Results presentation Final 100310 - Glanbia/media/Files/G/Glanbia...presentation and accompanying announcements. Due to the inherent uncertainties, including both economic and business

2009 Results

This presentation and accompanying announcements contain 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 and accompanying announcements. 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.

10 March 2010 Slide 2

Cautionary statement

•Solid full year results in line with market

expectations; and

•Discussion regarding potential disposal of Irish

Dairy and Agri Businesses


10 March 2010

10 March 2010

2009 Results

• Unprecedented year with “a perfect storm” across the dairy industry

• Global economic recession

• Nutritional markets very resilient

• Weaker demand for dairy products

• Sharp decline in global dairy prices to extremely low levels until Q4 2009

• US cheese prices low and volatile for most of the year


2009 Market commentary

Section 1 Section 2 Section 3

• Resilient performance in a very challenging operating environment

• Strong result in Global Nutritionals, particularly Optimum Nutrition

• Major cost saving initiatives across the Group; continuing in 2010 in Ireland

• Strong operational performance achieved across the business

• 40% expansion in Southwest Cheese on track for successful delivery


2009 Operating highlights


• Operating margin grew by 10 basis points to 6.1% (2008: 6.0%)

• EBITDA margin grew 80 basis points to 8.3% (2008: 7.5%)

• Adjusted earnings per share down 14.4% to 30.68c (2008: 35.86c)

• Dividend per share up 5% to 6.84c (2008: 6.51c)

• Strategic review of main pension schemes reduced liability by €79.0m


2009 Financial highlights




2009 Results summary 2009 2008 Change

Revenue1 (€m) 1,830.3 2,232.2 (18.0%)

Operating profit pre exceptional (€m) 111.2 134.1 (17.1%)

Operating margin pre exceptional (%) 6.1 6.0 Up 10 bps

Net financing costs (€m) (24.0) (21.1) €2.9m

Share of results of Joint Ventures & Associates1 (€m) 10.2 7.3 39.7%

Profit before tax pre exceptional (€m) 97.4 120.3 (19.0%)

Net exceptional items (€m) 34.9 (19.4) See slide 10

Basic earnings per share (cents) 38.46 26.76 43.7%

Adjusted net income2 (€m) 89.9 105.1 (14.4%)

Adjusted earnings per share2 (cents) 30.68 35.86 (14.4%)

Dividend per share in respect of the full year (cents) 6.84 6.51 + 5%

1. Revenue including Glanbia’s share of the revenue of Joint Ventures & Associates was €2.1 billion for full year, compared with €2.6 billion for 2008. Share of results of Joint Ventures &

Associates is an after interest and tax amount.

2. Before exceptional items and amortisation of intangible assets.

• Net debt €442.6m (2008: €452.1m)

• Net debt to EBITDA 2.9 times (2008: 2.7 times)

• Total debt facilities €729.1m; €100m additional secured in 2009

• Free cash flow €52.0 m (2008: €72.4 m)

• Strategic capital expenditure €45.8 m (2008: €63.9m)

• Reinvested dividend from Southwest Cheese of €17.9m (2008: Nil)

• Net pension liability €85.8m (2008: €164.4m)


Financing



2009 Net exceptional items (post tax)


• Cost reduction programme (€15.1m)

o Annualised costs saving of c €10.0m in 2009;

o Over 200 redundancies planned in Ireland in 2010

• Pensions credit €79.0m

o Strategic review of pension arrangements

o Reduction in Group pension liability

• Foreign exchange charge (€18.3m)

o Non-cash charge on sterling inter-group loan repayment

o No balance sheet impact

• Exceptional tax charge (€10.7m)

• Net exceptional credit (post tax) €34.9m


2009 Segmental summary including Joint Ventures & Associates


• Total revenue declined 18.2%; €311.8m reduction in Dairy Ireland

• Operating profit down 14.9%; reflecting scale of decline in Dairy Ireland

• Strong operating/EBITDA margins reflect contribution of higher margin businesses

