Glanbia Regulatory News (GLB)

2015

Delivering better nutrition for every step of life's journey

Wednesday, 19 August 2015

19 August 2015 - Glanbia plc ("Glanbia", the "Group", the "plc"), the global nutrition group, announces its results for the six months ended 4 July 2015.

Results highlights for the half year

· Adjusted earnings per share 40.60 cent, up 4.2% constant currency (up 25.1% reported);

· EBITA from wholly owned business €138.5 million, up 7.5% on prior half year, constant currency (up 29.1% reported);

· EBITA margins from wholly owned business 9.7%, up 110 bps on prior half year, constant currency (up 140 bps reported);

· Strong result from Global Performance Nutrition with EBITA of €60.7 million a 17.4% increase on prior half year, constant currency (up 41.5% reported);

· Satisfactory performance by Global Ingredients in the context of challenging dairy markets with EBITA of €60.3 million a 9.5% decrease on prior half year, constant currency (up 11.9% reported);

· Good result from Dairy Ireland with EBITA of €17.5 million, as margins recovered to 4.7%;

· Joint Ventures & Associates performed in line with expectations in the first half; and

· Recommended interim dividend of 4.88 cent per share, an increase of 10% on prior year.

Note on foreign exchange: Glanbia generates a significant proportion of its earnings in US dollar and reports in Euro. Constant currency reporting is used to eliminate the translational effect of foreign exchange on the Group's results. The average Euro US dollar exchange rate for the first half of 2015 was $1.115 compared to an average rate of $1.371 for the first half of 2014 leading to an improved reported result when compared to constant currency. Note, constant currency guidance incorporates certain trading headwinds in the period as a result of a strong US dollar .

Commenting today Siobhán Talbot, Group Managing Director, said:

"Glanbia delivered a good performance in the first six months of 2015 driven by a strong result from Global

Performance Nutrition. Total Group revenue for the half year was €1.9 billion with adjusted earnings per share of 40.60 cent. Today we are reiterating full year guidance of adjusted earnings per share growth of between 9% and 11%, on a constant currency basis. Given the strength of the US dollar this is likely to translate to reported

adjusted earnings per share growth of circa 25% for the full year if foreign exchange rates remain at current levels.

Today's results demonstrate that our strategy is on track. As a global nutrition company, whose purpose is 'delivering better nutrition for every step of life's journey', we are focused on the development of a branded and ingredient product portfolio to serve the growing consumer demand for nutritional products in formats suitable for healthy and active lifestyles. This has provided some insulation from the challenges of volatile global dairy markets."

1. To arrive at the Constant Currency change, the average FX rate for the current period is applied to the relevant reported result from the same period in the prior year. The average FX rate for the first half of 2015 was €1 = $1.115 (HY 2014: €1 = $1.371).

2. EBITA is defined as earnings before interest, tax and amortisation and is stated before exceptional items.

3. Total Group includes Glanbia's share of Joint Ventures & Associates.

4. Adjusted earnings per share is reconciled in Note 11 of the financial statements.

2015 half year overview and outlook

Glanbia delivered a good performance in the first half of 2015. Total Group revenue for the period, including the Group's share of Joint Ventures & Associates, was €1.9 billion. Total Group revenue declined 8.4% constant currency (up 4.4% reported) as good branded revenue growth was offset by pricing declines as a result of global dairy market weakness. Total Group EBITA was €158.7 million, up 3.5% constant currency (up 22.5% reported). Total Group EBITA margin was 8.5%, up 100 bps, constant currency. Adjusted earnings per share for the half year were 40.60 cent, up 4.2%, constant currency (up 25.1% reported).

Capital investment and corporate development

Glanbia's total investment in capital expenditure was €59 million in the first half of 2015, of which €45 million was strategic investment reflecting the ongoing focus on the organic growth potential of the business. The investment programme in Global Ingredients to increase capacity in high end whey proteins and other added value dairy ingredients continues to plan in Idaho, with commissioning scheduled for Q4 2015. In April, the Group disposed of its investment in Nutricima to PZ Cussons plc for a cash consideration of £21 million (€28.5 million), the impact of which will be immaterial to the ongoing profitability of the Group.

Board changes

On 12 June 2015, Henry Corbally was appointed Chairman replacing Liam Herlihy who retired at the AGM. Mr Corbally previously served as Vice Chairman for four years. Patrick Murphy was appointed Vice Chairman on the same date having served as a non-executive director for the past four years. Also in June three new non-executive directors were appointed; Patsy Ahern, Jim Gilsenan and Patrick Hogan, as nominees of Glanbia Co-operative Society Limited. David Farrell and Patrick Gleeson also retired at the AGM.

