On Thursday morning, Glanbia managing director Siobhan Talbot and chief financial officer Mark Garvey announced full-year results for 2021 and a forecast for 2022.
There was an upbeat and optimistic tone from both members of the management team on an early morning analyst call that continued for almost two hours.
However, the market obviously doesn’t like the look of the numbers. The share price on Thursday fell from a start of €12.30 to finish at €11.04 and early morning trading shows a continued decline. I was asked numerous times why the fall, so here’s my take.
If Talbot had announced an overexposure of revenue or profits in Ukraine or Russia you might have expected this sort of a reaction, but, in effect, she said “a lot less than 2% of group revenue is generated in this geographical space as our sports nutrition product has focused more on the US and the UK”.
In August 2019, share price crashed by over 40% over a number of months when Glanbia issued a profit warning in early 2019.
Back then, the company blamed the tough international trading conditions. While still tough, things are looking brighter on trading conditions - so what’s at play?
Something has spooked the market and the first thing that comes to mind is the cautious group growth forecast presented for 2022. The prediction is for high single-digit growth figures for full year 2022.
On Thursday, Talbot was questioned a number of times as to why this growth figure was so cautious given the performance nutrition business, a big part of revenues and profit, seems to have turned a corner within Glanbia.
Talbot was at pains to explain she was very sure Glanbia could reach this high single-digit figure and “overachieve” based on the fact that her procurement team had 90% of whey powder needed for 2022 hedged, so exposure to any further input costs increases was limited.
However, it would seem to be the market is seeing through on how that performance nutrition growth is going to be achieved – mostly price driven rather than the volume of sales increasing.
The second thing that comes to mind is that one of the more recent brand acquisitions, SlimFast, has not turned a corner.
The first quarter of 2022 is almost complete and the first quarter is when consumers are using slimming products like this, so it looks like SlimFast is not going to deliver in 2022 either.
Talbot squarely puts this down to a COVID-19 effect and fundamentally she is confident the brand and product can deliver in the future as events and work spaces open back up and consumers start moving around more.
The third piece to try to explain the 10% share price fall in a day is probably the perceived or real lack of ambition.
Garvey and Talbot announced another €50m share buy-back. Many analysts see this as a company lacking ambition – why not take the multi-year cumulative €100m to €150m and look at other opportunities for the business.
If the shares were purchased on Thursday morning at €12.50, they have lost 10% in the first 24 hours.
The business isn’t short of cash – it is going to have a €307m cash windfall very soon for its share of Glanbia Ireland from the co-op.
This day last week, Glanbia plc shareholders passed one of the last hurdles to effect what co-op shareholders voted for last December.
So, in summary, if we are to explain the share price fall from the financial results announced on Thursday, aside from any share sell-off that we don’t yet know of, then the reasons are - a cautious growth forecast for full year 2022, a slimming brand and product that has underperformed since being purchased, and a perceived lack of ambition in the acquisition space.
Talbot and Garvey must be disappointed.
They delivered numbers on what they said they would do in 2021. They explained they had hedged a lot of the inflation risk, especially in performance nutrition, and overall they were upbeat on the two main pillars of the Glanbia group business – nutritional solutions and performance nutrition.
The investors spending money on Thursday think otherwise.
On Thursday morning, Glanbia managing director Siobhan Talbot and chief financial officer Mark Garvey announced full-year results for 2021 and a forecast for 2022.
There was an upbeat and optimistic tone from both members of the management team on an early morning analyst call that continued for almost two hours.
However, the market obviously doesn’t like the look of the numbers. The share price on Thursday fell from a start of €12.30 to finish at €11.04 and early morning trading shows a continued decline. I was asked numerous times why the fall, so here’s my take.
If Talbot had announced an overexposure of revenue or profits in Ukraine or Russia you might have expected this sort of a reaction, but, in effect, she said “a lot less than 2% of group revenue is generated in this geographical space as our sports nutrition product has focused more on the US and the UK”.
In August 2019, share price crashed by over 40% over a number of months when Glanbia issued a profit warning in early 2019.
Back then, the company blamed the tough international trading conditions. While still tough, things are looking brighter on trading conditions - so what’s at play?
Something has spooked the market and the first thing that comes to mind is the cautious group growth forecast presented for 2022. The prediction is for high single-digit growth figures for full year 2022.
On Thursday, Talbot was questioned a number of times as to why this growth figure was so cautious given the performance nutrition business, a big part of revenues and profit, seems to have turned a corner within Glanbia.
Talbot was at pains to explain she was very sure Glanbia could reach this high single-digit figure and “overachieve” based on the fact that her procurement team had 90% of whey powder needed for 2022 hedged, so exposure to any further input costs increases was limited.
However, it would seem to be the market is seeing through on how that performance nutrition growth is going to be achieved – mostly price driven rather than the volume of sales increasing.
The second thing that comes to mind is that one of the more recent brand acquisitions, SlimFast, has not turned a corner.
The first quarter of 2022 is almost complete and the first quarter is when consumers are using slimming products like this, so it looks like SlimFast is not going to deliver in 2022 either.
Talbot squarely puts this down to a COVID-19 effect and fundamentally she is confident the brand and product can deliver in the future as events and work spaces open back up and consumers start moving around more.
The third piece to try to explain the 10% share price fall in a day is probably the perceived or real lack of ambition.
Garvey and Talbot announced another €50m share buy-back. Many analysts see this as a company lacking ambition – why not take the multi-year cumulative €100m to €150m and look at other opportunities for the business.
If the shares were purchased on Thursday morning at €12.50, they have lost 10% in the first 24 hours.
The business isn’t short of cash – it is going to have a €307m cash windfall very soon for its share of Glanbia Ireland from the co-op.
This day last week, Glanbia plc shareholders passed one of the last hurdles to effect what co-op shareholders voted for last December.
So, in summary, if we are to explain the share price fall from the financial results announced on Thursday, aside from any share sell-off that we don’t yet know of, then the reasons are - a cautious growth forecast for full year 2022, a slimming brand and product that has underperformed since being purchased, and a perceived lack of ambition in the acquisition space.
Talbot and Garvey must be disappointed.
They delivered numbers on what they said they would do in 2021. They explained they had hedged a lot of the inflation risk, especially in performance nutrition, and overall they were upbeat on the two main pillars of the Glanbia group business – nutritional solutions and performance nutrition.
The investors spending money on Thursday think otherwise.
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