Glanbia PLC (GLB), a global nutrition group, reported a record adjusted earnings per share (EPS) growth of 20.5% to €0.37 in 2023, propelled by robust revenue and margin performance, especially in its Global Performance Nutrition (GPN) division and its flagship brand Optimum Nutrition.
The company also announced a 10% dividend increase and a share buyback program of €100 million.
Glanbia's strategic focus remains on sustainability and better nutrition, with the sale of non-core assets and the acquisition of a bioactive ingredient business. The company projects that EBITDA margins for 2024 will be consistent with 2023 levels.
Key Takeaways
- Adjusted EPS grew by a notable 20.5% to €0.37, marking a record for Glanbia.
- Dividend increased by 10%, and a share buyback program worth €100 million was announced.
- Strategic capital expenditure of $52 million in 2023, mainly on Nutritional Solutions and IT systems.
- Acquired a dairy bioactives business for $45 million.
- Provided guidance for 2024, including mid-single-digit volume growth and adjusted EPS growth of 5-8%.
- Glanbia to focus marketing on three key protein brands: Optimum Nutrition, Isopure, and think!.
- Anticipates higher whey costs in the second half of 2024 but remains confident in cash generation and growth opportunities.
Company Outlook
- Glanbia expects sustained EBITDA margins in 2024, similar to 2023.
- Capital expenditure for 2024 is projected to be between $75 million and $85 million, with strategic priorities aimed at growth in key areas such as Optimum Nutrition and international markets.
Bearish Highlights
- SlimFast brand experienced a 5% decline in Q1 due to distribution losses.
- Higher freight costs expected in the second half of the next year, which will impact the overall balance.
Bullish Highlights
- Strong demand for performance nutrition and protein products in international markets.
- Positive volume growth expected in Nutritional Solutions, especially in premix and health and immunity sectors.
- Increased marketing spend on Isopure and think! brands to capitalize on growth opportunities in the protein market.
Misses
- Lower share of profits from joint ventures.
- SlimFast brand's negative impact on overall performance with a 5% decline in Q1.
Q&A Highlights
- CEO Hugh McGuire emphasized the potential of the Isopure brand and the company's focus on brands driving growth.
- Discussed marketing efforts and expected velocity to increase volumes in the second half of the year.
- Addressed the challenges in the diet category and the competitive landscape, maintaining comfort with their price points despite moderate promotional intensity.
Glanbia's recent earnings call showcased a company on the rise, with strong financial performance and strategic investments aimed at future growth. The company's emphasis on brand strength, particularly in the protein and wellness segments, positions it well to meet evolving consumer demands. Glanbia's commitment to shareholder returns and confidence in its growth trajectory are evident in its increased dividend and share buyback program. With a clear focus on strategic priorities, Glanbia is poised to maintain its momentum in the global nutrition industry.
Full transcript - None (GLAPF) Q4 2023:
Liam Hennigan: Good morning and thank you operator and welcome to the Glanbia 2023 Full Year Results Analyst Call. During today’s call, the directors may make forward-looking statements. These statements may have been made by the directors in good faith based upon the information available to them up to the time of their approval of the Glanbia plc FY 2023 preliminary results announcement. Due to inherent uncertainties, including both economic and risk factors underlying such forward 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 Hugh McGuire, CEO, Glanbia plc.
Hugh McGuire: Good morning, everyone and thank you Liam. I’m delighted to welcome you to the Glanbia full year 2023 results call and presentation, my first as CEO. I am joined on today’s call by Mark Garvey and I will provide some highlights from 2023. Mark will then cover the financial and operational results, and I’ll then give a review of the business, after which we’ll be very happy to turn the call over to you for questions. I am very pleased to report that the group delivered a strong performance in 2023 with adjusted EPS growing by 20.5% to €0.37, a record for Glanbia. This was driven by strong revenue and margin performance from the GPN business where global consumer demand and Optimum Nutrition continue to grow momentum. And in our Nutritional Solutions business, overall volume trends continued to improve through the year with sequential improvement in volume growth in the fourth quarter. Our strong operational and financial performance continue to generate excellent cash flow with 90.4% cash conversion in the year. We increased returns to shareholders by raising the dividend by 10% and returning €100 million via our share buyback program. We’re also very pleased to announce that today the Board has approved a further €100 million share buyback for this year. We continue to deliver on our sustainability commitments, better nutrition, better world as our global sustainability program, and we’re well on track, which I’ll speak to later. We also continue to make good progress on our clearly defined better nutrition strategy, which we outlined at our Capital Markets event in November 2022. We’re focused on our two growth platforms, Glanbia Performance Nutrition and Glanbia Nutritionals. We continue to evolve our portfolio with the sale of our share in the Glanbia Cheese joint ventures, the sale of our noncore Aseptic bottling facility and the acquisition of an exciting bioactive ingredient business targeting immune and gut health, which strengthens our position in dairy bioactives. We’ve successfully navigated a volatile and inflationary environment, passing through significant double-digit price increases by seeing price elasticity better than expected. We’ve increased the investment in our brands and marketing by more than 200 bps, prioritizing our growth protein brands of Optimum Nutrition, Isopure and think! It was particularly pleasing to see Optimum Nutrition, our flagship global brand breakthrough $1.1 billion in revenue last year, delivering both volume and price growth in the period. We continue to strengthen our capabilities in digital, brand, innovation and sustainability. And we just recently announced a new role of Chief Digital and Transformation Officer reporting to me that will be both an important productivity and growth lever focusing on enhancing and accelerating Glanbia’s digital capabilities. With that now, I will hand over to Mark for some further details on 2023.
