August 24, 2011 / 6:11 AM / 6 years ago

UPDATE 3-Dairy prices boost Glanbia's FY outlook

* FY adjusted EPS to grow 18-20 percent

* H1 revs up 33 pct on strong dairy, nutritionals

* H2 milk production to be lower due to EU quotas (Adds forecasts surge in milk production post 2015)

By Conor Humphries

DUBLIN, Aug 24 (Reuters) - Irish food group Glanbia raised its full-year earnings growth forecast by more than 50 percent as revenues surged on strong dairy prices and growth in its high-margin nutritionals business.

Glanbia, Europe’s biggest supplier of mozzarella cheese for pizzas, said on Wednesday that adjusted earnings per share growth for the full year would be in a range of 18-20 percent, up from a forecast of 11-13 percent growth in May.

Revenues grew 33 percent to 1.38 billion euros ($2.0 billion) on a constant currency basis, well ahead of the average forecast of 1.13 billion euros in a Thomson Reuters I/B/E/S poll of six analysts.

“Growth was strong in both the Irish and international businesses creating a very strong set of numbers,” said Liam Igoe, an analyst with Goodbody stockbrokers.

“The surprise was the level of increase in the Irish business with high commodity prices driving up profits.”

Glanbia Managing Director John Moloney said earnings were boosted by 11 percent volume growth across the business and an increase in prices of 15 percent before currency movement.

They were also aided by the acquisition of U.S. performance nutrition business Bio-Engineered Supplements.

“In the first half, the scale of our U.S. cheese and global nutritional business became comparable in size to our core Irish business,” he said in an interview with Reuters.

“But considering there is a significantly higher margin it has had the effect of lifting group margins overall to 7 percent.” Margins in the nutritionals are around 10 percent compared to 5 percent in the core dairy business, he said.

Glanbia is counting on its exposure to developing markets and the resilience of its nutritionals business to support it in the face of a relatively weak global outlook for 2012.

Glanbia shares opened were up over 3 percent at 4.2 euros in morning trade, outperforming a 0.87 percent rise in the broader Irish market .


Ireland’s export-focused food sector has outperformed the Irish market in recent months and is helping to prop up the wider Irish economy, which is struggling to emerge from recession.

    Local rival Kerry Group (KYGa.I) said last week that earnings had increased 10 percent in the first half and said it was on target for full-year earnings growth of 8-12 percent.

    Moloney said a full-year revenue forecast by Thomson Reuters I/B/E/S of 2.36 billion euros was “realistic.” Full-year earnings per share will be around 43 euro cents, up from 38 cents last year, he said.

    Earnings growth will slip from 55 percent in the first half to around 18-20 percent for the full year in part due to comparisons to a strong second half in 2010 and a softening of global dairy prices, he said.

    “Global dairy market prices appear to have peaked in the current cycle. Indications are for a relatively modest softening in prices for the remainder of the year,” Moloney said.

    High milk production through to the end of June will cause output to fall in the second half as some farmers reach their limits under European milk quotas, he said.

    The share of the Irish dairy business in group revenues will continue to slip until the quotas are scrapped in 2015, when production will likely surge by 15 percent.

    Irish production may increase by up to 40 percent in 2015-2020 boosting the country’s export revenues by between 600 and 800 million euros, Moloney said.

    Glanbia is considering further acquisitions and will have around 150 million euros of cash for acquisitions by the end of the year he said. Asked if Glanbia would spend this money by the end of December, he said: “probably not.”

    Adjusted earnings per share in the first half were 28 euro cents, compared with a consensus forecast of 21 euro cents. ($1 = 0.695 Euros) (Reporting by Conor Humphries; Editing by David Jones and Jon Loades-Carter)

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