Glanbia shares slump to five-year low on sports nutrition profit warning

Shares in Glanbia plunged to their lowest level in almost five years on Wednesday after the nutrition group issued a profit warning as its main division, which supplies protein products for gym-goers and dieters, saw its earnings slump 30 per cent in the first half.

The Kilkenny-based group said it now expected its full-year adjusted earnings per share to fall within the range of 88-92 cent, compared to consensus analysts’ forecasts of 98.5 cent. Its shares plummeted by as much as 15.9 per cent at €11.76 during trading in Dublin, the biggest drop in more than a decade.

The company’s key Glanbia performance nutrition (GPN) division recorded a 30.2 per cent drop in earnings before interest, tax, depreciation and amortisation (ebitda) to €46.9 million in the first half, with the scale of the decline prompting it to report interim results a week ahead of schedule.

Chief executive Siobhán Talbot told The Irish Times the earnings slump was down to a number of factors, including the deteriorating economic environment in Brazil, Mexico and Argentina, changes in its supply chains in the Middle East, where “geopolitical tension” has been mounting, and India, where the market has been hit by regulatory changes and tariff increases.

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The GPN business’s northern European business was also affected temporarily by the pace at which customers had been switching from the group’s traditional distributors to online purchases.

Ms Talbot said Glanbia had only got a clear picture “in very, very recent days” of the weakness across the GPN international operations outside of its flagship North American business.

“We do a lot of business in those markets through distributors, and there was a lag in terms of full visibility in what was happening at consumer level,” she said.

Opportunity

Earlier, the chief executive told analysts on a call that Glanbia continued to see the currently-weak regions as a long-term growth opportunity. “We believe that a lot of the headwinds are behind us in a number of these markets. We see an element of one-offs within that.”

Glanbia sees “significant margin recovery” in GPN in the second half of the year as its customers buy product ahead of the new year, the group increases its pricing and it cuts promotional spending.

Ms Talbot insisted that the group was sticking to its medium-term target, set out in 2018, of growing its earnings per share by 5-10 per cent annually over five years, excluding the impact of currency movements.

The GPN division, which accounted for half of sales at wholly-owned units last year, reported a 13.4 per cent rise in revenues to €620.1 million, largely on the back of its $350 million (€314m) SlimFast acquisition last year and a solid performance by its North American operation.

The group’s other division, Glanbia Nutritionals, which also includes its US cheddar cheese business, delivered sales and earnings growth in the first half.