Mark Garvey: Thanks Hugh and good morning to everyone on the call. I will take you through the key financial highlights for 2023 and our outlook for ‘24. 2023 Group revenue was $5.4 billion, which was 8.7% down on prior year. Pricing was 7.7% lower due to lower dairy pricing in the Glanbia Nutritionals business, while volumes were down 0.5% and due primarily to destocking trends in our Nutritional Solutions business during the year. Group EBITA before exceptional gains was $424 million, an increase of 16.4% constant currency due to strong GPN EBITA growth. We saw a good increase in group EBITA margins from 6.2% to 7.8% with margin increases across all businesses. Adjusted earnings per share was €1.3137 and an increase of 20.5% constant currency and ahead of our upgraded guidance of 17% to 20% and well ahead of our Capital Markets Day target range of 5% to 10%. We had strong operating cash flow of $446 million, with an operating cash flow conversion of 90.4%, ahead of our 80% target. Return on capital employed for the year was 12.2%, an increase from 10.7% in 2022 and at the higher end of our Capital Markets Day target range of 10% to 13%. GPN had a strong year. Revenues grew by 4.8% constant currency with branded revenues up 5.1% and Pricing was a positive 5.4% as price increases taken in ‘22 were last during the year. Optimum Nutrition, which had sales of over $1.1 billion and now represents 62% of the GPN portfolio, had revenue growth of 17%, with volumes up 10.6% and pricing up 6.4%. Q4 was strong as we saw selling to certain customers as they prepared for New Year, New You programs. Q4 volumes were up 17.2% and pricing was down 5.9% as we saw some more targeted promotional activity. For the full year, Sports Nutrition and Lifestyle revenues were good, while SlimFast now represents approximately 9% of GPN revenues was more challenged. During 2023, GPN increased brand and marketing investment by over 200 basis points with marketing as a percentage of sales, now double digits and prioritizing the protein growth brands of Optimum Nutrition, Isopure and think! with a more of you and you campaign resonating with customers. Reported EBITA of just over $255 million, an increase of 33.7% constant currency over prior year, driven by revenue growth, operational efficiencies and margin optimization. Overall, EBITA margins were 14.2%, an increase of 300 basis points over prior year. The second half of ‘23 in particular, benefited from lower input costs and half two EBITDA margins were 16.3%. In 2024, we expect this trend to be somewhat reversed as freight costs have risen. Overall, we expect EBITDA margins for ‘24 to be more balanced between half 1 and half 2 and for the full year, sustained at least at the same level as ‘23. We continue to see strong momentum from Performance Nutrition and Healthy Lifestyle brands in ‘23. Optimum Nutrition, which represents 62% of the GPN portfolio grew 17%, 52-week leased U.S. consumption increasing 13.7%. International had a particularly strong year also growing like-for-like revenue by 12.8%. The healthy lifestyle brands of Isopure, think! and Amazing Grass, which are primarily sold in the U.S., represent 18% of GPN revenues. 2033 revenue growth was 10.7% and 52-week measured U.S. consumption was up 11.2%. The diet category continues to be challenged, in particular the FDM channel as underlying consumer diet behavior remains soft and retailers have reduced shelf space. We will continue to monitor our performance throughout the Q1 diet season and adjust our level of investment to get the best return. Nutritional Solutions reported revenues of just over $1 billion for ‘23, a decrease of 14.9% constant currency over prior year, primarily due to lower dairy pricing more than offsetting positive premix pricing and accounting for 9% of the revenue declining. Volumes declined 3.3% for the year. As we have discussed throughout ‘23, we saw customer destocking in both protein and premix over the year, but those trends have improved quarter-on-quarter. Volumes turned positive in the third quarter and in the fourth quarter, we saw volumes increase by 8.2% as customer offtakes, particularly in dairy, were stronger than anticipated, which we do expect to somewhat balance out in Q1 ‘24. We continue to see improvements in volumes in premix as the year progressed and expect premix volumes will be positive in Q1. Nutritional Solutions EBITA was $126 million down 6.2% constant currency and EBITA margins improved by 110 basis points and operating efficiencies and the impact of lower dairy pricing, improved margins. U.S. Cheese revenues were $2.6 billion, down 13.9% constant currency due to lower cheese markets. Volumes are marginally up, reflecting operating efficiencies in the business. U.S. Cheese EBITA was $42 billion, up 9.6% constant currency for the year, with EBITA margins of 1.6%, up 30 basis points. EBITA growth was driven by operating efficiencies and some milk procurement benefits during the year. Turning to cash flow. Cash flow generation was strong in ‘23 million. Operating cash flow was $446 million compared to $374 million in 2022. Operating cash flow conversion improved to 85.7% to 9.4%. Operating cash flow was enhanced by a strong increase in EBITDA as well as disciplined working capital management. From ‘22 yearend to 23 year-end inventory balances have been reduced by over $200 million as supply chain challenges from ‘22, significantly east on the impact of lower dairy pricing and programs put in place to structurally reduce inventory days across the group. Free cash flow improved from $283 million to $390 million due to the improved operating cash flow performance, lower net interest and cash payments as well as higher dividends received from our joint ventures. The sale of the group’s interest in the Glanbia Cheese joint ventures generated approximately $190 million, including the repayment of shareholder loans. At year end, net debt