increase of 2.3% constant currency (up 4.5% reported). This was driven by growth in GN which more than offset declines in GPN.

Wholly-owned EBITA pre-exceptional was €85m ($100.5m), down 25.4% constant currency (down 23.7% reported). Wholly-owned EBITA margins from operations were 4.6%, down 170 basis points on a constant currency and reported basis. The decline in wholly-owned EBITA and margin arose from the impact of Covid-19 on the second quarter performance of GPN where lower revenue drove significant negative operating leverage for the period.

Glanbia’s pre-exceptional share of equity accounted investees (joint ventures) profit after tax increased by €5m ($5.9m) to €31.8m ($37.6m) for the first half of 2020, with all joint ventures growing profit in the period.

Total group profit (pre-exceptional items) for the period was €69.9m ($82.7m), down €16.9m ($20m) on the previous half year.

Glanbia’s total investment in capital expenditure (tangible and intangible assets) was €29.2m ($34.5m) in the first half of 2020, of which, €20.2m ($23.9m) was strategic investment. While Glanbia said its capital investment program was managed tightly in response to Covid-19, investment continued in key strategic projects including investment in the Body & Fit direct-to-consumer ecommerce platform in GPN and value-added ingredients filling technology in GN. Total capital expenditure for the year is expected to be €65m ($76.9m) to €75m ($88.7m).

Consistent with Glanbia’s target annual dividend payout ratio of between 25% and 35% of adjusted earnings per share and as a result of the strong cash performance in the period, the board is recommending an interim dividend of 10.68 cent per share ($0.126), the same as the previous year. The payment represents a payout ratio of 34.4% on half year 2020 earnings. Glanbia’s dividend payout ratio policy remains unchanged. The dividend will be paid on October 2, 2020 to shareholders on the register of members as at August 21, 2020. Irish withholding tax will be deducted at the standard rate where appropriate.

Glanbia said its financial priority from the onset of the coronavirus pandemic was its financial strength. Net debt at July 4, 2020 was €650.9m ($769.7m), a decrease of €126.7m ($149.8m) compared to the net debt position at the end of HY 2019. This represents a net debt to adjusted EBITDA ratio of 1.95 times. The company said it has not taken any government financial support related to the Covid-19 pandemic.

Glanbia Performance Nutrition (GPN) suffered the main impact from Covid-19. Many international markets were severely disrupted by lockdowns as routes to market in many countries were essentially closed.

The impact of lockdowns, particularly outside the US, led to material negative operating leverage in the second quarter as sales declined significantly. As the period ended and into July 2020 ordering patterns for GPN brands improved in North America and international markets began to reopen. Recovery is expected in H2 with its pace influenced by the evolution of Covid-19.

Glanbia said prior to the pandemic, GPN had started a transformation project focused on core brands, route-to-market and business reorganisation to support its growth agenda. This project is on plan and key initiatives across these pillars are either delivered or in the execution phase. The project will deliver margin improvements through H2 2020. The trends, such as health and wellness and ecommerce have accelerated due to Covid-19 and as a result Glanbia has broadened the reach of this project to drive further opportunities across all aspects of the business.

Siobhán Talbot, group managing director, said, “In the first six months of 2020, wholly-owned revenues grew by 2.3%, on a constant currency basis. Glanbia Nutritionals delivered a good performance with earnings in line with prior year as key end market demand sustained throughout H1 2020. ​

“Joint Ventures delivered a robust performance growing profits in the period. Glanbia Performance Nutrition (“GPN”) was impacted by Covid-19, with International market disruption and challenges in the North American specialty and distributor channels. As a result, adjusted earnings per share declined in the period by 17.2% on a constant currency basis. The issues encountered by GPN were most pronounced in Q2 with performance improving as the period ended.” ​

Talbot said consumers’ increasing focus on health and wellbeing, as well as greater importance on trust and quality, positions Glanbia well for the future.

“While navigating Covid-19 we have maintained a strategic focus across the Group; we have broadened the ambition within the transformation project in GPN and we have continued to scale our capabilities in GN as demonstrated by the acquisition of Foodarom. We continue to selectively pursue opportunities which meet our strategic and financial criteria. While the short-term outlook remains uncertain, the board is confident that Glanbia has the portfolio, the consumer insight and the operational expertise to succeed in this new environment.”​

Glanbia withdrew its 2020 full year financial guidance on April 22, 2020 due to the uncertainty of duration and impact of the Covid-19 pandemic. Those conditions are still in place and therefore 2020 full year financial guidance remains withdrawn.