2012 half year results

Transcription

1 2012 half year results 29 th August 2012 Leading global nutritional solutions and cheese group

2 Cautionary statement This presentation contains forward-looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of their approval of this presentation. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The Directors undertake no obligation to update any forward-looking statements contained in this presentation, whether as a result of new information, future events, or otherwise. Constant Currency Glanbia s financial results are exposed to movements in the Euro/US dollar currency exchange rate and the impact this has on the translation into euro of the significant portion of the Group s profits that are US dollar denominated. To reflect the underlying performance of the business Glanbia uses constant currency as a basis for discussing financial results and providing earnings guidance. In the first half of 2012, US dollar denominated profits represented approximately 75% of the Group s earnings before interest, taxation and amortisation (EBITA). 2

3 Results overview 3

4 HY 2012 results overview Solid performance in the context of exceptionally strong HY 2011 Strong performance by Global Nutritionals Weaker global dairy prices impact Dairy Ireland and International Joint Ventures & Associates Revenue up 1.6% to 1.4 billion EBITA up 6.5% to million EBITA margin up 40 basis points to 7.9% Adjusted EPS up 1.3% to cents Half year dividend per share up 10% to 3.66 cents Revenue 1.6% EBITA 6.5% EBITA margin 40 bps Adjusted EPS 1.3% Half year dividend 10% All figures shown are on a constant currency basis 4

5 HY 2012 results summary pre exceptional 1 Constant Currency 2 Reported HY 2012 HY 2011 Change HY 2012 Change Revenue 3 1,364.9m 1,342.9m + 1.6% 1,420.7m + 5.8% EBITDA 124.1m 117.0m + 6.1% 131.2m % EBITA 107.2m 100.7m + 6.5% 113.8m % EBITA margin 7.9% 7.5% + 40 bps 8.0% + 50 bps Operating profit 98.0m 91.8m + 6.8% 104.0m % Operating margin 7.2% 6.8% + 40 bps 7.3% + 50 bps Share of results of Joint Ventures & Associates 3 6.1m 9.6m % 6.4m % Adjusted earnings per share c 27.63c + 1.3% 29.96c + 8.4% 1 An exceptional item of 4.7 million relates to the profit on disposal of the Yoplait Ireland franchise partially offset by associated asset write downs and rationalisation costs. 2 Constant currency is based on retranslating HY 2012 results at the HY 2011 average market exchange rate. The HY 2011 average exchange rate was 1 = US$ which compares with the reported average exchange rate for HY 2012 of 1 = US$ Total Group revenue, including Glanbia s share of revenue of Joint Ventures & Associates, was 1,678.5 million, 1,608.0 million on a constant currency basis (HY 2011: 1,589.7 million). Share of results of Joint Ventures & Associates is an after interest and tax amount. 4 Adjusted earnings per share is calculated as the profit for the year attributable to the owners of the Group before exceptional items and amortisation of intangible assets (net of tax). 5

6 HY 2012 Total Group divisional results HY 2012 revenue 1.1% 1.6 billion HY 2012 EBITA 1.5% million 43% 42% 65% 25% EBITA Margin 4.4% 15% EBITA Margin 11.2% 10% EBITA Margin 4.6% US Cheese & Global Nutritionals: million revenue 8.6%; 77.3 million EBITA 16.9% Dairy Ireland: million revenue 4.7%; 29.9 million EBITA 13.6% Joint Ventures & Associates: million revenue 1.5%; 11.2 million EBITA 30.0% Total Group includes Glanbia s share of Joint Ventures and Associates. All figures shown are on a constant currency basis 6

7 HY 2012 Total Group revenue analysis Total Group revenue HY bn Volume - Price 1% HY bn 1% US Cheese & Global Nutritionals HY m Volume 4% Price 5% HY m 9% Dairy Ireland JVs & Associates HY m HY m Volume (4%) Volume 1% Price (1%) Price (3%) HY m HY m 5% 2% All figures shown are on a constant currency basis 7