2015 outlook

Glanbia reiterates its guidance for 2015 of 9% to 11% growth in adjusted earnings per share, constant currency. If the Euro US dollar exchange rate remains at current levels for the full year Glanbia expects 2015 reported adjusted earnings per share growth of circa 25%. The constant currency guidance incorporates certain trading headwinds generated by a strong US dollar.

Global Performance Nutrition is expected to be the main driver of 2015 growth as momentum returns to the US business albeit this is somewhat offset by currency and geopolitical related challenges in certain non US markets. Global Ingredients continues to make good progress in its strategy of growing the value added dairy and non dairy ingredient portfolio, however the scale of the weakness in global dairy markets will result in some reduction in performance year on year. Dairy Ireland is forecast to deliver some recovery in margins versus a challenging prior year reflecting the benefit of investment in operational efficiencies and new product development. Joint Ventures & Associates are expected to deliver a performance in line with the prior year.

HY 2015 operations review

Segmental analysis (as reported)

Global Performance Nutrition

Commentary is on a constant currency basis throughout

Global Performance Nutrition ('GPN') delivered a strong performance in the first half of 2015 against high 2014 comparative metrics. Revenues increased 1.9% to €453.5 million (revenue growth HY 2014, 21.8%). Drivers of revenue growth were a 0.6% improvement in price and an 8.4% revenue contribution from acquisitions offset by a 7.1% decline in volume, due to lower contract sales. Overall branded revenue growth was 16.4%; while on a like for like basis, branded revenue grew by 3.7%. EBITA increased strongly by 17.4% in the period as EBITA margin grew 180 bps to 13.4%. A number of factors contributed to the improvement in margin including continued investment driven operational efficiencies across the business, mix improvement from the increased proportion of branded sales, and some reduction in input costs.

The business remains focused on branded revenue growth and in the period GPN saw renewed momentum in its US business. There continue to be trading headwinds in non US markets as geopolitical events and a strong US dollar impacts consumer purchasing power in certain geographies with Brazil, Oceania and Russia particularly affected. The global performance nutrition market remains very competitive and the business has increased the level of promotional investment where required to maintain market position. The innovation pipeline is good and recent launches such as Optimum Nutrition Gold Standard Pre-workout and BSN Clean Series are performing well.

Global Ingredients

Commentary is on a constant currency basis throughout

Global Ingredients ('GI') delivered a satisfactory performance in the first half of 2015 in the context of challenging global dairy markets. Revenues decreased by 11.7% to €609.3 million as volume growth of 6.8% was offset by an 18.5% decrease in price. While the business made progress in its strategy of growing value added dairy and non dairy ingredient sales the scale of the decline in global dairy markets resulted in a 9.5% reduction in EBITA in the period.

US Cheese

US Cheese increased volumes compared to last year as milk procurement dynamics improved relative to a challenging first half of 2014. There was a decrease in revenues due to reduced US cheese market prices which were down on average by 26% compared to the same period last year. Performance marginally improved as the benefit of higher volumes and continued focus on operational performance offset the impact of the significant price reduction. Cheese demand remains solid across the US retail and foodservice market and this countered the reduction in export activity to non US markets as a result of a strong US dollar.

Ingredient Technologies

Ingredient Technologies revenue and performance was behind the prior year as weaker dairy market conditions drove lower market pricing across a number of product categories. There continues to be an imbalance between supply and demand of dairy ingredients on global markets and this was exacerbated by a strong US dollar. Glanbia continues to develop its value added systems portfolio with bar solutions performing well in the period. The $85 million capital expenditure investment to increase production capacity of high end whey proteins and dairy ingredients is on track for commissioning in Q4 2015.

Customised Solutions

Customised Solutions had a strong first half benefiting from continued growth with key customers during the period. The business continues to leverage its global footprint, investing where appropriate, to sustain and build its relationships with key global and regional customers.

Positioning for growth

GI has commenced a programme to redesign the business to leverage future market opportunities. Building on its core strengths the current business unit structure will be integrated into one global GI organisation. This new organisation will have a regionally focused sales team to deliver the full suite of Glanbia's capability to its customers and markets, enabled by centres of excellence across key functions. It is envisaged that this programme will take 12-18 months to complete and will involve an investment of approximately €15 million which will be treated as an exceptional item in the Group's 2015 and 2016 financial statements.

Dairy Ireland

Dairy Ireland had a good performance in the first half of 2015 against a relatively weak first half of 2014. Revenues increased 4.3% reflecting a 3.1% increase in volumes, 0.5% improvement in price and a 0.7% revenue contribution from acquisitions. A 170 bps recovery in margin drove an increase in EBITA versus the prior half year.

