Headquarted in Kilkenny, Glanbia PLC is a global nutrition company with operations in 32 countries, employing 6,600 people. The group was originally formed in 1997, after a merger between Avonmore Foods and Waterford Foods, Ireland’s two biggest dairy co-ops. Since the merger, Glanbia has drastically moved away from its core dairy business and expanded into international markets.
Share Price Performance
Over the last 12 months Glanbia’s share price has experienced a sharp decline, dropping by over 25%. They reached a peak of €19.59 in April 2017 but now trade at €13.90. The primary reason for the sell off was the disappointing performance of the JV’s due to weak dairy prices. In the years previous, Glanbia has been a huge success story, with eight years of double-digit earnings growth driving their stock price to new highs.
- In 2014, they acquired Nutramino, a Scandinavian sports nutrition company operating mainly in Sweden, Denmark and Norway. Nutramino expanded into the UK and Ireland, with big retailers such as Holland and Barrett stocking their products.
- Isopure was another acquisition in 2014, they sell a range of protein powders and drinks.
- Glanbia took over thinkThin in 2015 for $217 million. thinkThin sell a range of healthy protein snacks in the form of bars, powders, cakes and smoothies etc. Products are stocked in well-known US retailers such as Trader Joe’s, CVS, Whole Foods and Target.
- Last year, Glanbia bought Amazing Grass, a US company that primarily sell plant-based nutrition, a massive health trend in America.
- In February 2017, they acquired Body & Fit, an online nutrition business with a big presence in Germany and the Benelux region.
Reasons to Buy
- Continue to make strategic acquisitions to grow and maintain their market share in various product categories. Mergers and acquisitions are a key competent of their growth strategy, they intend to spend another €300 to €400 million on further acquisitions.
- Have sold off 60% of Glanbia Ireland, their undesirable low-margin liquid milk business. The company can focus more attention on products with higher margins.
- Potential takeover target, there is speculation shareholders would be bought out at €20 per share. Diversifying away from the liquid milk businesses increases the chances of an international food group buying out the company. Analysts at BNP Paribas suggested the Irish company as a perfect takeover target for Japanese food company, Ajinomoto.
- Future Dividend plans – to entice investors they plan a dividend payout between 25% to 35% of adjusted earnings per share.
Reason to Sell
- They released a profit warning in February 2018, stating earnings growth will slow down in the coming year due a combination of weak dairy prices and increased investments.
- The specialist nutrition market is highly competitive with thousands of companies saturating the market. Glanbia has no sustainable competitive advantages in the performance nutrition sector. The barriers to entry are so low, almost anyone can setup a nutrition business with a few thousand euro.
- Currency exchange risk – the United States makes up 80% of their revenue. The dollar has weakened significantly against the euro from early January 2017, falling from 0.96 to 0.81. They need to start hedging their currency risk.
- They report some of their earnings on a constant currency basis, companies use this reporting method to hide underlying problems on their balance sheet.
Their stock price has fallen significantly over the past year. The stock could be bottoming out but I think its price still has potential to fall further in 2018 and 2019. Would be interested in buying shares if they fall closer to €10.