was $249 million, down from $490 million a year earlier, representing a net debt-to-EBITDA ratio of 0.5x. Interest cover in ‘24 was over 38x and the group is operating well within our financial covenants. The group is $1.3 billion of committed debt facilities with a weighted average maturity of 4.7 years with no facility due for renewal prior to late ‘27. Turning to our capital allocation framework. The group spent $52 million of strategic capital expenditure in 2023, primarily adding additional capability in Nutritional Solutions to meet customer needs, integration of prior acquisitions as implementations are upgrading IT systems, including the upgrade of our group ERP systems to the latest technology. In 2023, we acquired another dairy bioactives business for initial consideration of $45 million, enhancing our capabilities in this category. This business is in the process of being integrated with the Sterling Technology’s business acquired in 2022. The group continued to return capital to shareholders with $97 million returned via dividends. And today, we announced we are increasing the 2023 final dividend by 10%, so that the total dividend for 23 will be €0.3543, representing a payout ratio of 29.2% and in the middle of our guided payout ratio range of 25% to 35%. In addition, the group returns €100 million to shareholders via share buyback programs in ‘23, acquiring and canceling 7.2 million shares at an average price of €13.86. Today, we announced we intend to buy back a further €100 million to start in ‘24 and launched an initial buyback tranche of €50 million today. So other points to note for ‘23 are as follows: the share of profits of joint ventures is $12.5 million, which is lower than prior year. That is due to the sale of the Glanbia Cheese joint ventures earlier in the year. Net finance costs were $12.3 million and significantly lower than prior year due to lower average debt levels and returns on gross cash balances due to higher deposit rates in North America. The effective tax rate for ‘23 was 14% with the implementation of the OECD Pillar 2 rules from the beginning of ‘24, we expect the group’s effective tax rate to be between 15% and 17% in 2024. Exceptional items amounted to a net gain of $46 million for the gain on the disposition of operations of $256 million, somewhat offset by portfolio related reorganization costs and pension costs. And in 2024, the group expects capital expenditure, including business sustaining CapEx to be in the range of $75 million to $85 million. Next, I would like to provide some more detail on the impact of the changes in commercial arrangements associated with our joint ventures, which we announced last year, which came into effect at the beginning of 2024. In addition to these new commercial arrangements, the group will also be moving to EBITDA and EBITDA margin reporting, as we believe this is more in line with industry classes and our peers. For illustrative purposes, on this slide, you can see pro forma data for 2023 as if the new commercial arrangements were in place in 2023 as well as the EBITDA impact for ‘23. Group EBITA margins for ‘23 were 7.8%, adding back depreciation for the group as 130 basis points, resulting in an equivalent EBITDA margin of 9.1%. Then pro forma adjusting for the impact of the change associated with joint venture commercial arrangements an additional 450 basis points would have been added back to get to a revised group pro forma EBITDA margin of 13.6%. On the right side of the slide, you can see the pro forma impact on our different businesses for ‘23. For Glanbia Nutritionals, ‘23 revenues of $3.6 billion will be reduced to $1.8 billion on a pro forma basis, with the most significant impact on our U.S. cheese business. There is no impact on GPN revenues. Also, EBITDA for all businesses is not impacted by these changes. EBITDA margins for Nutritional Solutions in ‘23 were 15.6% compared to EBITA margins of 12.5%. These EBITDA margins on a pro forma basis for the commercial arrangement changes in ‘23 would be 17.8%, which is a relevant basis for ‘24 guidance. EBITDA margins for U.S. cheese for ‘23 or 2.1% compared to ESA margins of 1.6%. These EBITDA margins on a pro forma basis for the commercial arrangement changes to ‘23 would be 5.7%. Finally, ‘23 GPN reported EBITA margins of 14.2%, our equivalents of 15.7% on an EBITDA basis, which is now the basis for guidance in ‘24. And just now to take you through our guidance for 2024. In GPN, we expect revenue growth will be between 4% and 7%, including the 53rd week. The growth will be volume led, and we expect some negative price with some promotional activity during the year. The guidance assumes a headwind from SlimFast of up to 2.5% as we lap distribution losses during the year. As I noted earlier, we saw strong sell-in in Q4 ‘23 as customers prepared for New Year, New You promotions, which we expect to rebalance in Q1 ‘24. We expect Q1 revenues to be marginally back on prior year primarily due to the strong seller in Q4, lapping SlimFast distribution losses and experiencing some softness in the specialty channel. In GNS, we expect volume growth between 3% and 5% for the year as we expect a measured rebound of the destocking activity we saw during ‘23. We Again, as noted earlier, we did see strong customer uptake in dairy towards the end of Q4, which we expect will balance out somewhat in Q1. Turning to EBITDA margins. We expect sustained GPN and NS EBITDA margins, at least at a level achieved in 2023 at 15.7% and 17.8%, respectively. We expect operating cash conversion to be over 80% for the year. The effective tax rate of ‘23 was 14% with the implementation of the OECD Pillar 2 rules from the beginning of ‘24. We expect the group’s effective tax rate to be between 15% and 17% in ‘24. And adjusted earnings per share is expected to grow between 5% and 8% on a constant currency basis in ‘24. And with that, I’ll hand it back to Hugh.
