Glanbia reports “resilient” Q3 while navigating pandemic challenges
29 Oct 2020 --- Glanbia has reported improving business growth for the nine-month trading period ended October 3, 2020 (Q3 YTD) in its Q3 2020 interim management statement.
Notably, revenue for its Glanbia Nutritionals (GN) segment increased by 9.2 percent versus the prior year.
Operating cash flow has been “strong,” according to the interim statement, and net debt versus the same period in the prior year reduced by €188 million (US$220.4 million). Also, Glanbia predicts positive growth for its Foodarom acquisition completed in Q3.
The company’s Performance Nutrition (GPN) segment delivered a revenue decline of 14 percent in Q3 YTD compared to the prior year.
However, Siobhán Talbot, group managing director, notes that trends in GPN “improved significantly” in Q3 with an increase in revenues and margins versus Q2 as markets gradually reopened and trading patterns improved.
The company reported in a live webcast that it remains “very confident” on the long-term growth potential of its business potential despite severe pandemic-related disruptions in Q2 2020.
Positive growth for GN and Foodarom
Revenue for GN increased by 9.2 percent versus the prior year, made up of a price increase of 7.5 percent, a volume increase of 0.8 percent and acquisitions delivering 0.9 percent.
During Q3, Glanbia completed its acquisition of Foodarom, a Canadian flavors business, for a purchase price of CA$60 million (US$45 million) plus contingent consideration.
Glanbia Nutritionals revenue increased by 9.2 percent versus the prior year.This business will enable the further development of flavor solutions to customers of Nutritional Solutions (NS), Glanbia’s added-value food ingredients business.
“Demand in Q3 YTD has remained robust with the majority of NS customers oriented around growth categories such as supplements and specialized nutrition as well as retail channels for food and beverage brands,” the report reads.
Joint ventures navigate pandemic volatility
Glanbia reports all of its joint ventures performed well in Q3 YTD. The joint ventures “operate robust business models, are well-financed and have navigated COVID-19-related market volatility well,” the company states.
The company states its share of joint venture revenue declined by 4.3 percent in the period driven by a price decline of 2.2 percent and by a volume decline of 2.1 percent.
Furthermore, two “major joint venture construction projects” are currently “on track,” one of which being a new US whey-producing facility.
Revenue decline for GPN
Glanbia attributes its GPN revenue decline of 13.9 percent to the COVID-19 disruptions in Q2. These reduced volumes in international markets and the specialty and distributor channels in North America.
“Trends improved significantly in the third quarter, as routes-to-market in international regions gradually reopened. Price trends also improved and were positive in the third quarter,” the statement explains.
In its 2019 full-year results, Glanbia also reported GPN revenue lagging behind GN. Then, foreign exchange headwinds and higher tariffs impacted its competitive position.
This resulted in branded volume declining by double digits in 2019, the company noted earlier this year.
GPD improvement plan
To improve the GPN portfolio, Glanbia set out a strategy in late 2019 to improve its Optimum Nutrition brand in the performance nutrition category globally and SlimFast within the lifestyle portfolio in North America and the UK.
Despite a 14 percent revenue decline in Q3 YTD, GPN “improved significantly” as markets gradually reopened after Q2.In the Q3 interim statement, the company outlined that international markets were nearly a quarter (23 percent) of total global GPN sales to Q3 2020, with Optimum Nutrition accounting for the majority of the business.
SlimFast brand consumption in measured channels increased 8 percent in Q3 YTD, “outpacing category growth rates.”
In Q3 2020, like-for-like branded revenues improved versus Q2 2020, however, “as expected” they were lower versus prior year due to strong comparatives for the SlimFast brand and ongoing headwinds in the ready-to-eat category.
2020 exit strategy
In Q4 2020, Glanbia predicts GN and its joint ventures to continue to deliver a “resilient earnings performance,” in addition to continually improving the GPN segment.
Meanwhile, the company remains “vigilant” of the continuing uncertainties arising from COVID-19.
“Good operating cash flow is expected to continue in the fourth quarter with net debt to adjusted EBITDA ratio anticipated to be below two times by year-end,” says the report.
With these favorable financial results, the company expects to build momentum into Q4 and exit the year well-positioned for 2021 growth.
Throughout the global COVID-19 pandemic, NutritionInsight is regularly updating its news feed for the coronavirus information and insights you need to guide your business through this challenging period.
Edited by Anni Schleicher
