A "strong" performance from Glanbia's nutrition ingredients business has led the Irish food group to lift its forecast for full-year earnings.
Glanbia said it expects its adjusted earnings per share to increase 8-10% on a constant-currency basis. In May, it forecast a 5-7% rise.
The improved estimate came as Glanbia reported higher first-half sales and profits. Glanbai booked a 28.8% increase in half-year net profit to EUR85.2m (US$106.9m). Revenue was up 5.8% at EUR1.42bn.
It was Glanbia's so-called global nutritionals arm that boosted results. The nutritionals business supplies ingredients to companies from infant formula firms to sports products makers.
The company does not provide financial figures specific to that business. It instead groups the nutritionals operations with its US cheese arm.
Revenue and EBITDA from the combined business increased in the first half of the year, although revenues from the US cheese division fell and operating profit was flat.
Separately, Glanbia also announced a plan to sell a 60% stake in its Irish dairy ingredients arm in a bid to divert resources to more attractive parts of its business.
The company plans to form a joint venture with its majority shareholder, the Glanbia Co-operative Society, to run what it said is the largest dairy ingredients supplier in Ireland.
Glanbia plc
HALF YEAR RESULTS FOR SIX MONTHS ENDED 30 JUNE 2012
SOLID FIRST HALF PERFORMANCE; UPGRADING FULL YEAR OUTLOOK
STRATEGIC DAIRY PROCESSING JOINT VENTURE ANNOUNCED
SOCIETY PROPOSES REDUCTION IN PLC SHAREHOLDING TO 41.4%
29 August 2012 - Glanbia plc ('Glanbia'), the global nutritional solutions and cheese group, announces a solid half year performance for the six months ended 30 June 2012, compared with an exceptionally strong first half in 2011. The Group is also upgrading the 2012 full year outlook to 8% to 10% growth in adjusted earnings per share on a constant currency basis. Commentary in this release is on a constant currency basis.
· Strong performance in Global Nutritionals underpinned by positive demand and price growth in key nutritional market segments
· US Cheese delivered a reasonable first half performance in the context of weaker US cheese market prices
· Satisfactory performances by Dairy Ireland and International Joint Ventures in a weaker global dairy market environment
· Acquisition of Aseptic Solutions, a US beverage manufacturer and co packer, for US$60 million in July 2012
Strategic dairy processing joint venture
In another Stock Exchange release today, Glanbia announces that a non-binding Memorandum of Understanding has been signed with its majority shareholder, Glanbia Co-operative Society Limited (the "Society"), subject to contract and approvals, to enter into a 40% (Glanbia): 60% (Society) joint venture in respect of Dairy Ingredients Ireland. The Society plans to part fund its investment in the joint venture by a 3% sale of the issued share capital of Glanbia, thereby reducing its shareholding in the Group to 51.4%. The Society's Board has decided to seek the approval of its members by a simple majority for the joint venture transaction. It will also require the approval of Glanbia plc shareholders at a general meeting, excluding the Society and its associates. Subject to completion of legal contracts and receiving the necessary approvals, the transaction is expected to complete before the end of 2012.
Proposal to reduce Society plc shareholding to 41.4%
Separately, but related to this joint venture proposal, the Society has announced it is putting a proposal to relevant members to reduce its shareholding in the plc to below 51%. Subject to approval, the Society will dispose of shares equal to 3% of the issued share capital of Glanbia (in addition to the 3% disposal relating to the Joint Venture) and distribute a further 7% of Glanbia share capital to Society members. This will result in a reduction in the Society's shareholding in Glanbia from 51.4% to 41.4%. The reduction in the shareholding below 51% will require 75% approval at two special general meetings of the Society. Approval to reduce the Society shareholding to below 51% is firstly contingent on the joint venture transaction being approved.
John Moloney, Group Managing Director, said:
"The Group delivered a solid first half operating and financial performance. EBITA margin grew 40 basis points on a constant currency basis to 7.9% reflecting the focus by the Group on both innovation in higher margin nutritional products and ongoing efficiency measures. We have also been active in pursuing our growth strategy this year with a US$60 million nutritionals acquisition and significant capital development projects in Ireland, Germany and the USA. Today, we have announced the details of a joint venture with Glanbia Co-operative Society Limited, creating an exciting new business model for post quota growth in Irish dairy processing.
The overall outlook for the Group for the remainder of the year is positive and we are upgrading our guidance for 2012 to 8% to 10% growth in adjusted earnings per share on a constant currency basis. We also look forward to the successful completion of the joint venture agreement, which offers a compelling strategic proposition for both parties, before the end of the year."