Hugh McGuire: Thank you, Mark, and thank you, Liam, for a little bit of excitement this morning. Apologies for that. One of our values is find a better way. So we’ll be looking at that and how we improve for next time. I’m going to take you to Page 17. The purpose of Glanbia is delivering better nutrition. We know that people want to live full healthy lives, reach their physical performance goals recover quickly and stayed strong at any age. We are competing in large and growing categories and our top three nutrition categories represent an addressable market of almost $100 billion with average growth rates in mid-single digits. Our portfolio of brands and ingredients lead key consumer mega trends within these categories. Performance in active lifestyles have clearly been growing trends are now increasingly fueled by things like technology and social media influencers. In the U.S., 71% of consumers now engage an exercise at least once a week. 42% of consumers are actively incorporating more protein into their diets and 64% of U.S. adults prioritize more energy as a top health goal. We return to busy on-the-go lifestyles, convenience, health and functionality are key nutrition criteria for our consumers without compromising taste, functionality or nutritional content. We’re also seeing accelerating trends where our portfolio is perfectly positioned to drive. We see demand for protein immunity enhancement and overall wellness as key areas of opportunity for the Glanbia portfolio. Where we’ve seen the most significant shift over the past year has been the area of weight management. Healthy weight loss remains a key focus with 65% of Americans stated they want to lose weight. It’s no surprise that the advent of GLP-1 drugs has been a major disruptor to this category. We see from our own consumer research to protein, nutrient density and digestion are critical needs that are gaining awareness of GLP-1 users and are increasingly being recommended by health professions. We see this as an opportunity for both our performance and lifestyle brands and our protein and micronutrient solutions. Moving to Slide 18. I want to talk to you now about our two growth platforms of GPN and Nutritional Solutions and take you through our strategic priorities to drive growth in both. GPN’s mission is very simple. It’s about inspiring people everywhere to achieve their performance and healthy lifestyle goals. Our portfolio of authentic and unique nutrition brands appeal to consumers all over the world with opportunity for growth across multiple geographies, channels and use these occasions as we drive awareness and reach. Our strategic priorities are clear. Number one, capturing the global growth potential of Optimum Nutrition. Optimum is the world’s number one sports nutrition brand, growing by 17% to become a $1 billion brand in 2023. It now represents over 60% of the GPN brand portfolio and has experienced strong growth globally, delivering double-digit volume growth in 2023. We continue to gain share and outperform category growth in measured channels, with U.S. consumption growth last year of 13.7%. As Mark has outlined, the performance of the brand was supported by increased brand investment and excellent execution as we continue to drive awareness and distribution gains. We’ve made some great progress in the year across key distribution metrics with household penetration of 11% to 4.5%, ACV of 22% and TDPs, or total distribution points of 24%. These metrics are all for U.S. measured channels but highlight some of the progress as well as the further opportunity as we capture the potential of the brand. Second strategic priority to build a lifestyle nutrition platform in North America. Our healthy lifestyle portfolio includes the brands think!, Isopure and Amazing Grass, and they help active lifestyle consumers achieve their goals with a range of high-protein bars, protein drinks and green super foods. This portfolio performed well last year with U.S. consumption growth of 11.2%. I will speak more about this portfolio in a later slide. Our third strategic priority accelerate growth in priority international markets. We continue to accelerate in our international business, now representing 35% of GPN revenue and we grew like-for-like revenues by 13% in 2023. The growth across the region was broad-based and driven by volume growth of the ON brand and is supported by increased brand investment and continued development of our in-market teams and capability. ON continues to drive our performance, and we’ve seen good growth in many markets, including Mexico, Australia, Korea and Canada. And particularly, I’m pleased to see the growth of ON and the U.K., our second largest market outside the U.S. where we continue to scale our presence as a true omnichannel player and have seen over 30% growth last year. Innovation continues to be a priority for the launch of our new ON clear 100% plant protein and our revamped ON bar range. Our fourth strategic priority is maximizing our omnichannel opportunity, driving physical availability of our brands reaching more consumers. We’re very much an omnichannel business now, having evolved from primarily especially e-commerce channel business to expanding their business across Food, Drug, Mass, Club where it is now 35% of our global business. Over the past few years, we built a single one face to customer team to engage with all retail partners across the entire brand portfolio. We’re making good progress on metrics such as household penetration, but none of our brands currently have a household penetration of more than 5%, which shows substantial opportunity for recruitment and future growth. Turning to Slide 19 to speak to ON a little bit more. The Optimum Nutrition brand is built in authenticity and trust, and we continue to broaden and deepen our consumer reach and relevance for a wider range of consumers. The momentum of Optimum Nutrition makes it the number one sports efficient brand in the world and also the number one in 18 countries. In terms of marketing activation, we’re about to launch our latest campaign, More of You in You, which will run in all supportive markets for March this year across all media channels and will feature for the first time on national television in the U.S. and U.K. market. We’ve recently announced that we’ve become the official sports nutrition partner McLaren Formula One. This partnership unites 2 brands with high performance per core constantly striving for better. It’s also a big focus for activation in our international markets with 21 of the 24 brand been held outside the U.S. Our roster of influencers and ambassadors drive brand advocacy as well as strong reach and engagement. This remains a key focus for the brand and we now have over 4,000 ambassadors, coaches and elite athletes on the roster. And finally, there’s a continued focus on innovation as we grow our distribution and usage occasions across a range of channels and formats. We’ve seen good traction on recent labor extensions on weight goal standards and amino energy, and we have a strong future pipeline. Turning to Page 20. We are very pleased with the performance of our high protein, zero low carb lifestyle brand, Isopure, where we increased marketing and investment last year. Traditionally, a specialty e-commerce brand, it grew strong double-digit percent last year with expansion into club and mass channels and we see significant opportunity for this brand with lifestyle consumers with key on-trend positioning. Approximately 72% of Isopure consumers are new to the brands, nearly half of whom are new to the protein category. We have low household penetration of just over 1% and lots of opportunity for distribution, particularly across grocery channels. We’ve just launched a new on-trend extension with Isopure Collagen to better serve our consumers who are looking for propylene and collagen to support their healthy lifestyles. Our think! Protein bar business is regaining momentum behind our core proposition of high-protein zero sugar. We increased prices significantly in both 2021 and late 2022 across the range and as we lap those increases, we’re seeing the brand respond well. We continue to increase our investment levels behind the brand, and we have a solid innovation pipeline, leveraging new flavors with good velocities and recent flavor launches of