Consumer Products

Consumer Products delivered good growth in the period as the investment in operational efficiencies, new product development and some reduction in input costs has enabled a recovery in margins. Revenue growth was driven by increases in branded and value added milk sales plus bolt on acquisitions. Glanbia will continue to innovate and invest in its brand portfolio both domestically and internationally.

Agribusiness

Agribusiness delivered a satisfactory performance in the period. Lower animal feed and fertilizer sales were offset by cost improvement initiatives within the business.

Joint Ventures & Associates (Glanbia Share)

Commentary is on a constant currency basis throughout

Joint Ventures & Associates delivered a satisfactory performance in the period. Key drivers of the revenue movement were a 20.1% decline in pricing reflecting the dairy market environment and a 0.2% increase in volumes. The disposal of Glanbia's interest in Nutricima in the period led to a 0.5% decline in revenues compared to the prior half year. All Joint Ventures & Associates had a good operating performance with a focus on costs off-setting some of the challenges of lower dairy markets. The significant €235 million investment programme in Glanbia Ingredients Ireland ('GII') is largely complete and the commissioning of the new ingredient facility at Belview, Ireland is progressing with GII expecting to process an additional 15% milk volume from its suppliers in 2015 versus 2014.

Half year 2015 finance review

Income statement

For the first half of 2015, wholly owned revenue decreased 3.9%, constant currency (up 10.6% reported) to €1.4 billion (HY 2014: €1.3 billion). EBITA grew by 7.5%, constant currency (up 29.1% reported) to €138.5 million (HY 2014: €107.3 million). EBITA margin increased by 110 bps to 9.7%, constant currency.

Net financing costs of €10.7 million were broadly in line with prior year (HY 2014: €10.5 million). The Group's average interest rate for the period was 3.9% (HY 2014: 4.8%). Glanbia operates a policy of fixing a significant amount of its interest exposure, with 85% of projected 2015 debt currently contracted at fixed rates for 2015.

The HY 2015 pre-exceptional tax charge increased by €4.4 million to €19.1 million (HY 2014: €14.7 million). This represents an effective rate, excluding Joint Ventures & Associates, of 17.0% (HY 2014: 17.0%).

The Group's share of results of Joint Ventures & Associates decreased by €2.0 million to €13.3 million (HY 2015: €15.3 million). Share of results of Joint Ventures & Associates is an after tax and interest amount.

Adjusted earnings per share

* Adjusted earnings per share is reconciled in Note 11 of the financial statements.

Total adjusted earnings per share grew 4.2% (25.1% reported), driven by growth in EBITA. Adjusted earnings per share is believed to be more reflective of the Group's underlying performance than basic earnings per share and is calculated based on the net profit attributable to equity holders of the parent before exceptional items and amortisation of intangible assets, net of related tax.

Dividend per share

The Board is recommending an interim dividend of 4.88 cent per share (HY 2014: interim dividend 4.43 cent per share). This represents an increase of 10% on the prior year interim dividend. The dividend will be paid on 16 October 2015 to shareholders on the register of members as at 04 September 2015. Irish withholding tax will be deducted at the standard rate where appropriate.

Exceptional items

Exceptional items incurred in the first half of 2015 resulted in an exceptional charge of €7.3 million compared to a charge of €2.7 million for the same period in 2014. Details of the exceptional items are as follows:

1. Rationalisation costs primarily relate to the ongoing redundancy programme in the Dairy Ireland segment.

2. GI has commenced a programme to redesign the business to leverage future market opportunities. Building on its core strengths the current business unit structure will be integrated into one global GI organisation. This new organisation will have a regionally focused sales team to deliver the full suite of Glanbia's capability to its customers and markets, enabled by centres of excellence across key functions. It is envisaged that this programme will take 12-18 months to complete and will involve an investment of approximately €15 million which will be treated as an exceptional item in the Group's 2015 and 2016 financial statements.

3. On 01 April 2015 the Group disposed of its investment in Milk Ventures (UK) Limited which is the parent company of Nutricima Limited, a non-core Joint Venture business involved in the supply and distribution of evaporated and powdered milk, based in Nigeria. PZ Cussons plc, Glanbia's partner in the Joint Venture Nutricima, acquired Glanbia's 50% stake for cash consideration of £21 million (€28.5 million). In line with IFRS 5 - Non Current Assets Held for Sale and Discontinued Operations, the disposal of the Group's interest resulted in a non-cash loss of €3.6 million. This comprised a profit on disposal of €1.4 million (cash consideration of €28.5 million less carrying value €27.1 million including loan to Joint Venture) offset by the recycle of €5.0 million cumulative foreign currency translation losses previously recognised in equity. Milk Ventures (UK) Limited was previously included in the Joint Ventures & Associates segment.

