Falling value of sterling not good news for Irish exporters
Comments made this week by Mark Carney, governor of the Bank of England, sent sterling to 12-month lows against the euro.

The value of sterling nosedived this week after governor of the Bank of England Mark Carney ruled out a rise in UK interest rates in 2016, citing weak economic growth in the UK and the continuing turmoil in global financial markets.

Sterling fell to more than £0.77 against the euro after Carney’s announcement, its weakest point against the single currency in over a year. With €4.4bn or 41% of Irish food exports sent to the UK last year, the sudden depreciation of sterling against the euro will be a major concern for Irish exporters.


The weakness of the euro against sterling throughout 2015 served to boost the competitiveness of Irish exports on UK shelves. Irish food and drink exports to the UK grew by 7% in 2015, with the greatest driver of this undoubtedly the favourable currency tailwinds.

The euro weakened by almost 11% against sterling at one point in the year, with the single currency particularly weak during the period between early March and late August 2015.

However, with global markets in turmoil since the start of 2016 amid concerns over an oil supply glut and the economic health of China plaguing investors, the Bank of England governor has decided to hold his position and wait before any rise in UK interest rates.

Carney said the time was not right for a rise in interest rates, as UK growth would be too weak in 2016, especially set against the backdrop of the present fragility in the global economy.

The impact of the news saw the value of sterling fall against both the euro and the US dollar on Tuesday this week, an outcome clearly intended by Carney and welcomed by UK markets, as a weaker pound will only help UK exports.

Bearish outlook

Coupled with Carney’s bearish economic outlook, the uncertainty around a British exit from the euro zone will only intensify over the coming months as we move closer to a referendum date (possibly sometime in summer 2016), meaning the weakness of sterling could be here to stay for an extended period.

Should this be the case, Irish food and drink exporters will find themselves operating in more challenging market conditions with much of the competitive advantage enjoyed over the last 12 months wiped away.

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Weak euro helps Irish food exports grow by 3% to €10.8bn

Agri shares: Aryzta shares rally strongly on back of half-year results
Shares in Aryzta rallied this week after the bakery giant reported positive half year results.

Shares in Aryzta were the standout performer this week, after the speciality bakery giant posted half-year results that hinted at the first signs of a recovery in the group’s underlying US business.

Aryzta shares have jumped 7% this week to €1.10, signalling improved investor confidence in the bakery giant.


Aryzta’s half-year results show that profit margins in the group’s North America unit expanded by 40 basis points year on year to 6.8% - the first margin expansion in the US business since 2014.

Overall, Aryzta reported group sales of €1.7bn for the six month period to the end of January 2019, reflecting organic sales growth of 0.7%. Aryzta said it achieved higher sales prices of 0.9%, which was only partially offset by a 0.2% decline in volumes across the business.

Aryzta CEO Kevin Toland described the results as results the "first step" for the company to deliver on its multi-year turnaround plan.

If the stabilisation of the US business can be sustained and Toland continues to refocus the business on its frozen B2B core, Aryzta could be at the start of a comeback.

Agribusiness PLCs

Of the other agribusiness PLCs listed on the stock exchange, there were strong gains for shares in Greencore and Donegal Investment Group.

Shares in Greencore jumped more than 5% in the last week to £2.08, while Donegal shares are also up 5% in the week to €9.65.

Shares in IPL Plastics, formerly One51, gained 5% this week to move close to C$10.80.

Kerry Group shares are up almost 1% in the week to €96.10, while Glanbia’s share price was also up 1% to €18.82.

Shares in insurer FBD Holdings fell 3% to €9.10 this week.

On oil markets, the price of Brent crude oil has risen over recent weeks and is currently trading at just over $67/barrel.

Glanbia Ireland reports 22% rise in profits last year
Ireland's largest dairy processor saw profits increase as a result of the full-year effect of buying the consumer foods and agribusiness from Glanbia plc.

Glanbia Ireland, the joint venture between Glanbia co-op and Glanbia plc, saw a 22% rise in operating profits to €73.4m mainly as a result of the full-year effect of the purchase of the consumer foods and agribusiness from Glanbia plc in 2017. Revenues increased 29% to €1.8bn as a result of the acquisitions. Milk volumes increased 5% to 2.7bn litres last year after being back 0.5% at the first half followed by a 10% surge in the second half. Glanbia now has 25% of its milk in fixed milk price schemes.

Stock values at year end increased 28% to €309.2m, mainly as a result of the enlarged business. The group balance sheet at year end showed total shareholder equity was €409.5m.

The group had net debt of €319.6mm, an increase of €32.7m on the end of 2017. Average debt levels had increased due to capital investment and higher working capital requirements, especially towards the end of the year.

Turnover from the ingredients business fell by 4% to €1.1bn as a result of a 1% increase in sales volumes but price deflation of 5%. It said it had also made good progress on expanding the group’s consumer brands internationally. The agribusiness division had revenues of €447.3m last year. The company said that the sales of feed was up 40% due to the weather conditions and that it had gained market share.

Cheese production

It is estimated that around 40% of its cheese production, which takes 800-900m litres of milk, is destined for the UK market. The business has been investing away from core cheddar production. Glanbia Cheese is building a mozzarella production facility in Portlaoise. It has also entered into a partnership with Dutch cheese processor Royal A-ware to build a new cheese facility in Belview which will cost €140m. This will come on stream in 2022. Glanbia is currently investing €125m in Belview in order to expand milk processing capacity at the site. This will be operational to process peak milk in 2019.

Operating margins were a healthy 4.1%. The business generated cash of €106.2m last year – up from €84.9m in 2017. Debt to EBITDA fell from 3.38 times to 3.01 times during the year. Overall the business made a net profit after tax of €57.8m. This reflects the agreed margin of 3.2% the business must make for its shareholders.

The model ensures that €28.9m or 50% of the profits after tax are held in the business for future investment and expansion. The other 50% is paid as a dividend to the parents. This sees Glanbia plc receive €11.5m from its 60% shareholding while Glanbia co-op will receive €17.4m. This portion generates the funds which the co-op uses to reward shareholders who are active farmers through either milk price supports or trading bonuses.

Callan Bacon owners explore €30m sale options
The business made an operating loss of €132,500 for the financial year to the end of April 2018.

The owners of Callan Bacon, the Kilkenny-based pork processer, are exploring options for the sale of the business.

According to reports, the company has appointed Deloitte to find potential buyers for the business, which has been valued at around €30m.

Callan is the largest bacon processor in Ireland with an annual capacity of 45,000t.

However, the business has been particularly exposed to the weakness in sterling over the last number of years, with 50% of Callan’s business coming from the UK market.

For the financial year ended April 2018, Callan made an operating loss of €132,500. The company had made an operating profit of almost €402,000 the previous year, albeit with very slender profit margins of just 0.6%.

The business reported a near 20% drop in sales to €56.6m for 2018. Accounts filed by Callan show sales in Ireland fell by 12% in the year, or €5m in value. Sales to customers outside of Ireland (mainly the UK), plunged 30% in the year, or more than €8.5m in value.