Boston cream pie and chocolate mint. And looking forward, we have an exciting licensing partnership coming in half to ‘24. Turning briefly to SlimFast. As Mark mentioned, the diet category continues to be challenged and particularly within the Food, Drug, Mass channel as underlying consumer died behavior remains depressed, and retailers to produce shelf space. In addition, we continue to see the decline in key to advise demand. As expected, we’ve seen the declines continue behind that reduced distribution. However, although a smaller channel for our business than FDM, we saw improved performance for the SlimFast brand in e-commerce with an increased focus on our core shake business and the launch of our new marketing campaign featuring 4-hour hunger control and our innovation agenda prioritizing high-protein flavors across ready to strength and powders. But our U.K. business is also small, and we’ve seen performance stabilize and we continue to monitor performance to our quarter 1 diet season and adjust our levels of investment and marketing media mix to the channels and tactics that get us the best return. As I mentioned earlier, we’ve conducted multiple rounds of proprietary research with GLP-1 users, which validates the opportunity for our entire brand portfolio. Protein, nutrient density and preserving muscle mass are critical leads that are gaining awareness with GLP-1 users. Based on current user demographics and behavior, we’re proactively testing targeted digital advertising and website content that will enable consumers to learn more about how our brands can support and complement their weight loss journey. Turning to Page 21 and our strategic priorities for Glanbia efficient. With the ingredients partner of choice to some of the world’s leading brands. We’re a leader in both cost and premix solutions and protein solutions. We act as a quarterback for our customers from idea stage commercialization, leveraging our deep innovation capability and global operational and supply chain expertise. Our first priority is build on our core strength in custom premix solutions. As Mark outlined, while 2023 has seen a period of customer inventory rebalancing in our micronutrient premix business, the demand at a consumer level for volume in the mineral fortification remains fundamentally unchanged. In fact, we know from a recent survey that three quarters U.S. adults take supplements and 92% say they are essential to maintaining their health. And this helps in our confidence that the Nutritional Solutions business will return to growth levels in line with our midterm targets in 2024. Our second strategic priority is to scale extensive protein capability and our deep expertise in that area. We are a protein powerhouse with a full range of dairy ingredients and solutions. We continue to invest in innovation and capacity to ensure we have the best solutions to meet the growing needs of consumers and customers for protein healthy snacking solutions that meet their functional taste and macro nutrient needs across a complete range of formats. Consumers continue to show strong interest and formats to address the desire for convenience, great taste and healthy snacks. And our third strategic priority is scaling complementary technologies and further M&A. Nutrition Solutions is a great platform for acquisitions and for further developing our solutions capability with a strong operating model and strong capabilities, which are scalable, and our recent complementary acquisitions are performing well. Moving to Slide 22, I’ll talk about those in a little bit detail. Over the past 4 years, we deployed €350 million in acquisitions in this solutions area. In 2019, we acquired the Watson business, which provides further scale to our premixed nutrient business and a manufacturing base on the U.S. East Coast. In 2020, we acquired Foodarom, with locations across North America, Canada and Europe. This flavor business offers customized flavor solutions through co-creation, strong technical and application support and close collaboration with our customers. Flavors is complementary to both our premix and protein offerings, and we like the strength of customer relationships that come with flavor technologies. Our 2021 acquisition of PacMoore gave us a unique position in the marketplace by vertically integrating our dairy and plant-based protein expertise with PacMoore’s extrusion expertise, which enables our customers to incorporate protein into sweet and savory snacking occasions. Our range of excluded protein crisps and protein bites for cereals and snacks is unique and gives us a firm opportunity to grow with this market. We further invested in capability at PacMoore to harness this opportunity. Lastly, we’ve also scaled our bioactives portfolio, which plays into a $20 billion immunity and gut health supplement segment, which is growing at rates in mid-single digits. We entered this area with the acquisition of Sterling Technologies in 2022, and we added to this with a bolt-on acquisition of 2023. And we’re now well positioned to serve this market with our colostrum-enriched nutraceuticals along with other existing products in our bioactive portfolio, such as lactoferrin [indiscernible]. Turning to Slide 23. Better Nutrition, Better World is Glanbia’s global sustainability program and essential to our strategy. We’ve made good progress over the last year and are on track against our stated targets. Our global packaging and [indiscernible] increased from 62% to 76% in 2023. We continue to look at ways to enhance that message for consumers. And during 2023, GPN partnered with How2Recycle, a leading organization in the U.S. and Canada dedicated to simplifying and enhancing the recycling process. And as a result, GPN was assigned unpack label accreditation widely recyclable for OEM powder products, which includes the iconic ON black pearl and ice powders, and we continue to add across the portfolio. We’re well on track for our 2030 goal, 100% of our packaging being recyclable, reusable or compostable. We’re also on track for other environment commitments relating to climate, water and waste and have clear targets in place, which are consistent with the 1.5 degree celsius road map. We delivered a 15.9% reduction in Scope 1 and 2 carbon emissions in 2023 and are well on track to reduce by 50% by 2030. In terms of water, we’re dedicated water conservation as well across all our facilities. And this year, we achieved 3.44% decrease in absolute threshold water withdrawal which means we’ve reduced freshwater use intensity by 6% compared to 2021 base year. And lastly, our people. We have a strong culture and values in Glanbia and believe in the power of our people and our culture to drive outperformance. Employee engagement is a key enabler. And in 2023, our Yervoy survey had an overall response rate of 80% and showed overall employee engagement levels increasing by plus 1 to 72. We continue to make progress on our DE&I journey, our employee resources groups and network of women through colors and mosaic continue to scale, creating connected communities of support across the organization. We continue to focus on female representation recording 40% female participation in management in 2023, an increase of 2% over 2022. Turning then to Page 24, the last page, investment case the investment case with Glanbia is clear. We have really strong brands and market positions as the number one player in sports nutrition, the number one in protein solutions and the number two in customized premix solutions. We compete in attractive nutrition markets supported by powerful and growing consumer trends. We continue to reshape and simplify our portfolio and our operating models are always evolving to prioritize greatest growth initiatives while continuing to improve our profitability. Our culture is performance-driven and values led. We have a strong team and culture, and we continue to build our key capabilities to capture opportunities that can drive further value. With a strong balance sheet and earnings potential to facilitate investment and strong shareholder return. After a record earnings growth in 2023 and based on our current assessment of the environment, we’re expecting to deliver growth of 5% to 8% adjusted earnings per share in 2024. And with that, operator, I would like to open the call to questions.
