Bloomberg News

Glanbia Eyes Purchases to Benefit From Cheese Business

October 24, 2011

(Corrects size and scope in first paragraph of story originally published on Oct. 21.)

Oct. 21 (Bloomberg) -- Glanbia Plc, the largest U.S. cheddar cheese maker, may spend 200 million euros ($278 million) next year on acquisitions to boost the nutritional products business it’s built up from the by-products of dairy goods.

The company is targeting purchases in the U.S. and Europe, Group Managing Director John Moloney said in an interview at Glanbia’s headquarters in Kilkenny, south of Dublin, last week.

“I would like to see that we’ll have a bigger and well- resourced global nutritionals business,” he said. “By the start of next year we should be able to spend somewhere between 150 million euros and 200 million euros” on acquisitions, the executive said.

Glanbia, which supplies cheese for McDonalds Corp. burgers, uses the whey produced in the cheese manufacturing process to make protein bars and shakes for weight trainers, as well as other lifestyle nutritional products. The company, which bought Florida-based Bio-Engineered Supplements and Nutrition for $144 million in January, generates double the margins at its nutrition business to those at its Irish dairy operations.

The nutritional business is the “key growth driver of the group” and the company is building a consumer brand through speciality retailers, Moloney said. The company’s health brands, used by bodybuilders and athletes, include Optimum Nutrition, BSN and specialty drink maker American Bodybuilding.

“That industry is growing at a rapid rate still and there is plenty of scope to grow it internationally,” said Darren Greenfield, a Dublin-based analyst at NCB Stockbrokers, with a “Buy” recommendation on Glanbia. “Nutrition should definitely be the focus of the company for the shareholders.”

Earnings Growth

In August, Glanbia raised its full-year adjusted earnings per share growth guidance to between 18 and 20 percent, from an earlier forecast of growth of 11 percent to 13 percent.

Glanbia shares were down 2 percent at 4.50 euros at the close in Dublin trading. Before today, they were up 30 percent in the past year, compared with a 5.4 percent decline in the ISEQ index.

Glanbia sells 640-pound blocks of cheddar cheese in the U.S., which end up in sliced and sold in retailers such as Wal- Mart Stores Inc. or on burgers at McDonalds or Burger King Holdings Inc. Ninety percent of the milk used in cheese making ends up as whey or other co-products, which can be used in health enhancers, Moloney said.

“Part of the strategy is that you move up that triangle from large volume in cheese and base dairy processing to lower volume but higher value products,” Moloney said.

The company’s U.S. cheese and global nutritional business, which are grouped in earnings together, posted an operating profit of 63.1 million euros in the first half, with a margin of 10.4 percent.

Milk Production

Glanbia, Ireland’s largest supplier of milk, processes 1.8 billion liters of milk a year in its home market, more than 80 percent of which is exported. The company’s milk production may climb 40 percent to 50 percent by 2020 after the abolition of European milk quotas in 2015, Moloney said. That may help generate additional revenue of 350 million euros to 400 million euros over five years, he said.

“Ireland is one of the few places in the world that will have a clearly significantly increased output” in milk for export, Moloney said.

--Editors: Peter Branton, Tim Farrand

To contact the reporters on this story: Finbarr Flynn in Dublin at fflynn3@bloomberg.net Dara Doyle in Dublin at ddoyle1@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge at


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