International
Markets: Glanbia reports strong 2012 results
By Finfacts Team
Mar 13, 2013 - 1:23 PM

Glanbia's global operations

Glanbia, the food group, today reported total group revenues of €2.88bn on a constant currency basis for 2012, up 4.8% on the previous year.

Pre-tax earnings for the year rose over 9% to €198.8m, while the company also reported a 14.2% growth in adjusted earnings per share to just under 53 cent - - ahead of expectations.

John Moloney, group managing director, said: "The group delivered strong organic revenue growth and a 22.1% increase in adjusted earnings per share; the third consecutive year of double digit progression. We also achieved a landmark agreement with our majority shareholder, Glanbia Co-operative Society, which restructured our Irish dairy processing business from a wholly owned operation to an associate. In addition, the Society's ownership of the plc will reduce to 41.3% and the composition of the Board will evolve on a phased basis from 2016.

"The prospects for 2013 are good, although we remain cautious given the global environment. We expect adjusted earnings per share growth, on a constant currency basis, of between 8% and 10% for the full year from a base of 51.02 cents. The Irish dairy processing transaction facilitates a concentrated focus on our international growth and the longer-term prospects for Glanbia are very positive. We are in a stronger position than ever to drive the business forward and capitalise on our competitive advantage in both business-to-business and business-to-consumer nutritional products and solutions."

Results detail

Liam Igoe of Goodbody commented  -- ""Glanbia's FY12 results were 4.7% ahead of our forecast at an EPS level, mainly due to the strong finish to the year by the Glanbia Ingredients Ireland’s (GIIL) bulk Irish dairy business (a 40% associate since December and treated as "discontinued" in FY results). The key driver of the 24% rise in consolidated operating profits was its core US Cheese & Global Nutritionals Division, where profits increased by a third last year and in line with our forecast.

Each of the three sub-divisions saw profit growth last year. In the B2B Ingredient Technologies (whey manufacturing), substantially higher pricing for whey led to significant profit and margin increases. The larger B2C Performance Nutrition business benefited from a 20% increase in revenue including over 7% volume growth, particularly in the second half. Profits were higher but margins lower due to the higher whey input costs and new personnel hires. The B2B Pre-mix business benefited from higher volumes as its German plant expansion came on stream mid-year. Cheese revenues were higher due to better volumes and pricing though margins and profits were slightly lower.

The continuing consolidated Irish based businesses saw profits fall 14%. This reflected the on-going sale of the Yoplait business (€18m proceeds), competitive conditions in the mainstream branded goods market (though Glanbia volumes held up) and weaker sales within the agribusiness unit. The newly formed GIIL associates (but 100% owned for 11 months in FY12) performed much stronger than our expectations and was only marginally lower than a very strong FY11 due to firmness in dairy commodity prices in H2.

Glanbia is guiding 8-10% underlying EPS growth for FY13 from the restated FY12 base of 51c (allows for new JV). Our own forecasts are at the upper end of this guide. The balance sheet is strong (1.7x Debt / EBITDA) and the statement indicates that FY13 will be a year of refocusing on its strategy to carry it through the next decade."

UK facing 'triple dip' recession:  David McNamara, chief economist of Davy, comments - - "Yesterday's industry and trade data for the UK painted a bleak picture of the economy in early 2013, with the possibility of a triple dip recession all the more likely in Q1. The likelihood is the Chancellor will stick steadfast to his debt and deficit goals but may well free up further current spending to funnel into capital projects, over and above the extra £5bn already committed in the Autumn Statement.

Elsewhere, the NTMA confirmed the imminent issue of a new 10-year bond yesterday. Details of the bond are scant as yet, but reports suggest an issue of €3.5bn, which will likely be oversubscribed.
Poor production and trade data mean contraction more likely in Q1

Yesterday's economic data for the UK painted a bleak picture of the economy in early 2013, with the possibility of a triple dip recession all the more likely in Q1. In January, industrial production fell 1.2% versus an expected 0.1% rise. Half of this fall reflected the closure of a North Sea oil rig, which is not expected to be operational for a number of years, so a rebound would not be expected in February. Core manufacturing also fell 1.5% but may rebound following poor weather in January. Exports fell 5.5% on the month.

What's more, the National Institute of Economic and Social Research (NIESR) monthly GDP estimate indicated a 0.1% fall in output in February following a 0.2% decline in January. While not a perfect estimate of actual output, the index is a good guide to official numbers and points to a flat-to-negative Q1. The poor weather in January and March will likely exacerbate falls in output, particularly in construction (8% of GDP), piling further pressure on the Chancellor to ease the austerity measures in his March 20th Budget. Weak sterling may yet boost exports by the end of Q1, but this may not be enough to push GDP into positive territory.