2009 2008

Revenue

Operating

profit pre

exceptional

Operating

Margin

EBITDA pre

exceptional

EBITDA

Margin Revenue

Operating

profit pre

exceptional

Operating

Margin

EBITDA pre

exceptional

EBITDA

Margin

€m €m €m €m €m €m

US Cheese & Global

Nutritionals 792.4 90.0 11.4% 110.0 13.9% 844.2 83.8 9.9% 96.7 11.5%

Dairy Ireland 1,028.8 24.0 2.3% 45.2 4.4% 1,340.6 49.7 3.7% 69.9 5.2%

Other business 9.1 (2.8) (30.8%) (2.7) (29.7%) 47.4 0.6 1.3% 1.0 2.1%

Group (as reported) 1,830.3 111.2 6.1% 152.5 8.3% 2,232.2 134.1 6.0% 167.6 7.5%

JVs & Associates 297.6 17.4 5.8% 23.8 8.0% 370.3 17.0 4.6% 23.1 6.2%

Total including JVs &

Associates 2,127.9 128.6 6.0% 176.3 8.3% 2,602.5 151.1 5.8% 190.7 7.3%


US Cheese & Global Nutritionals


• Global Nutritionals strong – organic growth, new products, FY Optimum

• More than offset lower US Cheese prices; average block cheddar down 30%

• Revenue down 6.1%; operating profit up 7.4%

• Excellent operating and EBITDA margin growth

Margin

13.9%Margin

11.4%

€m€m

€m

Margin

9.9%Margin

11.5%


Dairy Ireland


• Significant FY loss in Dairy Ingredients; market decline moderated in H2

• Consumer Products reasonable results in highly competitive market place

• Agribusiness weaker performance as a result of lower farm incomes

• Revenue, profits and margins all down

€m €m €m

Margin

2.3%

Margin

3.7% Margin

4.4%

Margin

5.2%


Joint Ventures & Associates


• Solid performance by Southwest Cheese, despite extremely low cheese prices

• Glanbia Cheese UK marginal decline, mozzarella cheese market related

• Nutricima Nigeria returned to profit; loss-making in 2008

• Revenue down 19.6%, operating profit up 2.4%

• Operating margin up 120 basis points

€m €m €m

Margin

5.8%

Margin

4.6%

10 March 2010

Strategy update

• Glanbia Co-operative Society Limited, 54.6% shareholder, has expressed an

interest in acquiring Group’s Irish Dairy and Agri Businesses (and related activities)

• Would be likely to involve significant reduction in Society’s ownership in plc

• Would require both Society member and plc shareholder approval

• Discussions progressing well; no guarantee of transaction being concluded


10 March Stock Exchange announcement



Clear rationale and unique transformation opportunity


• Glanbia Co-operative Society Limited

o Changes in global dairy markets creates environment for potential transaction now

o Offers the prospect of full ownership and control of relevant Irish businesses

o Aligns stewardship of key strategic assets more closely with member interests

• Glanbia plc

o Increases focus on international business – Global Nutritionals and Cheese

o Significantly improves financial flexibility

o Enhances development of successful growth strategy

• Dairy Ingredients: rationalisation and cost competitiveness underpins

sustainable business in changed global dairy markets

• Consumer Products: continue to develop product portfolio and ‘right-size’

organisation for new Irish food retail market

• Agribusiness: continue to focus on farmer needs and cost competitiveness


Dairy Ireland strategy


Ireland’s

Leading Dairy

Processor

7 of Top 100

consumer food

brands

A market

leader in farm

inputs


Well established international growth strategy


Incre

asin

g innovation r

ate

Str

onger

mark

et gro

wth

rate

s

Susta

inable

hig

her

marg

ins

Global

Nutritionals

US Cheese

Natural business alignment


Established, scale businesses with market leading positions


Performance

Nutrition

Customised

Premix Solutions

Ingredient Technologies

US Cheese

B2C

Business to consumer manufacturer and marketer

of products for performance nutrition and health

and wellness; including leading US sports brand.

B2B

Business to business focused micro-nutrient

applications and premix solutions provider; leading

global supplier.

B2B

Business to business whey-based ingredients

development and marketing; leading global

supplier.

Glo

ba

l N

utr

itio

na

ls

B2B

340,000 tonnes American-style cheddar cheese

64,000 tonnes whey based-ingredients


Nutritional Trends: structural growth drivers


Defensive and offensive

actions by leading food and

drink companies, NPD by

Nutrition specialists

Information age increasing

understanding of link

between diet and fitness,

health and wellness

Aging profile of Western

economies, higher disposal

income and shift in attitudes to

prevention rather than cure

Normalisation of nutrition

products; fitness, weight

management, body-

conscious, self-care and active

aging

Rising health care costs and

lack of comprehensive social

welfare and healthcare

systems in many countries



Global Nutritionals: strong track record of growth

Innovation

Centres open

Kortus Food

Ingredients

Shanghai

Pizzey’s

2003 2004 2005 2006

Management Team

put together

China Premix

Plant

Southwest

Cheese

Latin America

Idaho WPI

expansion

2007

Seltzer Inc.

