TIDMGLB
RNS Number : 4179K
Glanbia PLC
22 April 2020
FIRST QUARTER 2020 INTERIM MANAGEMENT STATEMENT
Glanbia reports a good Q1 and now focused on navigating
Covid-19
22 April 2020 - Glanbia plc, the global nutrition group
('Glanbia', the 'Group' or the "plc"), is issuing this Interim
Management Statement for the three month period ended 4 April 2020
("first quarter" or "Q1 2020" or "Q1"). This statement is issued in
conjunction with the plc's Annual General Meeting ("AGM") which is
being held today.
Summary
-- Q1 2020 wholly owned revenues up 17.0% on a constant currency
basis (20.2% reported) versus prior year due to good demand across
both Glanbia Performance Nutrition and Glanbia Nutritionals;
-- Group wide plans in place for Covid-19 operational from February, key priorities:
o protect the health and safety of employees
o continue supply of food to consumers and customers, and
o maintain a strong financial position.
-- Limited operational disruption to date due to the exceptional
performance of Glanbia employees and supply chain partners;
-- Strong balance sheet and operating cash flow; committed
facilities of EUR1.15 billion with no debt due for renewal in the
next 12 months and quarter end net debt of EUR690 million;
-- The final 2019 dividend will be paid to shareholders on 24 April 2020; and
-- Due to the uncertainty of duration and impact of Covid-19,
financial guidance previously issued on 26 February 2020 is
withdrawn.
Commenting today, Siobhán Talbot, Group Managing Director
said:
"Glanbia had a good first quarter of 2020, growing revenues by
17%, constant currency, versus prior year. This was underpinned by
good volume growth in both Glanbia Performance Nutrition ("GPN")
and Glanbia Nutritionals ("GN") in the period. Overall demand in
our key end markets was positive in the first quarter, however
greater volatility in consumer shopping behaviour was evident in
recent weeks arising from Covid-19 and due to uncertainty of
duration and impact of this pandemic, full year 2020 financial
guidance is withdrawn.
The Covid-19 pandemic is a human tragedy and our priorities are
to protect our people, provide essential food supplies and maintain
our strong financial position. Our nutritious products and
ingredients are essential for our consumers and to date all of our
plants have largely operated to plan and maintained supply. I would
like to express my deep thanks to our employees, customers and
suppliers around the world, in particular to our frontline staff
and their families who continue to give enormous commitment to keep
our supply chain and operations running. As an essential service,
the food industry has a critical role to play and we are very
focused on continuing to serve our consumers, customers and
communities through this global crisis."
Performance update
In the three months ended 4 April 2020, wholly owned revenue
increased 17.0%, constant currency. On a reported basis, reflecting
the stronger US Dollar Euro foreign exchange rate*, revenue
increased 20.2% when compared to the same period in 2019. The
drivers of the revenue increase, on a constant currency basis, were
price growth of 9.2%, volume growth of 6.3% and the Watson
acquisition representing 1.5%. Price growth reflected strong cheese
markets in the period in GN and volume growth was driven by a good
performance across both GN and GPN.
Covid-19 update
In the first quarter of 2020, the Group has traded well due to
good consumer demand for its nutritious products and ingredients,
which are predominantly sold in retail end markets. Strong demand
in North America offset weaker demand in International markets
where the challenges posed by Covid-19 had a greater impact, in
particular, on GPN's route-to-market.
In response to the Covid-19 pandemic the Group put in place
business continuity planning teams with three priorities: protect
the health and safety of employees, continue supply of food and
maintain the Group's strong financial position.
Protecting employees and maintaining food supply
The health and safety of the Group's employees is its number one
priority with office based staff working remotely and a restriction
on all travel in place. A comprehensive set of health and safety
measures has been implemented at all production sites worldwide
including health monitoring, occupational health support, employee
welfare supports, physical distancing, hygiene and sanitation
measures.
Glanbia employees have done an exceptional job and to date all
plants across the Group have maintained production with plans in
place at each site to manage potential disruption.
Financial position
Net debt at 4 April 2020 was EUR690.3 million, which represents
a decrease of EUR119.5 million versus the net debt position at the
end of the first quarter of 2019 with this improvement due to
continuing strong operating cash flow. Glanbia has available total
committed banking facilities of EUR1.15 billion with no facilities
coming due for renewal in the next 12 months. In addition, to
further preserve cash, the following precautionary measures have
been taken, discretionary spend has been curtailed, working capital
monitoring has been increased, capital expenditure has been reduced
to key strategic projects and essential maintenance only, and
M&A activity has been deferred.
Strategic initiatives
Glanbia remains focused on delivering its Group wide strategic
initiatives as outlined in February 2020. GPN organisational
changes and SKU rationalisation have been largely progressed. The
exit of contract manufacturing in North America remains on track.
Given the Covid-19 restrictions currently in place, the pacing of
some of the projects relating to Group wide initiatives and GPN
route to market may alter.