8 HY 2012 Total Group EBITA analysis Total Group EBITA 1.5% m m - 4.7m - 4.8m 118.4m Positive organic volume growth - Higher whey input costs for PN + Benefit to Ingredient Technologies from higher whey prices - Weaker global dairy markets + Efficiency and cost reduction programs - Weaker global dairy markets + Positive volume growth + Strong operational performance 0 HY 2011 US Cheese & Global Nutritionals Dairy Ireland Joint Ventures & Associates HY 2012 US Cheese & Global Nutritionals Dairy Ireland Joint Ventures & Associates All figures shown are on a constant currency basis 8

9 HY 2012 US Cheese & Global Nutritionals US Cheese Revenue EBITA EBITA margins Positive volume growth driven by foodservice and export demand Lower average market prices driven by higher milk output and cheese production Ongoing efficiency program, Glanbia Performance System, supported margins New milk price formula better aligns milk price with market prices of cheese and whey products Global Nutritionals Positive organic volume growth combined with price growth Revenue EBITA EBITA margins Key challenge related to continued higher whey costs in performance nutrition business Impact partially offset by price increases and Group s strategic positioning across the whey value chain Acquisition of Aseptic Solutions in July Overall performance continues to be underpinned by favourable market trends and strong product innovation Revenue 691.3m 8.6% EBITA 77.3m 16.9% EBITA margin 11.2% 80 bps Leading brand family in performance nutrition Leading US producer American-style cheddar cheese Global marketer of whey protein isolate Global supplier of micronutrient premixes Glanbia internal estimates All figures shown are on a constant currency basis 9

10 HY 2012 Dairy Ireland Dairy Ingredients Revenue EBITA EBITA margins Decline in global dairy markets due to higher milk production Margins impacted by lag in reflecting lower market prices in milk cost Efficiency and cost management programs provide margin benefit Improvement in sentiment in global dairy markets in recent weeks Consumer Products Revenue EBITA EBITA margins Conditions remain challenging but some signs of stabilisation in volumes Ongoing benefits from operational efficiency program Changed relationship with Yoplait Agribusiness Revenue EBITA EBITA margins Satisfactory overall performance Volumes down slightly in line with market trends Revenue 673.6m 4.7% EBITA 29.9m 13.6% All figures shown are on a constant currency basis EBITA margin 4.4% 50 bps No.1 Irish dairy processor No. 1 Dairy consumer brand No. 1 European manufacturer of enriched milk powders Glanbia internal estimates 10

11 HY 2012 Joint Ventures & Associates Southwest Cheese: USA Revenue EBITA EBITA margins Lower US Cheese markets driven by higher milk output Revenues lower as a result but volume growth positive driven by foodservice and exports Margin impact partially offset by strong operational performance Glanbia Cheese: UK Revenue EBITA EBITA margins Positive revenue growth driven by volumes Lower margins reflect comparison against favourable buy/sell equation in HY 2011 Nutricima: Nigeria Satisfactory overall performance Revenue EBITA EBITA margins Revenue 243.1m 1.5% EBITA 11.2m 30.0% EBITA margin 4.6% 190 bps Leading US producer American-style cheddar cheese No. 1 European supplier of mozzarella cheese No. 3 Consumer packaged dairy powders in Nigeria Glanbia internal estimates All figures shown are on a constant currency basis 11

12 HY 2012 Financing KPIs Results as reported HY 2012 HY 2011 Change EBITDA 131.2m 117.0m m Net debt 560.8m 569.1m - 8.3m Net debt/adjusted EBITDA 2.3 times 2.5 times times Return on capital employed 12.7% 13.0% - 30 bps 1 Adjusted EBITDA for the purpose of financing ratios reflects Group EBITDA plus dividends from Joint Ventures & Associates. 2 Return on capital employed is calculated as EBITA, including share of Joint Ventures & Associates EBITA, (post tax) over capital employed. Capital employed is defined as non-current assets plus working capital. Preference shares ( 63.5m) Private debt placement ($325m) Total committed debt facilities million Negotiations for extension of maturity of existing bank facilities to January 2018 expected to be completed shortly Bank facilities ( 510m) 12

