Glanbia Plc Ord

Good morning and welcome to the Glanbea Q3 2023 Interim Management Statement. During today's call, the directors made 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 the Glanbea PLC Q3 2023 Interim Management Statement. 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 made on today's call, whether as a result of new information, future events, or otherwise. I'm now handing the call over to Siobhan Tabbitt, Group Managing Director of Glanbia PLC.

Good morning, everyone, and welcome to the Glanbia Q3 2023 results call and presentation. On today's call, I'm going to provide a summary of our performance for the first nine months of 23. I'm joined by my colleagues, Mark Garvey, who will cover the financial results and outlook for the remainder of the year, and Hugh Maguire, who will be succeeding me as CEO in January of 24. So at the end of the presentation, we'll turn the call over and be happy to take your questions. Overall, I'm pleased to report that the third quarter has progressed as expected. with volume growth accelerating across the business, as Glanby's portfolio of better nutrition, brands and ingredients continues to resonate strongly with consumers who are seeking health and wellness. In GPN, strong optimum nutrition brand trends continue to deliver volume growth in the quarter and year to date, despite significant price increases implemented through Q4 of 22. ON continued its growth momentum both internationally and in the U.S., with U.S. consumption growth in the 12 weeks to mid-September of 9.5%, building on a strong comp of the prior year. In nutritional solutions, as expected, overall volume trends have stabilized, with volume growth again in the third quarter, driven by protein solutions, as trends in custom pre-mix solutions have continued to stabilize. Overall, the group's financial position and ongoing cash conversion remain strong. In terms of capital allocation, we have, during the period, completed the 100 million share buyback program announced earlier in the year and acquired the B2B bioactive ingredients business of Pantherix for $46 million, further complementing the capabilities in Glanby Nutritional Solutions. So as a result of the delivery year to date and our confidence at this point of the year in the outlook for the remainder of the year, particularly in GPN, we're upgrading our full year adjusted earnings per share guidance from the prior 12% to 15% growth, now to 17% to 20% growth, all constant currency numbers. Turning then to the revenue for the first nine months. From a group perspective, as I said, very much in line with expectations. In terms of volume within GPN, ON, our largest brand, continued its volume positive momentum in the period. In fact, volume accelerated for ON in the third quarter bringing the year-to-date volume growth to mid-single digit, as well as sustaining double-digit pricing in the brands. Pricing overall continued to be the key driver of growth in GPN, with the pricing sustained in the period as a result of the annualization of those strategic price increases we executed in 22. Across GN, we continue to see a significantly improving volume trajectory in nutritional solutions. As I referenced, volume growth delivered in the third quarter, which I'll speak more to later. We also had volume growth in U.S. cheese in year-to-date, reflecting robust end-market demand and very good customer relationships in that space. The pricing decline that you see in Glanby Nutritionals in both nutritional solutions and cheese was all a function of lower dairy market pricing. In terms of GPN, year-to-date it delivered branded life-like revenue growth of 3%. This was driven by growth in international of 12.3% and a decline of 1.8% in Americas as a result of the expected decline in the SlimFast brands. That same SlimFast performance impacted branded volume decline to minus 5.9%. But we had good demand trends across ON and the healthy lifestyle portfolio. And that trend continued with volume growth, as I referenced, accelerating in both those two areas in the third quarter. We expect this trend to continue into Q4, with the protein category currently resonating very strongly with active lifestyle consumers. I'll speak more to the brands shortly. And again, as I referenced earlier, pricing was a key driver of growth. We have sustained the pricing benefit of those 22 actions and delivered overall pricing growth of almost 9% year to date. We've increased our brand investment in the period, and this has supported volume progression of the key brands in the face of that pricing action. So for full year 23, GPN expects revenue growth of approximately 5% on a constant currency basis, as the year-to-date revenue growth will be significantly augmented by strong year-on-year growth in the fourth quarter that we have good visibility on at this point in time. On margins, the positive trajectory referenced in the first