Outlook
The period since Glanbia gave financial guidance in late
February has been marked by a rapid acceleration of the Covid-19
pandemic across the globe. A significant proportion of the global
population is now in lockdown which has impacted consumer shopping
activity in a variety of ways and it is difficult to model how
those behaviours will evolve.
Although the Group has traded well in Q1 2020, demand became
more volatile at the end of the quarter and into April particularly
in GPN. At this time it is extremely difficult to assess the impact
and duration of Covid-19 and therefore it is prudent for Glanbia to
withdraw its 2020 full year financial guidance issued on 26
February 2020.
As an organisation Glanbia is highly focused both on navigating
the current challenges and emerging strongly to capture growth
opportunities that will become available. The majority of the
Glanbia portfolio is exposed to health and wellness trends and in
growing channels which is positive for long term growth. The
financial strength of Glanbia and the commitment of its people,
positions the Group well for the future.
Glanbia Performance Nutrition (all commentary is on a constant
currency basis*)
GPN delivered revenue growth of 3.6% in the first quarter of
2020 compared to the prior year. This was driven by volume growth
of 4.1% offset by a price decline of 0.5%. Like for like branded
revenue growth was 6.0%, driven by volume growth of 6.8% offset by
price decline of 0.8%.
Volume growth was driven by good growth in the North American
Performance Nutrition and Lifestyle portfolios while the price
decline was driven by some increased promotional spend in
International markets and the Direct-to-Consumer business.
North America Performance Nutrition portfolio
The North America Performance Nutrition portfolio accounted for
39% of total Global GPN sales in 2019 and encompasses the Optimum
Nutrition (ON), BSN and Isopure brands. This portfolio delivered a
strong performance in Q1 2020 as a result of good demand in the
online and food, drug, mass and club ("FDMC") channels which offset
declines in specialty as well as contract business. Overall sales
momentum slowed at the end of the quarter. However, consumption in
measured channels for the ON brand was resilient in the quarter
with consumption of BSN and Isopure more adversely impacted by
Covid-19 as they are more specialty and distributor based
brands.
GPN's strategy of developing in the online channel has helped to
mitigate challenges in other channels related to the current
consumer environment. The ON brand is the category leader in the
online channel in North America and has developed and deployed
digital content in the period which helps consumers adapt their
training and nutrition plans where they have to spend extended
periods at home.
North America Lifestyle portfolio
The North America Lifestyle portfolio accounted for 29% of total
Global GPN sales in 2019 and encompasses SlimFast, think! and
Amazing Grass brands. This portfolio had a strong performance in Q1
2020 led by the SlimFast brand due to strong sales in the food,
drug and mass ("FDM") channels as well as expansion online.
Consumption of the overall lifestyle portfolio of brands was good
in Q1 2020 in measured channels. Pantry loading was evident in the
first half of March across both the Slimfast and Think! brands
while sales decelerated somewhat in the last two weeks of the
month. Consumption of the Amazing Grass brand has been very strong
throughout the quarter. GPN's Lifestyle products are typically
consumed as lower calorie healthy alternatives or as part of an
overall nutrition plan. Post the Covid-19 crisis, health and
wellness is likely to become even more embedded with consumers and
the portfolio of Lifestyle brands is well positioned for these
trends.
International
International markets accounted for 26% of 2019 total Global GPN
sales and are split evenly between European markets and Rest of
World. The quarter started well across international markets but in
March performance was significantly impacted by Covid-19
disruption, as restrictions affected all markets where the route to
market relies on third party distributors and the retail base is
fragmented.
Direct-to-Consumer
Body & Fit is GPN's Direct-to-Consumer online platform
serving consumers in Europe and accounted for 6% of total GPN sales
in 2019. Body & Fit volumes were solid in Q1 2020 but pricing
was adverse in response to increased competitive activity in its
core markets. The team continues to expand the platform from a new
base in Amsterdam with six new European markets added in the
period.
Glanbia Nutritionals (all commentary is on a constant currency
basis*)
GN delivered good revenue growth in the first quarter of 2020
versus prior year. Revenue increased by 24.0% versus prior year.
This was driven by a price increase of 14.2%, a volume increase of
7.5%, and the Watson acquisition, completed on 28 February 2019,
delivering 2.3%. Revenue drivers across Nutritional Solutions and
US Cheese are set out below.
Nutritional Solutions ("NS")
NS is a leading provider of customised nutrient premixes,
advanced-technology protein solutions, functional beverages and
flavours. NS has a diverse product portfolio and supports its
customers on both a global and regional basis, supplying solutions
that improve product functionality and nutritional profile.
NS revenue increased by 14.2% in the period. This was driven by
volume growth of 7.6%, a price decline of 0.7% and the Watson
acquisition delivering 7.3%.
All NS operations and supply chains continue to operate to plan.
Volume growth in Q1 2020 was driven by a strong performance in
vitamin and mineral premix and value-added dairy solutions. The
price decline in Q1 primarily related to dairy market dynamics.
Demand in Q1 has been underpinned by the depth of the portfolio
within NS which reaches across multiple sectors many of which
continue to grow despite the current Covid-19 restrictions. In
particular NS has seen strong demand in the healthy snacking and
supplement sectors. The Watson acquisition continues to perform
well.
