Glanbia has its origins in the Irish co-operative movement that evolved over the last century. Glanbia plc was formed in 1997 out of the merger of Avonmore Foods plc and Waterford Foods plc.
Realising the benefits of increased scale and greater diversification, the 1960’s saw the amalgamation of many small, locally focused co-operatives across Ireland. Waterford Co-op Society was formed in 1964 with Avonmore Creameries formed two years later in 1966. The increased processing capacity required following the formation of Avonmore led to the construction of a new multi-purpose dairy plant in Ballyragget, Co.Kilkenny. The plant was at that time the biggest processing facility in Europe.
The first Avonmore bulk milk collection March 1973
The introduction of European milk quotas in 1984 severely restricted the domestic growth opportunities for Irish co-operatives and their members. Waterford Co-op Society and Avonmore Creameries both recognised that to expand they would have to look outside Ireland and the best way to fund this expansion was through a stock market flotation. Avonmore Foods plc was floated on the Irish Stock Exchange on 6 September 1988 followed by Waterford Foods plc a month later on 6 October 1988. The capital raised enabled both businesses to expand their product offerings as well as their geographic footprint. Most notably, the acquisition of a number of small cheese plants in the USA formed the basis of our market leading US Cheese business that we have today.
Avonmore flotation at the Irish Stock Exchange September 1988
Following their respective flotations in 1988, the growth strategies of Avonmore Foods and Waterford Foods were similar and there were many areas of overlap. The rationale for a merger between the two was therefore clear but it would take several years and significant negotiation before a deal could be reached. On 4 September 1997, Avonmore Foods plc and Waterford Foods plc merged to form Avonmore Waterford Group (AWG) plc. The combined entity was the fourth biggest dairy processor in Europe and the fourth biggest cheese producer in the world. In 1999, the business was rebranded and the name changed to Glanbia plc, meaning “pure food” in Irish.
Celebrating the successful merger of Avonmore and Waterford September 1997
Between 2001 and 2004 Glanbia implemented a significant reorganisation aimed at reshaping its portfolio and providing the foundation for future growth. The strategy was clear; reduce commodity exposure and focus on higher margin, lower volatility, value added sectors. In particular, health and wellness and the demand for nutrition were identified as key trends for the future. The Group exited a number of businesses including its hard cheese and consumer meats businesses in the UK. It also invested significantly in new and existing businesses. Expansion at the cheese plants in Idaho, USA and Magheralin, Northern Ireland were followed by the announcement in 2004 of a $200 million investment in a greenfield cheese plant in New Mexico, USA in partnership with the Greater Southwest Milk Agency. The first nutritionals acquisition was also announced in 2004 with Glanbia buying Kortus Foods in Germany to form the basis of today’s Customised Premix Solutions business.
Ground-breaking at Southwest Cheese New Mexico site February 2004
The restructuring that had taken place over the preceding years meant that by 2005 Glanbia could start to focus on driving growth. Further expansion was announced at the cheese plants in Idaho while the Southwest Cheese joint venture which had only been commissioned in 2006 saw a further $90 million expansion in 2009. The acquisition of California based, Seltzer Foods in 2006 combined with Kortus Foods in Germany provided Glanbia with a strong foothold in the premix market. This was further strengthened by the construction of greenfield plants in Missouri, USA and Suzhou, China in . Through its Ingredient Technologies business, Glanbia had been at the forefront of the manufacture and development of applications of whey protein over several years. In 2008 it decided to vertically integrate with the acquisition of a customer, Optimum Nutrition. Along with the acquisition of BSN in 2011, Glanbia became a leader in the branded sports nutrition sector both in the US and internationally.
Optimum Nutrition purchased in August 2008
The elimination of quotas in 2015 would provide Irish dairy farmers with the opportunity to expand production for the first time in 30 years, bringing with it the need for increased milk processing capacity. This provided a huge opportunity for all stakeholders but also posed the question as to the optimal operating model that would address the needs of both Glanbia shareholders and Society members into the future. On 29 August 2012, a proposal was announced whereby the Society would buy 60% of Glanbia’s Irish dairy processing business, Glanbia Ingredients Ireland, and reduce its shareholding in Glanbia from 54% to 41%. Both Glanbia shareholders and Society members approved the proposal and on 25 November 2012, Glanbia Ingredients Ireland became a 40% associate of Glanbia.
Glanbia Ingredients Ireland Limited milk truck
In 2013 we reshaped our business into four business segments. We refined our strategy, set ambitious strategic targets and prioritised our capital allocation to optimise the value of our existing portfolio and bring new momentum to our global growth potential. The focus of our strategy and strategic priorities is weighted towards our two complementary global growth platforms, Global Performance Nutrition and Glanbia Nutritionals. Combined these businesses create distinctive competitive advantages for Glanbia, through deep dairy expertise, a unique span of market insights and first mover or leadership positions in key market segments. The Group also delivered another year of good results in 2013, refreshed the Board, appointed a new Executive team and continue with its acquisition and organic investment programme
2014 was another year of significant progress for Glanbia with strong results delivering the fifth consecutive year of double digit earning growth. Glanbia’s global business also continued to expand in 2014. The Group now has a footprint in 34 countries, adding new countries during the year through performance nutrition acquisitions and establishing further in-country offices. This gives us excellent reach into major developed and emerging markets, and the ability to foster and sustain strong relationships with our customers and consumers. Our two global growth platforms – Global Performance Nutrition and Glanbia Nutritionals – accounted for 91% of wholly owned earnings before interest, tax and amortisation (EBITA) and 77% of Total Group, including Joint Ventures & Associates, EBITA.
We had a strong year overall and are pleased that we sustained our growth momentum into 2015. We made good progress against our strategic priorities and this enabled us to achieve a reported growth in adjusted earnings per share of 29.4%. However, from a management perspective we focus on the performance of the business excluding the impact of currency translation. On this, we delivered on our key performance metrics, with adjusted earnings per share growth of 10.6% constant currency, our sixth consecutive year of double digit growth. We also achieved a return on capital employed of 13.9%.
We have a strong portfolio of nutritional ingredients and branded products and we believe that our deep sector knowledge provides us with a unique opportunity to capitalise on key growth trends in the nutrition industry. We are ambitious and will continue to invest to sustain this momentum.
In 2016, Glanbia made very good progress in implementing our strategy and delivering on our financial targets. We achieved a reported growth in adjusted Earnings Per Share (EPS) of 10.8%, and on a constant currency basis we delivered 11.2% adjusted EPS growth. Operating Cashflow was strong and improved by 25.9% to €354.4 million. We also achieved a Return on Capital Employed (ROCE) of 12.9% thereby delivering on three of our key strategic performance metrics.
Glanbia Performance Nutrition continued to build on its firm foundations through both organic growth and the integration of our 2015 acquisition, thinkThin, which performed well in the period with strong sales momentum. The reshaping of the Glanbia Nutritionals organisation was also largely completed in 2016 and the business is now poised for future momentum.
While the global landscape in which we operate will undoubtedly throw up challenges, we believe that there is also lots of opportunity and we will continue to innovate and develop high quality ingredients and brands that support the desires of our consumers to lead healthy lives.
© Glanbia plc 2017. All rights reserved
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