Glanbia issues 2021 results
In FY 2021 Glanbia wholly-owned revenue was €4.197bn ($4.66bn), an increase of 13.1% constant currency (up 9.8% reported). This was driven by growth in volume of 16.1% offset by a decline in price of 4.0% and acquisitions adding 1.0%. Both GPN (Glanbia Performance Nutrition) and GN NS (Glanbia Nutritionals, Nutritional Solutions) delivered double-digit volume growth and strong price improvement versus prior year. US Cheese price declines reflected market price reductions compared with FY 2020.
Wholly-owned EBITA pre-exceptional was €270.6m ($300m), up 34.0% constant currency (up 29.1% reported), driven by strong volume growth and margin improvement in GPN. Wholly-owned EBITA margins were 6.4%, up 100 basis points constant currency and 90 basis points reported due to margin improvements in GPN.
Glanbia’s pre-exceptional share of joint venture profit after tax for continuing operations decreased by €18.5m ($20.5m) to €19.2m ($21.3m) for FY 2021, as a result of strong prior year comparatives as well as commissioning costs for new joint venture plants.
Profit after tax for the year was €167.4m ($185.6m) compared to €143.8m ($159.4m) in 2020.
Adjusted EPS increased by 22.1% constant currency (18.1% reported) in the year, driven primarily by the increased profitability in both GPN and GN NS, offset by the expected reduced share of profits of joint ventures.
Basic earnings per share was 57.57 cent (2020: 48.72 cent).
Glanbia’s total investment in capital expenditure (tangible and intangible assets) was €77.5m ($85.9m) in FY21, of which €61.6m ($68.3m) was strategic investment. The strategic capital investment program included investment in the consolidation of GPN manufacturing sites in Chicago under the GPN transformation program, which enables more cost effective production. Total capital expenditure for 2022 is expected to be €75m to €85m ($83.1m to $94.2m).
The Board is recommending a final dividend of 17.53 cent per share which brings the total dividend for the year to 29.28 cent per share, a 10.0% increase on prior year. This total dividend represents a payout of 33.6% of 2021 adjusted EPS which is within the board’s target dividend payout ratio of 25% to 35%.
In line with its strategy of simplifying the business behind its growth platforms, Glanbia agreed the disposal of the 40% interest in the Glanbia Ireland DAC joint venture to Glanbia Co-operative Society Limited for €307m ($340.3m). Glanbia’s growth strategy is now exclusively focused on meeting the increasing consumer trend for better nutrition by driving growth in its key areas of nutrition expertise, which spans innovative ingredient solutions and leading performance and lifestyle nutrition brands.
The company said its GPN and GN NS divisions’ growth platforms are Glanbia’s first priority for investment and capital allocation, their growth and development will be driven by a combination of both organic growth and acquisitions. The group’s cheese and dairy ingredients activities, both wholly-owned and joint ventured, provide reliable returns and a robust source of ingredients supply.
During 2022, Glanbia anticipates the effects of Covid-19 will further abate, however the ongoing impact of cost inflation, especially dairy-related, will need to continue to be actively managed as it was in 2021. Given this context, Glanbia said it has started 2022 with good revenue growth in both GPN and GN NS and expects both businesses to deliver high single-digit percentage revenue growth for 2022, largely driven by pricing.
Based on the current market environment and expectations for the remainder of the year, Glanbia expects to deliver growth in FY 2022 adjusted EPS for continuing operations in a range of 2% to 8% on a constant currency basis. The reported growth rate is expected to be higher than the constant currency result by approximately 5% based on current foreign exchange rates.
FY 2021 GPN EBITA increased by 65.5% versus prior year to €145.1m ($160.8m). This was driven by the strong revenue growth and improved margin.
In 2022, Glanbia now expects GPN revenue to grow by a high single-digit percentage and FY EBITA to be broadly flat on FY21 with the margin declining by c.100 basis points versus prior year.