4. Transaction related costs in 2014 were comprised of costs relating to acquisition activities that did not come to fruition and additional contingent consideration relating to the acquisition of Nutramino Holding ApS, in excess of its fair value at date of acquisition.

Group financing and cash flow

1. Definition of net debt, adjusted EBITDA and adjusted EBIT are as per financing agreements which include dividends from Joint Ventures & Associates and the pro forma effect of acquisitions.

The Group's financial position continues to be strong. Net debt at the end of HY 2015 was €577 million. This is an increase of €105 million relative to the end of HY 2014. Net debt to adjusted EBITDA was just under 2 times and interest cover was 10 times, both metrics remaining well within financing covenants. Relative to the year end of 2014, net debt has increased by €67 million. The key drivers of the net debt increase from year end 2014, have been a seasonal increase in working capital and the FX impact on the conversion of US dollar private placement debt to Euro for reporting purposes. The main uses of cash since year end 2014 have been a seasonal increase in working capital of €128.1 million, capital expenditure of €58.8 million, dividend payments of €19.4 million and interest of €14.0 million offset by the proceeds from the Nutricima disposal of €28.5 million.

Pension

On 04 July 2015, the Group's net pension liability under IAS 19 (revised) 'Employee Benefits', before deferred tax, decreased by €20.8 million to €94.0 million versus year end 2014(FY 2014 pension liability €114.8 million). This decrease primarily relates to a change in actuarial assumptions for the discount rate used for the Irish defined benefit pension schemes from 2.1% to 2.4%.

Principal risks and uncertainties affecting the Group's performance in 2015

The Board of Glanbia plc has the ultimate responsibility for risk management. The performance of the Group is influenced by global economic growth and consumer confidence in the markets in which it operates. In the second half of 2015 the principal risks and uncertainties affecting the Group's performance are:

· The competitive landscape for Global Performance Nutrition, recognising the impact of a stronger US dollar on the purchasing power of consumers in certain international markets;

· The overall impact on margins of movements in dairy pricing particularly in whey markets; and

· The potential impact of geopolitical unrest and macro-economic uncertainty on the international growth strategy.

The principal risks and uncertainties are outlined in detail on pages 50 to 57 in the 2014 Annual Report.

Cautionary statement

This announcement contains forward-looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of their approval of this report. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The Directors undertake no obligation to update any forward-looking statements contained in this announcement, whether as a result of new information, future events, or otherwise.

Results webcast and dial-in details

There will be a webcast and presentation to accompany this results announcement at 8.30 a.m. BST today. Please access the webcast from the Glanbia website at http://www.glanbia.com/investors/results-centre, where the presentation can also be viewed or downloaded. In addition, a dial-in facility is available using the following numbers:

Ireland (01) 246 5601

UK (0203) 427 1902

USA (212) 444 0895

International +44 203 427 1902

The access code for all participants is: 8165082

A replay of the call will be available for 30 days approximately two hours after the call ends.

For further information contact

Glanbia plc +353 56 777 2200

Siobhán Talbot, Group Managing Director

Mark Garvey, Group Finance Director

Liam Hennigan, Head of Investor Relations +353 56 777 2308

Mark Garrett, Director of Communications and Public Affairs +353 86 601 9655

Responsibility statement

The Directors are responsible for preparing the half yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Central Bank of Ireland and with IAS 34 - Interim Financial Reporting, as adopted by the European Union.

The Directors of Glanbia plc confirm that, to the best of their knowledge:

• The Group condensed interim financial statements for the half year ended 04 July 2015 have been prepared in accordance with the international accounting standard applicable to interim financial reporting (IAS34) adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

• The half yearly financial report includes a fair review of the development and performance of the business and the position of the Group;

• The half yearly financial report includes a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the Group condensed financial statements for the half year ended 04 July 2015, and a description of the principal risks and uncertainties for the remaining six months;

• The half yearly financial report includes a fair review of related party transactions that have occurred during the first six months of the current financial year that have materially affected the financial position or the performance of the Group during that period and any changes in the related party transactions described in the last Annual Report that could have a material effect on the financial position or the performance of the Group in the first six months of the current financial year; and

The Directors of Glanbia plc are as listed in the Glanbia plc 2014 Annual Report, with the exception of the following changes in the period:

· David Farrell, Patrick Gleeson and Liam Herlihy* retired on 12 May 2015.

· James Gilsenan, Patsy Ahern and Patrick Hogan were appointed on 12 June 2015.

*Liam Herlihy retired as Chairman on 12 May 2015. Henry Corbally was appointed Chairman on 12 June 2015.

A list of current directors is maintained on the Glanbia plc website: www.glanbia.com

On behalf of the Board

Siobhán Talbot Mark Garvey

Group Managing Director Group Finance Director

18 August 2015