half results in August continues to improve the structural margin in GPN. And that is underpinned by a continued focus on revenue growth management initiatives, operating efficiencies, and margin optimization. We are achieving improved margins while also increasing our year-on-year brand investment across all our key markets. As a result of our continuing confidence in sustaining margin progression, we are today upgrading our GPN margin guidance for full year 23 to between 14 and 14.5%. That will represent an increase of between 280 and 330 bps on full year 22. Looking then at the brands, as I referenced, ON is our flagship global brand and the number one brand in sports nutrition. As you would expect, given its scale and most importantly its potential, Optimum Nutrition is our clear priority brand. It is the brand that has and will receive the greatest proportion of resources and investment and is now over 60% of our portfolio. As a global brand, it has continued to experience good volume momentum across both Americas and international and had a strong third quarter. In the US, our consumption continues to be strong and as referenced earlier, in the 12 weeks to September, almost 10% growth. In international, the growth of 12.3% was largely driven by ON, excuse me, which was supported by higher investment levels as the brand continues to gain traction with new consumers across all our key priority international markets. We expect strong momentum for ON in Q4 and continue to progress all aspects of the brand playbook with strong brand activation planned into Q1 24. Anchored in delivering consumer protein and energy needs, the ON powder format has a really strong value proposition, and no doubt it is resonating with consumers and will continue to drive our brand momentum. Given the continuing momentum of the brand, and despite the scale of the strategic price increases implemented last year, we're confident that the brand will deliver mid-single-digit volume growth for full year 23. Looking to healthy lifestyle, it's 18% of our GPN portfolio. It includes the brands of Isopure, Think, and Amazing Grass, and it continues to gain momentum. Here, our recent consumption was 12.3%. Q3 was another strong quarter for the Isopure brand, where the continual rollout of the Isopure, Add Less, Do More campaign, distribution, growth, and new visual identity, driving good consumption. We've launched a number of innovative flavors across the healthy lifestyle brands and again here expect good momentum to continue for the rest of 23. Slim fast is now 10% of our GPN portfolio that has continued to decline as expected as ongoing challenges within the diet and weight management category have resulted in reduced shelf space for the brands. Our consumption here was down 35.8%. As we discussed previously, it's fair to say that the weight management landscape has changed dramatically in recent years. However, one of the things that remains constant is the very strong need of many consumers for support in their weight management journey. And Slimfast continues to have very strong awareness and recognition by consumers as a brand that has a long heritage in this space. Our strategy for SlimFast is now very aligned with this trend, whereas we outlined early in the year, we are now refocusing our efforts and rebasing our investments back to the core brand meal replacement, ready-to-drink shakes and powders. Turning then to Glanby Nutritionals in Nutrition Solutions, I'm pleased to report that the business delivered volume growth in the third quarter, continuing the sequential growth trajectory that we spoke to at the half-year results. This growth was underpinned by good demand in protein solutions, while customer off-takes on the premix side continued to stabilize. The overall volume decline of 6.4% was driven largely by those supply chain rebalancing trends that we saw in the first half of the year, again, as previously referenced largely in premix. Pricing was down 7.6%, with positive price in premix offset by the declining dairy protein market pricing. We expect demand for protein solutions to continue to be well into the fourth quarter and for nutritional solutions to deliver an overall mid single digit decline in volumes for the full year. Full year EBITDA margins for nutritional solutions are expected to be between 12 and 13%, representing again an increase of between 60 and 160 basis points versus 22. This is being driven by operating efficiencies and the accretive impact of the lower dairy pricing. As I referenced in September, we completed the acquisition of a bioactive ingredients business, Pantherix. This business will complement the existing ingredient technology portfolio of nutritional solutions, particularly in the areas of immunity and gut health, providing a wider breadth of technical capabilities in the nutritional solutions space to support our customers. So now I'll hand to Mark.