Operator: Thank you. [Operator Instructions] Our first question today is from Cathal Kenny from Davy. Cathal, please go ahead. Your line is open.
Cathal Kenny: Good morning, all. And thanks for taking my questions. First question is on the revenue guide for GPN. If we back out SlimFast, it looks like you’re guiding at least mid-single-digit volume growth or ‘24 for GPN. Interested to know the building blocks by maybe a little bit more color around the drivers of that assumption? That’s my first question. Second question is on Hugh, you’ve elected to obviously prioritize your marketing and brand spend and investment around three brands, which you characterize as protein growth brands. Maybe you can provide us a little bit of color on the thought process behind that, please? Those are my two questions. Thank you.
Hugh McGuire: Thanks, Cathal. Good morning. They’re probably both connectors, I think. Ultimately, it’s all about opportunity and what provides greatest opportunities and reallocating investments around those highest growth opportunities. In terms of revenue growth, yes, you’re right, and we’re ambitious for growth across the portfolio. And I think when you look at we’d be looking at that and I’ve alluded to that in some of my comments as well. Velocity will obviously be a key part of that. And clearly, investing in the brand will help in increasing awareness and consideration of those brands. distribution. We see significant distribution opportunities across international and also in the U.S., and I mentioned that, I think there’s opportunities to drive our ACV distribution in the U.S. and international continues to grow strongly. And lastly, innovation is also supporting that. So when we think about it as the increased investment in brand marketing around the greatest opportunities, which are the three brands we outlined, and we’re seeing good growth in all three.
Cathal Kenny: And do you plan to step up your marketing spend relative to sales again in ‘24?
Mark Garvey: I would say, Cathal, we have probably the same percentage of marketing, I think, in ‘24 versus ‘23 from a phasing perspective, probably more of that will go into first half versus second half. And that probably is how you saw my comments around a more balanced margin as well, first half second half maybe that you saw in ‘23. But as a percentage of sales, it should remain roughly the same as ‘23.
Cathal Kenny: Thank you.
Operator: Thank you. Our next question today is from Patrick Higgins from Goodbody. Patrick, please go ahead. Your line is open.
Patrick Higgins: Thank you. Good morning, everyone. A couple of questions on my end. So firstly, just in terms of, I guess, the competitive landscape in GPN and promotional intensity through Q4 and into Q1. Was that kind of more or less than you had anticipated? And I guess, what’s your expectations on promotional kind of activity or intensity through this year? And then also, how should we think about your price points relative to competitors at this stage? Are you comfortable where the price point is? Second question is just around the whey cost backdrop, particularly the higher grade whey, which we obviously don’t have as much visibility on? And could you just give us an update there? And I guess, you’re hedging for 2024 and visibility on your whey cost for the year ahead? Thank you.
Hugh McGuire: Good morning, Patrick, how are you? I’ll take the first kind of two parts of the question, and Mark will talk about way. In terms of competitive landscape, quarter four to quarter one, I suppose the first thing I’d say is we tend now to look at quarter four and quarter 1 together because there’s so much investment as we get ready for New year, New You innovation and ensuring we have the right inventory in the right channels at the right time to support those promotions. All of our promotional spend in quarter four was planned, it was planned particularly around key initiatives in our club and e-commerce channels. What I’d say on promotional intensity, I think in January, we saw the same what I’d say is higher than 2022, but back in-line with prior norms in terms of promotional intensity but we have seen that moderate as we move through quarter one. And in terms of price points, no, very comfortable with price points. All of the – both – all of the spend really is around trade spend and promotional support, supporting the brands. We have some tactical price reductions on smaller brands that have had price drops in commodities. But in terms of our core kind of hero SKUs and portfolio, we’re comfortable with the price points at the moment.
Mark Garvey: Yes, Patrick, in terms of whey costs, we are in a period where they’re rising somewhat now. You might recall back in the end of ‘22, we have very high whey costs into early ‘23. We procured well then as that whey cost came down. So we actually have a benefit coming through with our second half of ‘23, it will help us in the first half of ‘24 as well, but we will see some higher whey costs coming to our second half of ‘24. We are procured now through the third quarter. So we’ve still got a quarter to go, but we feel reasonably comfortable, I would say, in terms of how we procure to date. And obviously, we’re keeping a close eye on the market. Series and for we did spike a bit in the end of Q4 ‘23. And that’s why, of course, you saw that offtake as well in our artificial solutions business in terms of dairy protein also.
Patrick Higgins: That’s great. Thank you.
Operator: Thank you. Our next question today is from Alex Sloane from Barclays (LON:BARC). Alex, please go ahead. Your line is open.
Alex Sloane: Yes. Good morning, all. Two questions from me, please. Just firstly, on cash flow, another very strong performance really saying the bar here. I guess even after the €100 million buyback, the balance sheet is going to be in a healthy position. So the question really is on the state of the M&A pipeline and your priorities from here. I guess we haven’t seen much in GPN here in terms of M&A in recent years. Are there more opportunities here in the U.S. or internationally? Or should we be thinking more about M&A activity continuing in NS? That’s the first one, if okay. And then just secondly, just on the GPN growth outlook for ‘24, any material differences you’d expect in that outlook across channels? I think you referenced in the comment some softness in specialty, maybe we could get a bit more color on that and what’s offsetting, assuming that’s perhaps club and online? Thanks.
