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ISEQ lower-Glanbia results examined

Wednesday, March 13 08:51:14

The ISEQ is a little lower this morning at 3860, down 5 points as European markets ease on the back of mixed Corporate results.

In Ireland, Glanbia results look very positive and these are discussed by NCB Stockbrokers:

Glanbia reported better than expected FY12 results this morning.

Sales were E3.0bn (+10.4pc in constant currency) vs. our estimate of E2.8bn, EBITA E213.6m (7.0pc margin, +40bps yoy) vs. our estimate of E212m, and EPS of 56.6 cent (+14.2pc yoy in constant currency, +22.1pc reported) vs. our estimate of 54.8 cent. Initial 2013 EPS guidance is given as 8-10pc growth.

Analysis: US Cheese & Global Nutritionals (c.71pc of revenues, c.73pc of EBITA):

For the full year, sales increased 11.0pc in constant currency vs. our estimate of c.9pc driven by 6pc volume growth and 4pc product mix. EBITA margin increased 80bps yoy driven by a strong performance in Global Nutritionals. In US Cheese volumes increased low single digits while prices were c.6pc lower. 2013 performance is expected to be in line with 2012. Global Nutritionals had another strong year in 2012 in all 3 divisions and investment in new technologies, acquisitions and capacity is expected to support another strong year in 2013.

Dairy Ireland (c.21pc of revenues, c.10pc of EBITA): For the full year, sales increased 2.4pc in constant currency vs. our estimate of c.-1pc driven by 3pc volume growth and 2pc pricing growth offset by the Yoplait franchise disposal. EBITA margin declined 70bps reflecting a challenging year in both Consumer and Agri. Dairy Ingredients Ireland has now been moved from this division to JVs. Agri is expected to perform in line in 2013 while Consumer Products is likely to face another challenging year.

JVs and associates (c.18pc of EBITA) contributed E12.1m vs our expectations of E12m excluding Dairy Ingredients Ireland. Overall performance in FY13 is expected to be somewhat similar.

Net debt came in slightly lower than expected at E376.6m (-E104m yoy; 1.7x net debt/EBITDA). Free cashflow decreased E26m yoy to E60.4m due to higher Global Nutritionals inventories, increased Agribusiness debtors and an insurance receivable.

Conclusion & Action: Overall, FY12 results were c.3pc ahead of expectations and initial FY13 growth guidance of 8-10pc like-for-like (c.1pc reported) reflects confidence in a continued strong performance in Global Nutritionals despite the current environment.

The catalysts this year are likely to be around investment and further nutritionals acquisitions (we estimate c.E150-200m of head room). Future earnings should suffer lower volatility following the Dairy Ingredients Ireland spin-off. Glanbia currently trades on c.12.6x FY13E EV/EBITDA and c.15.3x P/E vs. the wider nutritionals sector at c.16-17x P/E according to NCB Stockbrokers.