Glanbia: Mixed Q119

24 Apr 2019

Glanbia this morning issued a mixed Q119A IMS but reiterated 2019 guidance of pro-forma adj.

EPS to grow in the 5% and 8% range on a constant currency basis. The translational FX tailwind is also unchanged at 3%. Wholly owned revenue was up 16.2% on a reported basis (INVe 11.1%), the main driver being the acquisitions of Slimfast and Watson. 

Volumes were up 1.4% (INVe 4.5%), but price dipped 2.7% (INVe -5.0%). Acquisitions contributed more than expected at 9.7% (INVe +6.4%). This was augmented by a 7.8% FX tailwind (INVe 5.2%). At the divisional level and on a constant currency basis, Glanbia Performance Nutrition reported weaker than expected numbers with revenue at constant currency up 4.9% (INVe 20.1%). 

There was a large, unexpected, contraction in volume in Q119A (-16.5% versus INVe +5.0%) attributed to “specific supply chain initiatives” impacting the “phasing of sales in certain non-US markets”. In contrast, the Slimfast acquisition performed better than forecast +24.8%, (INVe +17.1%). Price was down 3.4% (INVe -2.0%). Glanbia Nutritionals recorded a strong first quarter reporting a 10.4% increase in revenue (INVe-2.8%) driven primarily by very strong volume growth (11.2%; INVe 4.0%) and less weak price environment (-2.4%, INVe -6.8%). The Watson acquisition contributed 1.6%. Within Nutritionals, the higher margin Nutritional Solutions business reported a 22.1% increase in revenue driven by 16.1% volume growth and a 0.7% price increase. 

US Cheese revenue increased by 5.5% with volume growth of 9.1% offset by a 3.6% decrease in price. While not in reported revenue, JVs and Associates recorded a 14.9% increase in revenue (INVe 5.0%) with strong volume growth of 13.6% (INVe 8.0%) augmented by a small price increase (+1.3%; INVe -3.0%). Glanbia is trading at 17.6x FY19E P/E and 14.7x EV/EBITDA an over 15% discount to a weighted average food ingredient and dairy peer base (ex-Chr. Hansen). 

AUD gets hammered after CPI miss 

The Australian Q1 CPI print came in at a very disappointing 0.0% against the 0.2% expected, with the YoY number coming in at 1.3% against the 1.5% forecast. With the Australian economy hugely reliant on strong Chinese growth, the recent run of stable/stronger Chinese economic prints and sentiment indices had probably boosted hopes of a consensus beat but that was not to be. The AUD dropped almost 1% against the euro immediately after the release earlier this morning and has remained under pressure ever since. Markets are now pricing in at 70% chance of a 0.25% rate cut at the RBA’s early June meeting. 

It’s worth noting that the Bank of Canada meeting and rate announcement is due at 3pm today, in line with market expectations we don’t foresee any real noise around this meeting with the BoC to continue with their ‘on hold’ policy.  

EURUSD breaks below 1.1200 on positive earnings, record SPX 

Markets will be looking towards Friday’s preliminary US GDP data for Q1 for a guidance on the world’s no. 2 economy. However in advance of that, a raft of earnings releases for many of the largest companies will give a good insight into how major US and global economies have fared in Q1.

The dollar matched April highs against the Euro yesterday, breaking briefly below 1.1200 on the back of strong data releases from major names including Twitter, Coca-cola, Lockheed Martin and Procter and Gamble. The positive earnings also pushed the S&P 500 to a new record high close at 2933, meaning the entire dip from October to Christmas Eve, which saw almost 20% wiped off the value of the S&P500 index of shares, has been completely recovered and then some.

Still to come this week are earnings from a wide range of companies, including bellwethers for the global economy such as Caterpillar, Colgate-Palmolive and Visa, major tech stocks, Facebook, Amazon & Microsoft, and energy Exxon& Chevron. If the positive trend continues, the US could remain supported as demand for US assets continues. 

Economic releases 

09.00    GE       IfO business climate 

09.30    UK        Public sector borrowing 

09.30    UK        Chancellor Philip Hammond gives evidence to Treasury select committee 

15.00    CA        Bank of Canada meeting