The impact of inflation in GPN is expected to be material with year-on-year cost of goods sold (COGS) inflation of approximately 20% with dairy input costs accounting for nearly 70% of that total. GPN has secured supply and fixed pricing for 90% of its expected dairy input requirements for 2022, which provides good visibility as well as protection against any further dairy price increases. Over FY 2022, inflation is currently estimated to result in an EBITA margin headwind (after pricing action) of c.300 basis points.
GN recorded a strong performance in FY 2021 with revenues up 11.4% on prior year (reported 7.8 %). This was driven by volume increases of 18.1%, offset by a pricing decline of 7.7% and acquisitions adding 1.0% growth. Volume increase was driven by strong demand for ingredient solutions in the GN NS portfolio and by the cheese and whey plant in the Michigan, US joint venture, which was commissioned in the first half of the year. Price decline was driven by US Cheese due to lower average market prices in the period versus a strong prior year comparator. GN EBITA increased in FY 2021 by 9.8% as a result of strong revenue growth which offset a margin decline of 10 basis points.
GN NS revenues increased in FY 2021 by 20.8% versus prior year (reported 17.5 %). This was driven by a 13.6% increase in volume, a 3.7% increase in price and the Foodarom and PacMoore acquisitions delivering 3.5% growth.
Consumer trends related to immunity, functional nutrition and healthy snacking have been a powerful driver of the business.
GN NS EBITA in FY 2021 was €101.1m ($112.1m), 15.7% higher than the previous year. Margins declined by 50 basis points versus prior year to 11.5% driven by increased input costs in the period.
In 2022, GN NS expects to deliver good year-on-year EBITA growth driven by high single-digit revenue growth and stable margins. Despite material inflationary headwinds GN NS expects to deliver 2022 margins in line with the prior year as a range of mitigating actions to counter inflation are progressing including pricing action, procurement, efficiency and other cost saving initiatives.
US Cheese revenue increased by 7.7% in FY 2021 (reported 4.0%). This was driven by a 19.8% increase in volume offset by a 12.1% decrease in price. Volume growth reflected good demand from customers and the addition of new US joint venture capacity, which was fully commissioned in the first half of the year. Market pricing was volatile throughout the year and averaged at lower levels than in FY 2020 due to the strong prior year comparatives.
US Cheese EBITA was €24.4m ($27.1m) in FY 2021, a decrease of €3.5m ($3.9m) on FY20. This was driven by reduced EBITA margin which declined by 20 basis points as a result of higher operating costs in the year and the negative mix effect of an increased proportion of revenues from joint ventures.
FY 2022 performance for GN US Cheese is expected to be broadly in line with 2021.
Glanbia’s principal joint ventures (continuing operations) include MWC-Southwest Holdings, Glanbia Cheese UK and Glanbia Cheese EU. The group’s share of joint ventures’ profit after tax pre-exceptionals for continuing operations decreased by €18.5m ($20.5m) to €19.2m ($54.5m) in FY 2021.
For FY 2022 the performance of continuing JVs is expected to reduce versus the prior year largely due to expected start-up costs in the commissioning of the new European JV plant.
Siobhán Talbot, group managing director, said, “I am pleased to announce that Glanbia delivered a strong performance in 2021 compared to the prior year as good revenue growth delivered an increase of 23.9% in adjusted EPS, constant currency, for continuing operations. This was well ahead of our expectations at the beginning of 2021 and was driven by strong global consumer demand in Glanbia’s areas of nutrition expertise across ingredient solutions and our portfolio of nutrition brands. Our robust and effective operational execution delivered an excellent cash performance with 100.2% cash conversion in the year.
“Our clear strategic focus for 2022 and beyond is to drive growth across both GPN and GN NS as the nutrition partner of choice to our customers and consumers. During 2022, we anticipate the effects of Covid-19 will further abate, however the ongoing impact of cost inflation, especially dairy-related, will need to continue to be actively managed as it was in 2021. Based on today’s market environment and current expectations for the remainder of the year, we expect adjusted EPS growth for continuing operations of 2% to 8%, constant currency for FY 2022, with growth primarily driven by GN NS. Based on current foreign exchange rates, we expect the reported growth rate to be 5% higher than the constant currency result.”
