Glanbia income and sales down

by Eric Schroeder
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KILKENNY, IRELAND — Despite a challenging environment, Glanbia P.L.C. delivered solid financial results, including a strong performance from U.S. Cheese and Global Nutritionals. Adjusted net income at Glanbia in the year ended Jan. 2 totaled €89.9 million ($122.8 million), down 14% from €105.1 million in fiscal 2008. Net sales fell 18% to €1,830.3 million ($2,499.5 million).

“In 2009, the Group delivered a solid financial performance in very challenging circumstances,” said John Moloney, group managing director of Glanbia, an international dairy food company with interests in the United States. “The global economic recession led to extreme volatility in global dairy markets in the first half of the year, in particular, and this had a significant impact on Glanbia’s revenue, profitability and earnings.

“Throughout the year we focused on embedding strategic cost reductions and running our operations as effectively and efficiently as possible. We contained the decline in our financial results with a strong performance by Global Nutritionals, a resilient performance by U.S. Cheese and the benefits of strategic cost reductions. This cost competitiveness focus will continue into 2010.”

Operating profit within the company’s U.S. Cheese and Global Nutritionals segment rose 7% in fiscal 2009 to €90 million ($122.9 million) despite a 6% decline in sales to €792.4 million ($1,081 million). EBITDA rose 14% to €110 million ($151 million).

Glanbia said the U.S. Cheese business delivered a solid result amid stable U.S. cheese volumes and milk supply. The company did note that cheese prices declined sharply in January 2009 and remained low until the latter part of the year. As a result, average 2009 U.S. block cheddar prices on the Chicago Mercantile Exchange were 30% lower than 2008 levels. Although reduced prices affected revenue and profits, Glanbia said operating margin was sustained as a result of the risk management side of the business unit.

In contrast to the strength in the U.S. Cheese and Global Nutritionals business, Glanbia’s Dairy Ireland unit sustained a 52% decline in operating profit to €24 million ($32.8 million). Sales in the unit fell 23% to €1,028.8 million ($1,404.2 million).

Glanbia said the decline in the segment — which is made up of three business units — reflected a major loss in Irish Dairy Ingredients, strong competition in Consumer Products, and reduced farm spending that adversely affected Agribusiness.

Despite the difficulties in Irish Dairy Ingredients, Glanbia said the unit continued to develop its product portfolio through diversification of its cheese product mix, entering new cheese markets and developing protein technologies. The company also commissioned a whey processing facility during 2009.

In a separate announcement, Glanbia said it has received interest from Glanbia Co-Operative Society Ltd., its 54.64% shareholder, in acquiring Glanbia’s Dairy Ireland operations.

“The discussions are underpinned by a clear strategic rationale and represent a unique opportunity to transform Glanbia,” Glanbia said. “For the Society and its members, such a transaction would offer the prospect of full ownership and control of the key strategic businesses that are closely aligned with their interests. For Glanbia, it would, in particular, increase the Group’s focus on international nutritional ingredients and cheese, significantly improve financial flexibility and enhances development of its successful growth strategy.”

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