Company Reports

No-moat Glanbia’s first-quarter 2024 sales update showed 1.5% volume growth and a negative pricing contribution of 6.9%, reflecting the inflationary environment in dairy markets. Both the performance nutrition and nutritional solutions segments delivered low-single-digit positive volume development in the quarter. With the decline in dairy market pricing in line with expectations, Glanbia confirmed its full-year guidance for growth in adjusted EPS between 5% and 8%. We don’t expect to make material changes to our forecast in light of this update and confirm our fair value estimate of EUR 15.90. At current levels, shares look slightly overvalued.

No-moat Glanbia reported 2023 revenue of $5.4 billion, in line with our expectations, and an adjusted EBITA margin of 7.8%, 40 basis points ahead of our forecast. The superior margin was primarily driven by the performance nutrition segment, which delivered a second-half EBITA margin of 16.3%. This was more than 400 basis points ahead of the same period last year, benefiting from lower input costs. Although management sees some pressure coming from freight costs in 2024, they expect the EBITA margin to be maintained at around the same level next year. Further to this, the 2024 outlook also outlines mid- to high-single-digit revenue growth for the performance nutrition segment and mid-single-digit volume growth for the nutritional solutions segment, which should translate into adjusted EPS growth of 5% to 7% in 2024. This is in addition to record EPS growth of 20.5% reported for 2023. The market reacted positively to the solid 2023 performance and optimistic 2024 guidance, sending shares around 10% higher intraday. We also increase our fair value estimate to EUR 15.90 from EUR 14.20 after reflecting the 2023 numbers and 2024 guidance, as well as an upgrade of our midcycle EBITA margin to 8.0% from 7.5% previously, driven by a slightly higher expected EBITA margin for the performance nutrition segment. At current levels, shares are expensive.

Despite its positioning in fast-growing segments, benefiting from secular trends around healthy lifestyle and wellness, we believe Glanbia's products are largely commoditized and we assign the company a no-moat rating. From its humble beginnings as an Irish dairy cooperative, Glanbia has transformed over the past few decades into a global manufacturer of ingredients and sports nutrition, primarily by using whey, a byproduct of milk processing and cheese manufacturing. Acquisitions have served to further diversify the portfolio away from whey-based ingredients and products, with Glanbia also building a sizable position in vitamins and mineral premix, which we believe has contributed to the accelerated growth of the segment. However, its cheese operations still account for a large share of revenue and we believe constitute a distraction for management from the higher-value-added parts of the portfolio.

Despite its positioning in fast-growing segments, benefiting from secular trends around healthy lifestyle and wellness, we believe Glanbia's products are largely commoditized and we assign the company a no-moat rating. From its humble beginnings as an Irish dairy cooperative, Glanbia has transformed over the past few decades into a global manufacturer of ingredients and sports nutrition, primarily by using whey, a byproduct of milk processing and cheese manufacturing. Acquisitions have served to further diversify the portfolio away from whey-based ingredients and products, with Glanbia also building a sizable position in vitamins and mineral premix, which we believe has contributed to the accelerated growth of the segment. However, its cheese operations still account for a large share of revenue and we believe constitute a distraction for management from the higher-value-added parts of the portfolio.

We increase our fair value estimate for no-moat Glanbia by 9% to EUR 14.2 following a solid third-quarter trading update and a full-year guidance upgrade. Management now expects to deliver 2023 adjusted EPS growth in the range of 17% to 20% from a range of 12% to 15% previously. We are also increasing our midterm EBITA target to 7.5% from 7.0% previously as we have seen margin recovery in the performance nutrition and nutritional solutions ahead of our prior expectations. We believe Glanbia will be able to hold on to some of these gains at the group level, although we expect that the 14% to 14.5% EBITA margin expected for 2023 for the performance nutrition segment will be difficult to maintain going forward given pressure from increasing customer acquisition costs, especially for the ailing SlimFast brand. We are also updating our valuation model to reflect the recent change in reporting currency from EUR to USD. Shares were up around 7% at the time of writing following the guidance upgrade and the sequential improvement in volumes in the third quarter (from negative 4.1% for the first half to negative 2.5% for the first nine months). We believe shares are fairly valued at current levels.

