Food group Glanbia today reported a 19% fall in pre-tax profits for the year ending 2009. The group also announced its majority shareholder is interested  in acquiring Glanbia's Irish dairy operations.

Glanbia said its pre-tax profits dropped to €97.4m from €120.3m while revenues declined by 18% to €1.83 billion from €2.232 billion. The board is recommending a final dividend of 3.95 cent per share, a 5% increase from the 3.76 cent per share in 2008. This brings the total dividend for the year to 6.84 cent per share, also up 5% on the 6.51 cent per share the previous year.

Glanbia announced that Glanbia Co-operative Society Limited, its 54.64% shareholder, has expressed an interest in acquiring Glanbia's Dairy Ireland operations (incorporating Dairy Ingredients, Consumer Products and Agribusiness), Glanbia's Irish property business, Group Business Services and related Irish Joint Ventures & Associates. Glanbia said any such transaction would be likely to involve a significant reduction in the Society's ownership in the group and would require the approval of both the Society's members and Glanbia plc shareholders. While discussions are progressing well, there is no guarantee that they will result in a transaction being concluded, Glanbia said.

It added that the discussions are underpinned by a clear strategic rationale and represent a unique opportunity to transform Glanbia. For the Society and its members such a transaction would offer the prospect of full ownership and control of the key strategic businesses that are closely aligned with their interests. For Glanbia, it would, in particular, increase the group's focus on international nutritional ingredients and cheese, significantly improve financial flexibility and enhances development of its successful growth strategy.

Results detail

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Goodbody analyst Liam Igoe commented:  Glanbia; FY09 results in-line - - "Glanbia’s FY09 results this morning were in-line with expectations, with adjusted EPS of 30.7c compared with 31.0c forecast. Glanbia’s nutritional ingredients operations, which included Optimum Nutrition for the full year in FY09 (extra six months), increased operating profit by c.5% yoy. The business has been integrated well into Glanbia which has continued to grow the nutritional business by c.8% though the recession.

However, the USA cheese operations have had to contend with weaker prices from 2008, which has impacted reported sales and profits for the Idaho cheese business as well as the New Mexico cheese JV. US cheese prices did improve sequentially into H209, though they remained at levels below those prevailing in H208. The two main Ireland businesses have also had contrasting performances, again determined by the movement of dairy product pricing. The bulk ingredients business suffered its largest ever loss in FY09 due to the sharp fall in international dairy commodity prices in 2008/9, and the fact that milk price reductions were insufficient to offset these falls.

However, the performance in H209 in this area was close to break-even as commodity prices eased up later in the year. Given the earnings volatility in the bulk ingredients division, management is investigating the possibility of a disposal to the co-op of the dairy Ireland businesses which would generate the double headed positive of: (i) removing a low margin, volatile business; and (ii) possibly increase liquidity in the medium term. Glanbia provided limited details in terms of outlook. However, with the results broadly in-line with our expectations, we expect to make only minimal adjustments to our FY10f EPS (excluding the potential impact of a disposal of the Irish Dairy business). We expect that the market will view these as a strong set of results and anticipate a positive share price performance, driven by the positives attributable to the disposal of the Irish Dairy business."