Price hikes amid inflationary pressures drive Glanbia profits to €120M

17 Aug 2022 --- Glanbia delivered 13% growth in the first half of 2022, driven by price increases and volume growth. Group revenues reached €2.8 billion (US$2.9 billion), while EBITDA amounted to €171.7 million (US$174.8 million).

“I am pleased to report that half-year 2022 results have exceeded our plans, demonstrating the impact of a series of actions implemented since the latter part of last year in response to unprecedented inflation,” a spokesperson at Glanbia, tells NutritionInsight.

“Revenues grew strongly with significant pricing initiatives and volume growth in all business segments in the period.”

Moreover, profit after tax showed €121.5 million (US$123.6 million). Nutritional solutions (NS) like-for-like volume increased by 1.6% and Glanbia Performance Nutrition (GPN) increased branded like-for-like volume by 1.9%. The company’s constant currency growth was at 26.8%, which increased by 38.5%.

External financial environmentGlanbia remains optimistic and confident toward pressing inflation, although monitored closely.
Previously this year, Glanbia was optimistic about the future despite the rising inflation as the COVID-19 pandemic increased consumer demand in “trends into which we play – health, well-being and immunity,” the company previously told NutritionInsight.

“Glanbia is deeply saddened and concerned by how the crisis has escalated in Ukraine and the devastating impact on its people. Aside from the enormous human tragedy, the conflict contributed to macroeconomic instability this year and exacerbated inflationary trends,” the spokesperson says.

“Oil prices have eased as global recession fears grow, but geopolitical concerns remain," the spokesperson says. Companies are currently eyeing the Ukraine grain corridor deal where stakeholders are hoping increased grain exports can ease global food insecurity.

Glanbia explains that inflationary trends have been at unprecedented levels over the past months, as the impact has been monitored closely since the latter part of 2021. She adds that most companies are tracking the inflation levels at this time.

“We took significant actions early on to mitigate cost inflation, locking in 90% of our input costs in GPN early in the year, passing on price increases in both our branded business and our ingredients business, and taking other measures to improve efficiencies.”

Triggering prices or shifting trends?Non-dairy sales grow as dairy sales decrease, the company forecasts continued dairy inflation.
Non-dairy alternatives sales grew by 5.8%, while dairy sales decreased by 4.9%, the company noted during its financial presentation.

“Inflation at this time is broad-based. GPN will see inflation of approximately 23% in its COGs in 2022, with dairy (high-end whey) inflation quite a proportion of that. Dairy inflation is higher and longer lasting than expected earlier in the cycle. But ultimately, we do expect that the fundamentals of whey supply and demand will come more into balance through late 2022/ 2023.”

“Of course, given the global environment, the resilience of supply chains remains a key focus due to ongoing geopolitical volatility and inflationary trends.”

Total investment capital expenditure was €29.3 million (US$29.8 million) compared to €39.7 million (US$40.4 million) in the first half of 2021. Share buybacks returned €127.1 million (US$129.3 million) to shareholders, and the interim dividend increased by 10%.

What to expect from H2
The report highlights continued optimism for the second half year to come. Glanbia says it is confident in its ability to navigate unpredicted challenges in the economic environment, impacts of geopolitical tensions and inflation.

Yet, the company expects sustained revenue and earnings momentum in the second half “in the absence of any further unanticipated major market disruptions.”

“We will continue to monitor inflationary trends into the second half of the year but are confident that further pricing action and operational efficiencies will deliver improving margins and strong year-on-year EBITA growth,” the spokesperson says.

“Current expectations for improved EBITA growth in GPN underpin the upgrade in full-year guidance for the Group, with growth in adjusted EPS now expected to be 9% to 13%, constant currency. Based on current foreign exchange rates, the reported adjusted EPS growth is expected to be 21% to 25%,” Glanbia concludes.

By Beatrice Wihlander

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