Despite its positioning in fast-growing segments, benefiting from secular trends around healthy lifestyle and wellness, we believe Glanbia's products are largely commoditized and we assign the company a no-moat rating. From its humble beginnings as an Irish dairy cooperative, Glanbia has transformed over the past few decades into a global manufacturer of ingredients and sports nutrition, primarily by using whey, a byproduct of milk processing and cheese manufacturing. Acquisitions have served to further diversify the portfolio away from whey-based ingredients and products, with Glanbia also building a sizable position in vitamins and mineral premix, which we believe has contributed to the accelerated growth of the segment. However, its cheese operations still account for a large share of revenue and we believe constitute a distraction for management from the higher-value-added parts of the portfolio.

No-moat Glanbia delivered 6.6% growth in adjusted EPS (constant currency) in the first half of 2023. Solid pricing in the performance nutrition, or GPN, segment and a 110-basis-point improvement to 7.2% in the group EBITA drove this. Volumes continued to deteriorate in both GPN and the nutritional solutions segment, driven by customer destocking and lower demand for the brand SlimFast. Management expects that the volume picture will improve in the second half of the year and input costs will continue to decrease, which should support a stronger EBITA margin for the year than previously expected. Consequently, full-year guidance for constant-currency adjusted EPS growth has been increased to 12%-15% from 7%-11% previously. We will likely increase our fair value estimate by a low-single-digit percentage after updating our model, but we continue to view shares as appropriately priced at current levels.

No-moat Glanbia reported a 2.6% like-for-like decline in revenue growth in its first-quarter trading update, driven primarily by a significant volume decline in the nutritional solutions segment. Despite this underwhelming performance, management upgraded slightly full-year 2023 adjusted EPS growth guidance to 7%-11% from 5%-10% previously. This was motivated by improved input cost visibility for the full year (especially in regard to whey), with the group now expecting the performance nutrition segment to deliver an EBITA margin in the range of 12.5%-13.5% (compared with guidance of above 12.5% previously). The EBITA margin outlook for the nutritional solutions segment is unchanged at 12%-13%. The updated guidance aligns with our 2023 forecast and we therefore reconfirm our fair value estimate of EUR 13. Shares appear fairly valued at current levels.

No-moat Glanbia delivered stronger-than-expected full-year 2022 results, with EBITA of EUR 347 million—around EUR 50 million higher than our forecast. This was mainly the result of a hefty top-line delivery on account of a currency tailwind and exceptional pricing actions, which largely compensated for the cost inflation experienced during the year. Given this result, we increase our 2023 EBITA forecast by 10% to GBP 370 million to account for the carry-through of price increases. Net debt was also reduced by one quarter to EUR 460 million given strong cash flow generation. These updates, together with a time value of money adjustment take our fair value estimate to EUR 13 from EUR 12. Shares appear fairly valued at current levels.

Despite its positioning in fast-growing segments, benefiting from secular trends around healthy lifestyle and wellness, we believe Glanbia's products are largely commoditized and we assign the company a no-moat rating. From its humble beginnings as an Irish dairy cooperative, Glanbia has transformed over the past few decades into a global manufacturer of ingredients and sports nutrition, primarily by using whey, a byproduct of milk processing and cheese manufacturing. Acquisitions have served to further diversify the portfolio away from whey-based ingredients and products, with Glanbia also building a sizable position in vitamins and mineral premix, which we believe has contributed to the accelerated growth of the segment. However, its cheese operations still account for a large share of revenue and we believe constitute a distraction for management from the higher-value-added parts of the portfolio.

No-moat Glanbia's third-quarter update saw volume growth turn negative in the quarter. The reported year-to-date like-for-like sales figure still leaped nearly 22%, given continued price hikes to pass through raw material cost inflation, but this marked a slowdown when compared with the 25.4% growth reported at half year. The relative softness in volumes signals to deteriorating price elasticity, especially for the performance nutrition and nutritional solutions segments. Despite the slowdown in the quarter, management narrowed guidance for the full year constant-currency-adjusted EPS growth to 10%-13% from 9%-13% previously. Our updated forecast is roughly in line with guidance, with 18% adjusted EPS growth on a reported basis (up from 15%), also reflecting the strong positive contribution so far this year of the appreciating U.S. dollar (Glanbia generates 80% of its revenue in the United States). But this change has little bearing on our valuation. We retain our fair value estimate of EUR 12 and view shares as relatively fairly valued.

