Shares in the global nutrition and ingredients company fell to their lowest level since February 2015 on Monday, closing at €14.91. This is a decline of almost 15% since this time last year.

In July 2015, shares reached a record high when they touched almost €20 for a time before closing at €19.55.

This means that Glanbia has seen almost €1.5bn wiped off its valuation over the past 16 months. With the co-op owning 33%, it means the value of the co-op’s shareholding has fallen by €0.5bn, valuing it today at around €1.5bn.

Longer-term gain

Despite this recent fall, Glanbia shareholders have still seen their shares rise almost 50% in the past three years.

Glanbia shares have been trading at around 25 times earnings (profits). Other food companies such as Greencore, Nestle, Danone and Kerry have also been trading at these high levels of between 20 and 25 times earnings.

The rise in share prices and high valuations have been driven by quantitative easing in the US and the EU, a weaker dollar, low returns from bonds and a general widespread interest by investors including institutional investors in food and ingredient stocks.

Food and ingredient stocks under pressure

Glanbia, it seems, is not alone in seeing its share price decline in recent weeks. Looking at other food and ingredient stocks, they are all down about 8-10% over the past month.

Unilever, which was embroiled in a pricing row with Tesco last week, has seen its shares fall 8%. Nestle, the global food brand, has seen its shares fall 5% since the start of October. Danone, the French dairy company, saw its shares fall 7% over the past month.

Closer to home, shares in the Kerry group are down 7% in a month and Greencore shares are down 6% since September.

At the half year, Glanbia reiterated its outlook for the full year, forecasting 8% to 10% growth in earnings (profits). Performance nutrition is expected to be the main driver of the growth in 2016, however its ingredients division is expected to show some further improvement. Glanbia said that its US cheese business would see reduced performance as a result of weak dairy markets.

Acquisitions

Recent acquisitions such as ThinkThin and Isopure have boosted performance in Glanbia’s peformance nutrition division, where volumes increased 8%, profits were up 35%, and margins expanded to reach over 16% for the first six months.

Despite these positive numbers, prices felt some pressure and declined 6.7%, mainly blamed on the strong dollar.

The ingredients division, which is currently being restructured and now called Glanbia Nutritionals, saw profits fall 4% for the first six months, despite margins growing to 10.1%.

The consumer foods division, which includes liquid milk and the Avonmore brand, continued to see improved performance.

Read more

Siobhan Talbot interview: Glanbia boss cautiously optimistic on improvement in dairy markets