Thank you, Siobhan, and good morning to everyone on the call. At the end of the quarter, the Group's net debt was $335 million compared to $731 million at the end of Q3 last year. The lower net debt is primarily due to strong operating cash flow during the period with significantly reduced working capital outflows as inventories returned to a more normalised level compared to the post-COVID supply chain challenges of last year. In addition, the Group received proceeds of approximately €179 million in April for the sale of the Glambia Cheese UK and Ireland joint ventures and the repayment of associated shareholder loans. The group has committed financing facilities of over $1.3 billion. As Siobhan has mentioned, post-quarter end, we closed on the acquisition of the B2B bioactive ingredients business of Panterex for $46 billion, and we continue to look at acquisition opportunities primarily in the nutritional solutions space. Year-to-date strategic capital expenditure has been primarily focused on further manufacturing automation in GPN, protein extrusion capacity in nutritional solutions, and IT implementations across the group. For the full year, we expect strategic and maintenance capital expenditure to be between $75 million and $85 million. The group completed the most recent share buyback program in mid-September. The €100 million buyback resulted in the purchase and cancellation of 7.2 million shares at an average price of €13.86. We will continue to look at share buyback programs as a vehicle to return capital to shareholders. At the end of the year, we expect the group's net debt EBITDA ratio to be below 0.7 times. Now I would like to update you on elements of guidance for the full year. Firstly, for GPN, we now expect like-for-like revenue growth to be approximately 5% for the year, augmented by strong year-on-year growth in the fourth quarter. While we expect good revenue growth for the year in sports nutrition and lifestyle, we expect this to be somewhat offset by lower revenues in weight management. In nutritional solutions, we have discussed the supply chain rebalancing trends we have seen during the year, as well as the sequential improvement in trends as the year has progressed, with volumes down 6.4% year to date. For the full year, volumes are expected to be mid-single digit lower than prior year. Turning to GPN EBITDA margins, we now have good visibility for the remainder of the year And the positive trajectory we discussed as part of our half-year results in August continues to improve with a structural margin in GPN underpinned by continued focus on revenue growth management initiatives, operating efficiencies, and margin optimization. We have also said previously that second half margins are benefiting from price increases taken last year as well as lower weight costs in the second half, somewhat upset by inflation and other cost of goods sold and enhanced brand investment. We are now able to update our GPN EBITDA margin expectations for the full year to be between 14% and 14.5%, representing an increase over the prior year of between 280 and 330 basis points. Looking to next year, we will provide a detailed update on 24 margin expectations during our 23 full year end results call. At this point, we would expect 24 GPN EBITDA margins to be broadly in line with this year's. Turning to GN Nutritional Solutions, our EBITDA margin guidance is unchanged, and we expect margins to be between 12% and 13% For the full year, an increase of between 60 and 160 basis points over prior year. As we announced in August, we have, with our U.S. joint venture partners, decided to amend our commercial agreements, which will simplify group reporting from 2024. As a result of this change from 2024, Glamby Nutritionals will act as an agent for the joint ventures and consequently will recognize only the commissions earned on the sale of joint venture products. We will no longer gross up revenues and corresponding cost of sales of the joint venture products. There will be no change in day-to-day operations, and there will be no material change in the Group or Glanby Nutritionals EBITDA. Detailed pro forma information for 23 will be provided with the 23 results, but for illustrative purposes, depending on dairy markets, this change will result in Group and Glanby Nutritionals revenues being lowered by approximately $2 billion, and Group EBITDA margins will be higher by over 300 basis points from current levels. There will be no material change to Glanby Nutritionals Dollar EBITDA, with again subject to dairy market pricing, nutritional solutions EBITDA margins expected to be 150 to 200 basis points higher, and US cheese EBITDA margins expected to be 200 to 300 basis points higher than currently reported. We believe this change will be effective from 24, will simplify the presentation of underlying performance of the group, and facilitate easier comparisons with our peers. Now turning to cash, based on the performance year to date, we expect to have strong cash flow for the year, and operating cash flow conversion is expected to be between 80 and 90% for the full year. Return on capital employed is expected to be between 12% and 13% for the year at the top end of our capital market state target range. And as Siobhan has mentioned, we are pleased to upgrade our adjusted earnings per share growth guidance from 12% to 15% to 17% to 20% for the full year, primarily based on GPM expected performance. And with that, I would like to hand it back to Siobhan.