Seltzer

Midwest

Plant

2008

Idaho

Lactose

expansion

SWC

expansion

R&D sophistication, commericalisation and market awarenessR&D sophistication, commericalisation and market awareness

Acquisition

Organic expansion

Geographic footprint

US$550 million+

US$0

Idaho

WPI and WPC80

expansion

Idaho

Lactose and

WPC expansion

WPI expansion

Singapore

Malaysia

Indonesia

2009/10

Mexico

Sydney (2010)

Profibe


US Cheese: structural growth drivers


Increased, sustained

demand for cheese in

emerging markets

Core US market growing due

to increased population

growth, increasing use of

cheese as a core ingredient

in both out of home and at

home cooking

Ongoing rationalisation of

production capacity from

smaller older plants to scale,

modern facilities



Ongoing evolution of R&D sophistication & commercialisation

Cheese

production

starts in

Gooding

Twin Falls

plant

purchase

1990 2005 2006

Acquisition of

Wards Cheese

Southwest Cheese

250m lbs block cheese

Southwest Cheese

250m lbs block cheese

2008 2009 2010

SWC II

Total Glanbia cheese

>800m lbs

1991 1993 1997

Barrel cheese

expansion to

190m lbs

1999

Barrel cheese

expansion to

250m lbs

2007

Barrel cheese

expansion to

300m lbs

Barrel cheese

expansion to

330m lbs

Growth in US Cheese

US$0

US$1 billion

Systematic rationalisation of American-style cheddar cheeseSystematic rationalisation of American-style cheddar cheese

• Large scale, low cost, quality producer

• Expertise in managing and mitigating volatility

• Long-term relationships with market-leading customers

• Export opportunities in Asia/Middle East/Latin America



Strategic strengths

Market leading

positions in growth

markets

Focused scale player

Science-based

innovation

Developed route to

market

Strategic opportunities

Consolidation

opportunities in

fragmented markets

Growth markets

Favourable consumer

trends

Global expansion

Well established international growth strategy

• Resilient performance in a very challenging operating environment in 2009

• Strong result in Global Nutritionals, particularly Optimum Nutrition

• Whilst outlook remains challenging, there are some positive signs which

should underpin our performance in 2010

• Discussion on potential transaction progressing well

• Underpinned by strong strategic rationale for both parties


Conclusion


10 March 2010

Supplementary Information



2009 Summary cash flow2009

€m

2008

€m

Change €m

EBITDA pre exceptional 152.5 167.6 (15.1)

Working capital movement (32.9) (1.0) (31.9)

Net interest and tax paid (30.7) (49.7) 19.0

Business sustaining capital investment (20.1) (23.6) 3.5

Other (including additional pension contributions) (16.8) (20.9) 4.1

Free cash flow 52.0 72.4 (20.4)

Acquisitions (1.3) (229.4) 228.1

Disposals 2.0 22.3 (20.3)

Dividends received from Joint Ventures 17.9 0.5 17.4

Strategic capital expenditure (45.8) (63.9) 18.1

Equity dividends paid (19.5) (18.5) (1.0)

Currency exchange/fair value adjustments 4.2 (15.3) 19.5

Net decrease/(increase) in debt during the year 9.5 (231.9) 241.4

Net debt at the beginning of the year (452.1) (220.2) (231.9)

Net debt at the end of the year (442.6) (452.1) 9.5



2009 Summary balance sheet 2009

€m

2008

€m

Change

€m

Property, plant and equipment 363.2 361.1 2.1

Investments 88.7 100.6 (11.9)

Intangible assets 342.1 359.2 (17.1)

Non-current receivables 33.7 12.8 20.9

Deferred tax/capital grants (72.9) (46.4) (26.5)

Working capital 118.4 85.5 32.9

Retirement benefit obligations (85.8) (164.4) 78.6

Provisions (47.4) (28.4) (19.0)

740.0 680.0 60.0

Net financing (442.6) (452.1) 9.5

Shareholder equity 297.4 227.9 69.5

Documents

Results presentation Final 100310 - Glanbia/media/Files/G/Glanbia...presentation and accompanying announcements. Due to the inherent uncertainties, including both economic and business