Hugh McGuire: Yes. Maybe you know what, I’ll answer the GPN questions first on the M&A, and then I’ll hand over to Mark who’s doing a superb job on cash flow. The GPN growth first, yes, we very early in the year, Alex. So at this stage, we’re just tracking trends. We’re seeing – we’re happy with our growth at the start of the year, seeing good growth in our club e-comm and grocery channels. Specialty is a little soft at the start of the year. We’re just watching that carefully. It’s off across the entire industry and category. So – but that’s all built into our assumptions and guidance that we’ve given you. In terms of M&A, I suppose when you think about the growth priorities for GPN theirs is a lot of organic growth opportunity, as I outlined in terms of distribution, penetration, awareness, international and North America. So that’s the priority for the business right now, but that’s not to say that we don’t that we’re not looking at potential opportunities, but I would say that Nutritional Solutions is the bigger priority in terms of M&A right now, and we have an active pipeline.
Mark Garvey: Cash flow, I appreciate the recognition, Alex, in terms of cash flow performance. The business is doing a really, really great job in managing working capital, and it just gives us more optionality, frankly, which is why we get the confidence to announce that we could do a €100 million buyback straight off the bat. But basically, with a 0.5x net debt-to-EBITDA number at the end of the year. And even with, as you said, the buyback of dividends, et cetera, we have optionality as we look at opportunities this year now, which we feel really good about.
Alex Sloane: Thank you.
Operator: Thank you. Our next question is from Nicola Tang from BNP Paribas (OTC:BNPQY) Exane. Nicola, please go ahead. Your line is open.
Nicola Tang: Hi, everyone. Thanks for taking the questions. Actually, the first is a bit of a follow-up on Alex’s question around capital allocation. I was wondering you clearly talked about your confidence in cash generation. And so just wondering why the €100 million buyback is the right amount to repeat this year? And the second question, just a quick one in terms of Q1. You talked a little bit about how maybe we need to look at Q4 and Q1 together with respect to kind of New Year, New You campaigns. Can you just clarify a bit more what you’re seeing so far in Q1 on the GPN side? And I think you also mentioned a similar kind of phasing thing on NS as well. So maybe you could just clarify on NS expectations in Q1 as well? Thanks.
Mark Garvey: Good morning, Nicola, in terms of capital allocation, it’s the first time actually we’ve announced €100 million right off the bat. So we actually feel pretty confident around that. We tend to have done these in €50 million tranches. So for now, we feel pretty comfortable. The Board obviously have confidence in terms of what we can do there. Talking to the GPN and Q4, Q1 obviously, our comments were just trying to make clear to everybody that there was a strong sell-in in Q4. That’s something that we did with our customers. We’re seeing good consumption in Optimum Nutrition in the first quarter. So we feel very good about that. I said in the first quarter may be back. That’s primarily going to be in SlimFast, but maybe a little bit of a specialty point that Hugh mentioned earlier, I said SlimFast was 2.5% negative for the year. That’s around a 5% negative for the first quarter because as you can imagine, SlimFast is more over-indexed in terms of the first quarter. So distribution losses do have an impact on us. In terms of Nutritional Solutions, we’re very pleased with the trajectory and Nutritional Solutions as we sort of end the year saw that demand coming through, as I said, on the protein side. Do you see some of that come off in terms of balancing Q4, Q1. But the good news that we’re very happy with is the premix will be positive in the first quarter in terms of volumes. So that’s a trajectory we’re managing through all 2023 as customers are just managing their own inventories. So you’ll see that coming through in the first quarter. So you’ll see a positive volume print for Q1 for NS, probably won’t be at the 3% level at that point, but it will be a positive print in terms of volumes in Q1.
Nicola Tang: Thank you.
Operator: Thank you. Our next question is from Lauren Molyneux from Citi. Lauren, please go ahead. Your line is open.
Lauren Molyneux: Hi, good morning. Thanks for taking my questions. Back on GPN, just looking at the growth, the international growth was obviously quite strong again. Just wondering if you could talk through maybe what’s driving this? Is this more volume-led or pricing large and what’s the benefit from distribution expansion there as well? Then similarly, thinking about the portfolio, I guess, how should we think about SlimFast brand and its position with your portfolio – within your portfolio? How do you sort of about the turnaround of that business going forward? And then my final question, just on NS, obviously, the volume improvement in the final quarter. Wondering if you could talk more about how you’re seeing the demand in that business evolving? Is there any color you can give on the demand for the different platforms? And then also looking at your recent acquisitions have been quite focused on the health and immunity side of things. So, kind of how confident are you of that growth rate continuing going forward? And is that a meaningful part of your business now? Thank you.
Hugh McGuire: Good morning Lauren. How are you? So, maybe starting the GPN question on international and volume price, it’s both volume and price led. I am very happy with the performance. And what’s driving that, I think, investments, I called it out. Firstly, we have – we continue to build strong capable teams in brand and commercial across our international markets that can drive distribution growth across omnichannel, but also that we can invest in brand. We have made a substantial investment over the last 4 years, in fact, in people and in brand marketing. So, that’s supported a lot of the growth, and we would see strong growth again. In terms of – and it’s primarily Optimum Nutrition as well is the way you should think about it. So, we are seeing strong demand for performance nutrition, for protein, and it’s the capability on the ground that’s helping support this. In terms of SlimFast, I have said it earlier on, it’s obviously the category has significant challenges. The diet category we have seen retailers consolidate shelf sets, particularly in North America and in food drug mass where traditionally, the bands have scale. But it’s a smaller brand now. It’s a more focused brand on meal replacement primarily shakes and powders. We have right-sized the investment for that scale of brand. And as I have said, we are seeing some small – green, but small shoots. And so it’s the way you should think about it. It is primarily a smaller ready-to-drink protein business in our portfolio now. It still is a scale protein ready to drink business on our portfolio. And lastly, just in terms of Nutritional Solutions, I think, we would see growth equally across the major platforms of protein and customer premix solutions. And the acquisition is really interested in the dairy bioactive area. I think that’s an area that we can build out. It’s still a small scale, but it’s an exciting new growth opportunity for us.
