A 35% increase in performance nutrition earnings to €81.7m was the main driver of profit growth at Glanbia for the first six months of the year.

Group managing director Siobhán Talbot warned that global dairy markets remain weak and continue to be a challenge for parts of the business, but added that because of the diverse nature of Glanbia’s business, the group was able to reiterate guidance for the full year.

Overall, the group recorded a 10.8% rise in earnings for the first half of 2016. Total group revenue fell 1.7% to €1.84bn as a result of challenged dairy markets globally. Despite this, total group earnings (EBITA) increased 11.4% to €176.5m, with margin expansion of 110 basis points to 9.6%.

Performance nutrition is now core to driving higher margins of the group and makes up 46% of group earnings. Margins continued to expand in the division to 16.2%. While revenues increased 12% to €505.3m, helped by an 8% boost in volumes and the acquisition of Thinkthin last November, prices declined 6.7%. Branded volume growth outgrew contract volumes.

Talbot explained to the Irish Farmers Journal that while prices have fallen back, this has been as a result of the group investing in price to drive volumes, in order to respond to competition. She said that it is a “very competitive space across all regions and particularity in the US”.

The group said the strong US dollar remains a headwind in certain non-US markets. In Brazil and Oceania in particular, consumers’ ability to pay was challenged due to weaker local currencies. The group invested in prices to bridge that gap and Talbot added that Glanbia was happy to do so as they are in these regions for the long term.

Glanbia Nutritionals

Earnings fell 4% to €58m in its ingredients division which has now been rebranded Glanbia nutritionals. She said this is less about cost cutting, despite a three-year restructuring charge of €20m, and more about offering the full range of solutions under one business unit, rather than three.

She said that both the ingredients and joint ventures are the businesses at the coalface of the challenged dairy markets and this pointed to the weaker performance.

Ingredient revenues decreased 5.9% to €572.6m. Despite a 2.2% increase in volumes pricing fell by 8.1% compared to the same period last year. Overall margins were strong and increased to 10.1%.

US cheese volumes were broadly in line in the first half of 2016 as plants operated close to full capacity.

Its consumer foods and agribusiness saw a 1.1% increase in earnings to €17.7m.

Revenues decreased 3.3% reflecting a 1.1% increase in volumes, a 4.9% decline in price and a 0.5% revenue contribution from acquisitions. Margins increased 30 basis points to 1.1%, driven by an improvement in sales of value-added branded products and input cost reductions.

Net debt at the end of June was €644m, an increase of €67m relative to the end of June last year. Despite this, the group is in a strong position financially, with a net debt to earnings ratio of 1.83 times.

Given the right opportunity, Talbot said the group would be comfortable looking at acquisitions up to €300m but that the challenge was finding a target at the right price.

The group is recommending an interim dividend of 5.37 cent per share, an increase of 10% on prior year and reiterated its outlook for the year.