13 FY 2012 outlook The overall outlook for the remainder of the year is positive. Global dairy markets have stabilised and this is expected to underpin a steady performance in Dairy Ireland, US Cheese and International Joint Ventures in the second half. Growth within Global Nutritionals is forecast to remain strong, driven by the ongoing trend towards healthy living and a strong innovation pipeline. Upgrading outlook for FY12 adjusted EPS growth to 8% to 10%, on a constant currency basis 13

14 Vision and strategy 14

15 Clear vision and growth strategy TO BE THE LEADING GLOBAL NUTRITIONAL SOLUTIONS AND CHEESE GROUP STRATEGIC PRIORITIES Align to key growth customers and markets Science-based innovation Effective risk and capital management Operational excellence 15

16 2012 business focus areas US Cheese & Global Nutritionals Deliver nutritionals acquisition Complete planned facilities expansion in Customised Premix Solutions Review milk procurement strategy in US Cheese Achieve organic growth targets for Global Nutritionals Product innovation and customer collaboration Manage buy/sell balance and whey supply in Performance Nutrition $60 million acquisition of US-based Aseptic Solutions by Ingredient Technologies 20 million leading-edge plant commissioned in Germany Introduced a new milk price formula which better aligns the price paid for milk with market prices for US cheese and whey products Positive organic volume growth combined with continued price growth $11 million cheese innovation and customer collaboration centre in Idaho for 2013 Strong innovation pipeline across all Global Nutritional segments This remains the key challenge for Global Nutritionals performance in the second half Ongoing Ongoing Ongoing 16

17 2012 business focus areas Dairy Ireland Clarity on the strategic approach to opportunity post abolition in 2015 of the current EU milk quota regime Deliver whey expansion in Dairy Ingredients Build strong customer relationships Achieve further strategic cost reductions in Consumer Products Proposed 40:60 joint venture announced today with Glanbia Co-operative Society Limited in relation to Irish dairy progressing 21 million expansion of value-added whey processing capacity Long term contract agreed between Agribusiness and US-based Sturm Foods for supply of milled oats for the McCann s Irish Oatmeal brand from million sale of Yoplait Ireland franchise back to Yoplait and ongoing related cost rationalisation programme Ongoing 17

18 Glanbia proposals announced today 18

19 Summary of proposals Proposed new dairy processing joint venture Strategic joint venture in relation to Dairy Ingredients Ireland business unit 60% Society : 40% plc Creating the platform for 60% growth in milk output by 2020 Part funded by the Society 3% sale of plc shares; reduces shareholding to 51.4% Option for the Society to acquire remaining 40% within 6 year period Subject to approval by Society members and plc shareholders Proposal to reduce Society shareholding to 41.4% Distribution (spin-out) of 7% of issued share capital of plc to Society members Sale of further 3% with proceeds used to provide additional equity to JV and reduce Society debt Reducing the Society s ownership to 41.4% but remaining the largest shareholder in the plc Subject to approval by Society members in two separate votes The distribution and share sale is contingent on the joint venture being approved 19

20 Joint venture overview Business Overview New entity to be known as Glanbia Ingredients Ireland ( GII ). Business consists of Ballyragget and Virginia processing plans, 45% share of Corman Miloko Joint Venture and the 23% Glanbia shareholding in the Irish Dairy Board 2011 revenue 738 million; 2011 EBITDA 44 million; 2011 EBIT 33 million Planned 60% increase in processing capacity. Including new 150 million processing plant in Belview, Co. Kilkenny, total expansion investment programme of 180 million by 2020 Agreement Overview Net fixed assets as at 31 December 2011 have been agreed at 74.1 million (Society pays 60%); million fixed assets net of 20 million discount and 16.3 million pension Working capital at completion will be paid to the plc in cash by GII; average 2011 working capital was 112 million An equity capital injection of 29.6 million into GII will be paid proportionally by both parties at completion GII to have a strong opening balance sheet and financed independently of the JV partners 20