US Cheese
US Cheese is a leading producer and marketer of American-style
cheddar cheese in the US supplying brand owners and private label
companies who in turn supply major retail and food service
operators. US Cheese operates all of the dairy processing plants
within GN and the Southwest Cheese JV plant which produces cheese
and whey ingredients.
All US Cheese operations and supply chains continue to operate
to plan. US Cheese revenue increased by 28.6% in the period. This
was driven by volume growth of 7.4% as increased demand from retail
destinations compensated for lower demand from food service
channels. Pricing increased by 21.2% as a result of stronger cheese
pricing in the period versus prior year, a trend that has now
reversed materially since the end of the quarter. US Cheese
operates a robust business model which passes through dairy market
movements to input costs providing substantial margin protection
against dairy price changes.
Joint Ventures (all commentary is on a constant currency
basis*)
Glanbia share of Joint Ventures ("JVs") revenue grew by 10.0% in
Q1 2020 versus prior year. This was driven by volume growth of 1.7%
and price growth of 8.3%. Volume growth was primarily driven by
Southwest Cheese which more than offset a decline at Glanbia
Ireland. Price growth was also primarily driven by Southwest Cheese
which was offset by a decline in Glanbia Cheese UK.
All of Glanbia's JVs have performed well in Q1 2020. The JVs
operate robust business models, are well financed and are well
positioned for Covid-19 related market volatility.
New Joint Ventures
Construction of the Group's new joint venture project in
Michigan, USA continues as planned. Construction of the new joint
venture project in Portlaoise, Ireland has paused due to Covid-19
restrictions in place currently in Ireland which may delay the
completion of this project.
Financing
The Group's balance sheet remains in a strong position.
Glanbia's net debt at 4 April 2020 was EUR690.3 million which
represents a decrease of EUR119.5 million versus the net debt
position at the end of the first quarter of 2019. This decrease was
primarily driven by continuing strong operating cash flow.
In light of the potential financial risks posed by Covid-19
Glanbia has increased its focus on cash flow and liquidity to
ensure it has significant resources to mitigate material disruption
if it were to arise.
In response to the considerable financial market volatility
during March, on 8 April 2020, Glanbia completed a precautionary
measure of extending the maturity date on $351 million facilities
due 5 November 2020 to 5 July 2021.
Glanbia had EUR1.15 billion of committed facilities at the end
of Q1 2020 and over EUR450 million of available debt capacity, of
which over EUR200 million was held in cash balances. Committed
facilities have an average maturity date of 2.7 years with none due
for renewal within the next 12 months.
Chairperson succession
A process to identify a successor as Chairperson of the plc
commenced earlier this year. A sub-committee of the Board, led by
Dan O'Connor, Senior Independent Director, was established.
External advisors were appointed to assist the sub-committee in the
selection process which is progressing well.
AGM
Glanbia is holding its AGM today. Due to restrictions in Ireland
to limit the spread of Covid-19 the meeting has been adjourned to
the Company's head office in Kilkenny, Ireland and will be held as
a closed meeting. Shareholders who wish to follow the proceedings
of the AGM can do so by listening via a teleconference and later
today the results of the resolutions relating to the AGM will be
published. All details relating to the AGM can be found on the
Company's website: www.glanbia.com/agm
* To arrive at the Constant Currency change, the average FX rate
for the current period is applied to the relevant reported result
from the same period in the prior year. The average Euro US Dollar
FX rate for Q1 2020 was EUR1 = $1.101 (Q1 2019 was EUR1 =
$1.136).
Ends
Cautionary statement
This announcement contains forward-looking statements. These
statements have been made by the Directors in good faith based on
the information available to them up to the time of their approval
of this report. Due to the inherent uncertainties, including both
economic and business risk factors underlying such forward looking
information, actual results may differ materially from those
expressed or implied by these forward-looking statements. The
Directors undertake no obligation to update any forward-looking
statements contained in this announcement, whether as a result of
new information, future events, or otherwise.
IMS conference call dial-in details
There will be an analysts' conference call to accompany this
Interim Management Statement at 8.30 a.m. (BST) today.
To listen to the call, please dial-in using the following
numbers:
Ireland 01 246 5621
UK 0330 336 9411
Europe +44 (0)330 336 9411
USA +1 323-794-2093
Pass code 2951907
A replay of the call will be available for 30 days from this
afternoon. Please see the link below to the Investor Relations
section of the Glanbia plc website for details:
http://www.glanbia.com/investors/results-centre
This announcement contains inside information. The person
responsible for arranging for the release of this announcement on
behalf of Glanbia plc is Michael Horan, Company Secretary. The time
and date of this announcement is, at 7am, 22 April 2020.
For further information contact
Glanbia plc +353 56 777 2200
Mark Garvey, Group Finance Director
Liam Hennigan, Group Director of Strategic Planning &
Investor Relations: +353 86 046 8375
Martha Kavanagh, Head of Corporate Communications: +353 87 646
2006
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END
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