Last year left a bitter taste, but Glanbia looks good in the round
If the name of Glanbia fails to register, its products certainly will. The mid-cap Irish food producer supplies the cream for Baileys Irish Cream, the mozzarella that tops Domino’s pizzas, and ingredients for the cheese found in McDonald’s and Burger King buns.
However, such tie-ups have done little to protect Glanbia from either severe falls in commodity prices or a sharp downturn in the Irish economy. First, the company has had little choice but to accept lower prices for the butter, cheese, whey and other milk-derived products that it sells through world wholesale markets. Second, it has suffered from domestic recession — partly from lower consumer spending on branded foods and tougher competition from sterling-based rivals, but more from the knock-on effects of lower milk prices on farm incomes. This has hampered its agribusiness division, which sells fertilisers and animal feeds. The upshot is that Glanbia’s Irish dairy division, its biggest in terms of sales, will have made its first loss in 2009 — of about €18 million on current estimates.
The reassurance is that Glanbia will return to growth in 2010. Dairy markets have begun to pick up in recent months: farm-gate milk prices have risen about 20 per cent from their 2009 lows. The company has also stepped up its cost-cutting efforts at home, so much that yesterday it announced a further €15 million provision for the restructuring of its Irish operations. It is still early days, but the elimination of last year’s losses should enable group earnings to grow by between 6 and 8 per cent this year.
But Glanbia’s evolving shape belies its roots as a commodity food producer — still evident in the farmers’ co-operative that retains 55 per cent of its shares. It has forged a series of overseas joint ventures in which profits are moving in the right direction: Nutricima, a dairy powder tie-up with PZ Cussons in Nigeria, which provides scope to enter other emerging markets, and Southwest Cheese in New Mexico, one of America’s biggest whey processors.