21 Easy organisational transition Fully aligned with Glanbia s existing organisation and business model Glanbia plc Business unit moves from Dairy Ireland division to Joint Ventures & Associates Dairy Ireland US Cheese & Global Nutritionals Joint Ventures & Associates Standalone business within Glanbia s portfolio, with existing experienced management and staff Dairy Ingredients US Cheese Glanbia Ingredients Ireland Strong complementary links with plc continue market access, technology transfer, commercial agreements, innovation pipeline, strategy support and financial discipline Supported by Glanbia s proven ability in strategic international joint ventures in UK, USA and Nigeria Consumer Products Agribusiness Global Nutritionals Southwest Cheese (USA) Glanbia Cheese (UK) Nutricima (Nigeria) 21

22 Dairy Ingredients valuation overview Fixed assets 110m Discount on assets 20m Pension 16m Net fixed assets 74 million Agreed fixed asset discount as part of the joint venture transaction In line with Pension Board approved funding plan IAS 19 pension accounting obligation 35 million June 2012 ( 11 million December 2011) Society 60% equates to 44.5 million Final consideration determined by change in fixed assets between 31 Dec 2011 and completion Working capital at completion paid in cash by GII to the plc Average 2011 working capital was 112 million Working capital 112m Net fixed Assets 74m GII net assets 186m Illustrative based on net fixed asset value at 31 Dec

23 Joint venture - Glanbia plc financial assessment Due from Society for 60% share of JV 34.3m 10.2m Cash amount paid by Society to plc (funded by 3% share sale) Illustrative example using closing share price of 5.91 of 24 August 2012 Loan from the plc to the Society to fund remainder of consideration due 44.5m Total consideration due from Society* Due from GII for working capital at completion 112.0m Illustrative example using average 2011 working capital Plc equity injection into GII 11.8m Plc equity injection into JV, proportional to 40% ownership Society equity of 17.8 million bringing total JV equity 29.6 million *Illustrative based on net fixed asset value at 31 Dec

24 Share distribution and sale Separately but related to the joint venture proposal, the Society is seeking approval to reduce its shareholding in Glanbia to 41.4% as follows: Distribute 7% of the share capital to Society members Dispose of 3% (in addition to the 3% disposal under the joint venture proposal) In this scenario: The joint venture parties will inject an additional 29.6 million in equity into GII in proportion to their shareholdings (plc share 11.8 million). Total equity investment 59.2 million (plc share 23.6 million). The consideration payable by the Society to Glanbia for the 60% joint venture interest will be discharged by cash, with no requirement for a loan note. 24

25 Conditions for completion and timetable Society member approval Joint venture proposal subject to 50% approval Share distribution and sale requires 75% approval in two stage voting process If the joint venture proposal is not approved, neither transaction will proceed The 150 million green field investment is also contingent on the approval of the joint venture transaction Plc shareholder approval As a related party transaction, the joint venture is subject to approval by Glanbia plc shareholders, excluding the Society and its associates A circular will be issued to shareholders in due course Timetable Subject to contracts and approvals, the joint venture transaction is expected to complete before the end of

26 Compelling proposition for both parties Plc Clarifies the Group s strategy and approach to Irish milk processing expansion Allows the Group to continue with its successful international growth strategy, with a particular focus on nutritionals Short term earnings dilution Reshapes ownership structure with Society shareholding down to 41.4% Free float increases from 45.6% to 58.6% Society representation on Glanbia board falls from 14 to 8 by 2018 Society Underpins the ability to drive future growth in dairy processing for members Clarifies ownership structure of critical assets for members Gives majority and possibly full ownership of world class dairy processing business Broadens the Society s portfolio of investments Timely opportunity for spinout of Glanbia plc shares Develops a progressive and new model for sustainable growth for members 26

