Glanbia is looking beyond a tightening Irish market for growth. In 2006, it increased pretax profits by 8 per cent to €74.4 million and chairman Michael Walsh told reporters yesterday that 40 per cent of profits come from its international business.
Echoing this, managing director John Moloney pinpointed overseas operations as the means by which the group plans to push margins "north of 5 per cent by 2008". Those margins stood at 4.6 per cent last year.
The group has three divisions: consumer foods, responsible for brands such as Avonmore; agribusiness and property, which includes grain animal feeds and fertiliser; and food ingredients and nutritionals, which manufactures cheese, butter and proteins.
Operating profits from consumer foods dropped 10 per cent to €24.5 million, partly as a result of losses in the pigmeat business.
Agribusiness grew its operating surplus by 58 per cent to €16.8 million, but analysts estimated that €6 million to €7 million of this was from property sales. Operating earnings from food ingredients were up 3 per cent at €44.17 million.
In a note issued yesterday, Davy analyst John O'Reilly agreed growth will come from abroad. He predicted overseas operations would represent 50 per cent of Glanbia's profit in 2008.
All the news the company generated last year was on the international front. South West Cheese, the $160 million (€121 million) joint venture between the Irish company and US co-op South West dairies in New Mexico, began production in 2006. At the same time it bought nutritionals (food ingredients such as proteins, vitamins and minerals) operator Seltzer in California for €82 million.
It also committed itself to spending €50 million on further expansion abroad, including €5 million on a nutritionals plant in Asia Pacific and over €22 million on its powdered milk joint venture with PZ Cussons in Nigeria.
But in Ireland, it closed a loss-making pigmeat cannery in Roosky, Co Roscommon. Mr Moloney said its focus here for the near future would be controlling costs and boosting margins.
The market conditions that forced the closure of Roosky are likely to continue in Ireland, while competition on the supermarket shelves has made it difficult to increase profits from products such as milk, a big part of its Irish business.
NCB analyst Paul Meade pointed out that, without the property sales, tough conditions here would "obscure the benefits of strong overseas trading".
But it is worth noting that Mr Moloney predicted that the Kilkenny-based agribusiness group could sell up to 30 properties with development potential over the next few years.