Despite its positioning in fast-growing segments, benefiting from secular trends around healthy lifestyle and wellness, we believe Glanbia's products are largely commoditized and we assign the company a no-moat rating. From its humble beginnings as an Irish dairy cooperative, Glanbia has transformed over the past few decades into a global manufacturer of ingredients and sports nutrition, primarily by using whey, a byproduct of milk processing and cheese manufacturing. Acquisitions have served to further diversify the portfolio away from whey-based ingredients and products, with Glanbia also building a sizable position in vitamins and mineral premix, which we believe has contributed to the accelerated growth of the segment. Its cheese operations, however, either wholly owned or as joint ventures, still account for a large share of revenue and we believe constitute a distraction for management from the higher-value-added parts of the portfolio.

No-moat dairy ingredients and performance nutrition manufacturer Glanbia reported a strong set of first half-year results on the back of extraordinary pricing actions that delivered a contribution of around 22% to revenue growth, year on year. Volumes were surprisingly resilient—flat for the performance nutrition segment and up by 5% for the nutritional division over the same period. We updated our outlook to reflect the near-term upside in pricing, but we anticipate some of the short-term benefits will start to reverse in the latter part of next year as dairy prices normalize, which leaves our fair value estimate unchanged at EUR 12.

Despite its positioning in fast-growing segments, benefiting from secular trends around healthy lifestyle and wellness, we believe Glanbia’s products are largely commoditized and we assign the company a no-moat rating. From its humble beginnings as an Irish dairy cooperative, Glanbia has transformed over the past few decades into a global manufacturer of ingredients and sports nutrition, primarily by using whey, a byproduct of milk processing and cheese manufacturing. Acquisitions have served to further diversify the portfolio away from whey-based ingredients and products, with Glanbia also building a sizable position in vitamins and mineral premix, which we believe has contributed to the accelerated growth of the segment. Its cheese operations, however, either wholly owned or as joint ventures, still account for a large share of revenue and we believe constitute a distraction for management from the higher-value-added parts of the portfolio.

We initiate coverage of Glanbia with a EUR 12 per share fair value estimate and no-moat and Standard capital allocation ratings. Our medium uncertainty rating reflects the company's exposure to the volatile dairy market, offset by its vertical integration and diversified portfolio of consumer brands and ingredients. Our fair value estimate of EUR 12 suggests a 12% upside to the current share price.

Despite its positioning in fast-growing segments, benefiting from secular trends around healthy lifestyle and wellness, we believe Glanbia’s products are largely commoditized and we assign the company a no-moat rating. From its humble beginnings as an Irish dairy cooperative, Glanbia has transformed over the past few decades into a global manufacturer of ingredients and sports nutrition, primarily by using whey, a byproduct of milk processing and cheese manufacturing. Acquisitions have served to further diversify the portfolio away from whey-based ingredients and products, with Glanbia also building a sizable position in vitamins and mineral premix, which we believe has contributed to the accelerated growth of the segment. Its cheese operations, however, either wholly owned or as joint ventures, still account for a large share of revenue and we believe constitute a distraction for management from the higher-value-added parts of the portfolio.

We are no longer providing equity research on the following companies: Chr. Hansen, Tate & Lyle, Kerry Group, Glanbia, Chocoladefabriken Lindt & Spruengli, and Geox. We provide broad coverage of more than 1,400 companies across more than 140 industries and adjust our coverage as necessary based on client demand.

No-moat dairy ingredients and performance nutrition manufacturer Glanbia reported a strong set of 2016 results driven by its global performance nutrition, or GPN, division. Organic sales were flat, while reported sales rose strongly due to acquisitions, and margins held up better than expected in the face of rising dairy prices. This division alone accounted for 80% of Glanbia's currency-adjusted EBITA increase on 2015. We are revising our estimates upward and increasing our fair value estimate by 10% to EUR 15.80. Shares are slightly overvalued at current levels. There is no change to our no-moat rating.

Glanbia is a leading global manufacturer of ingredients and performance nutrition. These two businesses account for 78% of revenue and 90% of operating profit, and are the driving force of future growth. The business is built around whey, a byproduct from milk processing and cheese manufacturing, as an important protein ingredient in food and nutrition.

All nine ingredients companies we follow have now reported earnings results. These mostly ranged from in line to disappointing, with only Ingredion's results being (once again) above expectations. In terms of our fair value estimates, four stocks saw no revision (Kerry, Givaudan, International Flavors & Fragrances, Glanbia); only one saw a downgrade (Symrise, by 3%); and four saw significant upgrades (Ingredion by 12%, Christian Hansen by 13%, Tate & Lyle by 15%, and Barry Callebaut by 17%). We have made no changes to moat ratings in the ingredients sector.