Shares down sharply on warning that high-end whey costs will hit the bottom line this year

Irish stock market-listed food giant Glanbia lost almost a quarter of its valuation on Wednesday, clawing back only the steepest of the losses in late trading.

The plunge was as big as 24pc in the share price at one stage. Even after a recovery, it ultimately left a staggering €890m paper loss for the day. The farmer members of TirLán, the former Glanbia co-op, are the PLC’s biggest shareholders and suffered a trading loss approaching a quarter of a billion euro.

The massive swing came after Glanbia had announced increased sales and profits for 2024, but warned that the surging cost of high-end whey, vital for its protein rich consumer products and supplements, will hammer its Performance Nutrition business this year.

Whey is a side product of cheese making and is easy to produce but the high-end whey needed for higher margin, protein rich, products requires extensive refining in expensive modern plants, and there are not enough to meet global demand.

That means intense cost pressure this year, according to Glanbia’s chief financial officer Mark Garvey. Prices for the in-demand, high-protein ingredient are running around 20pc higher than even their post-Covid spike amid production capacity constraints.

“It is creating a $200m headwind for the business – we can mitigate around $150m of that but not mitigate it fully,” he said.

Boosting global capacity of the high-end version of the cheese by-product is capital intensive, at around $700m for a new plant, he said.

Demand for high-protein, whey-rich products is being boosted by users of Ozempic and other so-called semaglutide drug treatments for obesity and diabetes because patients who use those drugs require extra protein, Mr Garvey pointed out.

Ironically, at the same time the same class of new anti-obesity drugs may be a drag on Glanbia’s SlimFast brand in the US and UK – the firm has commenced a sale process for the business.

Glanbia paid $350m to buy SlimFast in 2018. Mr Garvey said it performed well before Covid, but has struggled since. The group took a $91.4m writedown on the business in the 2024 accounts.

The group is also selling its Body & Fit business, which is a direct-to-consumer e-commerce business that services the market for body-building supplements in the Benelux region.

Selling through third parties including Amazon and established mainstream retailers is now more important and efficient across the group, Mr Garvey pointed out.

The Kilkenny-based food and nutritionals group said revenue in 2024 was $3.8bn (€3.6bn), up 5.8pc on a pro-form and constant-currency basis.

Profits increased to $310m, from $298m, and the group earnings margin (Ebitda) increased to 14.4pc before exceptional items.

The threat of tariffs is creating uncertainty for all businesses, but may be less of a headwind for Glanbia, given its business in the US is relatively self-contained, he said. The group manufactures domestically for that market in Chicago and on both coasts.

Meanwhile, the PLC has launched a group-wide transformation programme to drive efficiencies and support growth, which it said is targeting annual cost savings of at least $50m by 2027.

This programme includes a new operating model with three focused divisions: Performance Nutrition, Health & Nutrition and Dairy Nutrition. It includes a slimmed-down mix of brands.

Earnings per share in 2024 increased to 140.03 US cents, in line with guidance.

This year Glanbia expects to deliver adjusted earnings per share between 124 US cent and 130 US cent, driven by what it said was a good performance from Health & Nutrition, Dairy Nutrition and the group’s US joint venture, but with the Performance Nutrition business expected to deliver a decline due to what is described as an unprecedented level of input cost inflation.

Glanbia CEO Hugh McGuire said the 2024 results had been driven by growth across the portfolio of better nutrition brands and ingredients, citing the Optimum Nutrition and Isopure protein brands that delivered double-digit volume growth in the year.

“Our strong operational and financial performance continued to generate excellent cash flow, with 88pc cash conversion in 2024. We increased the dividend by 10pc and returned €102m to shareholders via our share buyback programme, including €2m of a €50m buyback programme announced in November 2024, which is ongoing, and authority for an additional €100m of share buybacks announced today,” he said.

Glanbia’s operations span the European and US markets, which are potentially facing tariff disruptions over the coming year, but the group said it believes its strategic changes provide a solid foundation for managing “any short-term challenges” while supporting long-term growth.

Reporting on:independent.ie