The likelihood is the Chancellor will stick steadfast to his debt and deficit targets but may well free up further current spending to funnel into capital projects, over and above the extra £5bn already committed in the Autumn Statement and Plan A will remain firmly in place.

Elsewhere, the NTMA announced the imminent issue of a long-awaited 10-year bond, maturing in March 2023. Reports suggest a €3bn issue is likely to be oversubscribed, given the appetite for Irish sovereign paper in recent months. This follows the €2.5bn issue in January, with the NTMA committed to raising €10bn in 2013 as Ireland prepares to fully re-enter the markets."

Justin Doyle, Investec Bank Ireland, said today:

• "As we sit slap bang in the middle of an eerily quiet week, with FX markets stuck in very tight ranges, it’s becoming less clear as to where we are going to get some direction;
• Bundesbank President Weidmann went on record yesterday saying the European debt crisis is far from over and it still poses the most significant risk for the German economy. He also noted his concerns over the Italian and Cypriot situations that the French reform programme seems to have 'floundered';
• Up today, U.S. retail sales later this afternoon is really the only data of interest with markets forecasting a +0.5% headline print up from +0.1% in the previous month.

Banks: Bank remuneration bill set to be cut 6-10%; Eamonn Hughes and Colm Foley comment  - -"The Department of Finance yesterday published a Remuneration Review of Covered Institutions, conducted by Mercer. The report evaluated the cost of remuneration at the four covered banks between 2008 and 2012 finding that whilst total remuneration has declined by 20-54% across the banks (-31% for AIB and -23% at BOI), this has been primarily achieved through reductions in headcount and cessation of incentives, with underlying salaries up over this period. With the banks still losing money due to falling income and elevated credit losses, the Government has outlined that the €1.75bn remuneration bill should be further reduced by 6-10%. This will necessitate detailed consultation with employees and unions.

The Mercer report indicates AIB’s remuneration bill in 2012 was €799m in 2012, with BOI at €821m, which implies that 6-10% savings would equate to €48-80m and €49-82m respectively. However, the report acknowledges that the banks, to varying degrees, already plan further cost saves that are not taken into account in this review. For instance, BOI has already indicated its target of a sub-50% cost income target (was 87% in FY12), AIB is targeting €350m of savings by 2014 with a 60-65% cost income ratio (with €40m remuneration savings in 2013 and €125m over 2014-18) and PTSB has already announced a significant voluntary severance and branch closure programme (benefits to accrue this year).

Restructuring programmes already in train will go a large way to generating the targeted savings outlined in the report. It is unclear what, if any, additional savings will be required beyond the current programmes but there may be incremental savings generated, at least in part, which given required engagement with staff will only manifest on a full year basis next year."

Europe's top 1,000 nonfinancial companies have over €1 trillion in cash in 2013

US Markets

In New York Tuesday, the Dow rose to another new record -- adding 3 points or 0.02% to 14,450.

The S&P 500 slid 0.24% and the Nasdaq slipped 0.32%.

Asia Markets

The MSCI Asia Pacific fell 0.6% in Tokyo Wednesday.

The Nikkei 225 is down 0.61%; China's Shanghai Composite Index dipped 0.99%; Korea's Kospi index rose 0.32%; Australia's S&P/ASX 200 declined 0.50% and in Mumbai, the Bombay Stock Exchange's S&P BSE 100 index slipped 1.03%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.42% in early afternoon trading Wednesday.

In Dublin, the ISEQ is down 0.20%.

Glanbia is up 0.12%.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

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Currencies

The euro is trading at $1.2976 and at £0.8684.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Tuesday last week, the BDI rose 18 points or 2.13% to 865 - - the BDI is up 23.75% in 2013.

Crude oil for April 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $93.04 plus 35 cents from Tuesday's close. In London, Brent for April delivery is trading on the International Commodities Exchange at $109.39. The North Sea benchmark accounts for two-thirds of the global market.

Bloomberg reports that for the first year since the futures were created, Brent crude is poised to overtake West Texas Intermediate (WTI) oil as the world’s most-traded commodity.

Daily trading in Brent jumped 14% to average 567,000 contracts in the year to November 20 compared with all of 2011, while WTI fell 17% to 575,000, according to data from the ICE Futures Europe exchange in London and New York Mercantile Exchange compiled by Bloomberg. The number of Brent futures changing hands has exceeded those for WTI every month from April through October, the longest streak since at least 1995.

Brent, produced in the North Sea, is gaining favour among traders because of its role as the benchmark for energy prices from Saudi Arabia to Russia. Prices have climbed 34% in the past two years, reflecting everything from war in Libya to the embargo on Iran. WTI, the main grade in the US, has risen 9% as the nation, which prohibits crude exports, has struggled to clear a glut at Cushing, Oklahoma, the delivery point for Nymex futures.

Gold spot price

The spot price of an oz of gold is trading in New York at $1590.20 down $1.30 from Tuesday's closing in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

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