27 Summary and outlook 27

28 Summary & outlook Overall outlook positive and well positioned to continue growth Global Nutritionals growth underpinned by favourable market trends and ongoing focus on innovation. Global dairy markets have stabilised providing the base for a more stable performance in the second half Well defined strategy with clear adherence to key strategic priorities Joint venture proposal has compelling strategic logic for both parties Upgrading outlook for FY12 adjusted EPS growth to 8% to 10%, on a constant currency basis 28

29 Supplementary information 29

30 Market commentary Global dairy markets Progressively weaker market pricing Significant growth in global milk production Continued positive global demand Market is expected to be more stable reflecting continued positive demand growth and the impact of recent drought conditions in the US on global supply. US Cheese Weaker prices for the first half of the year Growth in US milk output and cheese production Positive demand growth; exports strong US cheese prices are expected to increase in the second half of the year as drought conditions result in a reduction in the US milk supply Global Nutritionals Strong growth in key nutritionals markets Growing number of nutrition-aware consumers Whey protein prices significantly higher Consumer Products Signs of stabilisation in Irish food retail market Favourable demand conditions in key nutritional segments expected to continue. Modest decline in prices for higher end whey expected in second half of the year due to the addition of new sources of supply Despite stabilisation, market expected to remain challenging characterised by intense competition. 30

31 Segmental analysis on a constant currency basis HY 2012 (1) HY 2011 Revenue EBITA (2) EBITA Margin Revenue EBITA m m m m EBITA Margin US Cheese & Global Nutritionals % % Dairy Ireland % % Group (3) 1, % 1, % JVs & Associates % % Total including JVs & Associates 1, % 1, % (1) Pre exceptional items. (2) Given the nature of Group acquisitions in recent years, EBITA is an accurate reflection of underlying cash generative operating performance. (3) Reported results exclude Joint Ventures & Associates. Share of results of Joint Ventures & Associates in the income statement is an after interest and tax amount. 31

32 Segmental analysis as reported HY 2012 (1) HY 2011 Revenue EBITA (2) EBITA Margin Revenue EBITA m m m m EBITA Margin US Cheese & Global Nutritionals % % Dairy Ireland % % Group as reported (3) 1, % 1, % JVs & Associates % % Total including JVs & Associates 1, % 1, % (1) Pre exceptional items. (2) Given the nature of Group acquisitions in recent years, EBITA is an accurate reflection of underlying cash generative operating performance. (3) Reported results exclude Joint Ventures & Associates. Share of results of Joint Ventures & Associates in the income statement is an after interest and tax amount. 32

33 HY 2012 summary cash flow HY 2012 m HY 2011 m Change m EBITDA pre exceptional Working capital movement (150.3) (127.2) (23.1) Net interest and tax paid (18.9) (13.0) (5.9) Business sustaining capital investment (15.2) (10.0) (5.2) Other (6.2) (7.8) 1.6 Free cash flow (59.4) (41.0) (18.4) Acquisitions/disposals 19.9 (114.2) Dividends received from Joint Ventures (1.7) Strategic acquisition/capital expenditure (24.8) (10.8) (14.0) Restructuring Costs (0.5) (7.1) 6.6 Equity dividends paid (14.6) (13.2) (1.4) Currency exchange/fair value adjustments (3.9) 20.8 (24.7) Net increase in debt during the period (80.5) (161.0) 80.5 Net debt at the beginning of the year (480.3) (408.1) (72.2) Net debt at the end of the period (560.8) (569.1)

34 HY 2012 summary balance sheet HY 2012 m HY 2011 m Change m Property, plant and equipment Investments Intangible assets Non-current receivables (2.0) Deferred tax/capital grants (97.8) (88.6) (9.2) Working capital Retirement benefit obligations (117.4) (29.7) (87.7) Provisions (45.3) (42.5) (2.8) 1, , Net debt (560.8) (569.1) 8.3 Shareholders equity

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