Operator: Thank you. Our next question is from Karel Zoete from Kepler. Karel, please go ahead. Your line is open.
Karel Zoete: Yes. Good morning all. Thanks for taking the questions. I have two follow-up questions. The first one is on your margin outlook for GPN and particularly in relation to volume leverage because you guide for significant drought of probably your most profitable brand and SKU. And so if I think about margin outlook, it seems that there certainly will be some volume leverage, there will be some mixed benefits, marketing investments will be stable. So, is your outlook for a stable margin in GPN a bit cautious? And the other question is then as a follow-up on your non-U.S. strategy. And also in relation to the digital strategy, a new Chief Digital Officer, does that imply that with a focus on ON that ambitious for the European direct-to-consumer platform are now really skilled back. And when it comes to the non-U.S. business in general, I think the UK and Australia has been successful, but elsewhere has been fairly volatile. So, is the approach going forward still want to focus on really these strong markets or one of more expansion? Thank you.
Hugh McGuire: Karel, I will take that. Well, I might take the GPN questions and start from the back and move forward and Mark will answer the margin outlook question. Look, the international business always is a degree of volatility as we talk about internally, there is often a war somewhere in the world. So, we will see that volatility on occasion. But I think our business and teams have strong capability in navigating that, whether it’s the Israeli conflict in Gaza at the moment or is the Ukraine war, there will always be some challenges there. And then we will also see some challenges on trade and regulatory changes across markets. But I think it’s fair to say the team managed that very, very well and executed really well. So, what I would say is the opportunities in both markets, whether it’s our scale Tier 1 markets, and I call that the UK had a very good year. Last year, Australia also had a good year last year, and so there is a number of our markets. But that’s the same approach, which is building in market on the ground competency that is brand and business lives [ph] and then investing behind the brands and driving distribution. So, we would see opportunity in both. The smaller question in B2C, the role of digital, is an exciting role for us. we have made a big investment in technology in recent years. Mark called out our investment in SAP S/4HANA. And I think there is great opportunity to leverage this. I think there is opportunity for us to automate and digitize more across the organization to a far broader role than just direct-to-consumer. And the lady we appointed, Wendy Chang-Smith, who is the CFO of GPN. She is with us about 3 years and has strong expertise from Amazon (NASDAQ:AMZN), Kellogg’s, J&J (NYSE:JNJ). So – and it’s really about building the right structure to support growth. So, B2C will be a component of that. And I wouldn’t say B2C is broader than just our local brand in Europe. We now treat the Body & Fit brand as a local jewel. But we have over 20 direct-to-consumer sites across the world that we continue to build out. So, it’s more a competency and capability under Wendy’s team. In terms of – and I think that’s – I think I have covered all questions. I will hand it over to Mark on margin.
Mark Garvey: Good morning Karel. In terms of your question on margin, I suppose, firstly, I would say, we are very happy that we are well ahead of our Capital Markets Day targets in terms of the GPN margins that we actually posted in ‘23. Obviously, ‘24, we are saying that they will be at least at that level. You might recall in November, I said we would be broadly in line. So, to some extent, I have given a bit of a small upgrade to that. To your point, clearly, there are some operating leverage points that we will be able to get, but volume is probably a little bit of a negative from a SlimFast perspective. I have a fairly good idea what the marketing spend will be. Well, I don’t know yet in the fourth quarter in terms of way procurement. So, there is still some uncertainty there. And so I expect we will evolve that as we go through the year, but we do have the comments to say it would be at least at the level that we printed for 2023 at this point.
Karel Zoete: Super. Thank you.
Operator: Thank you. Our next question is from Rashad Kawan from Morgan Stanley (NYSE:MS). Rashad, please go ahead. Your line is open.
Rashad Kawan: Hey. Thank you and good morning. Hugh and Mark, thanks for taking my questions. A couple for me, please, and apologies if you have already covered this. I missed a couple of minutes of the call initially. But firstly, on the shape of the P&L, how do you expect that to evolve? I know you spoke about Q1, but maybe through the next kind of three quarters around GPN and NS, how you think about the evolution of the P&L from a pricing, volume and mix perspective? And then if I can just follow-up on the margin point. I mean clearly, you are setting a floor, but if I look at the second half margins for GPN, I mean I think you were north of 16% versus the 14.2% for the year. So, I guess what’s – what would kind of bring margins back to kind of the full year level as opposed to getting to closer to that second half level that you reached in the second half? I know you talked about some of the drag around SlimFast or maybe freight rates, etcetera. But is there – is it more on the side of conservatism given the unknowns, or are there any specific dynamics that will bring it down closer to 2023? Thank you.
Mark Garvey: No problem, Rashad. I will just go straight into those questions. I think in terms of the margin for the first half in 2024, obviously we do have positive input cost benefits there. You will see we are over-indexing our marketing spend in the first half versus the second half next year. So, although it’s 10% for the full year, it will be over that in the first half and probably under that in the second half. We are sort of moving to get a good start for the year in terms of driving the velocities that Hugh talked to as well. Now, in the second half of next year, we also will see higher freight cost. So, that is something we also have to take into account in terms of our overall balance for the year. So albeit, you will see margins higher in the first half than the second half. You won’t see as big a differential as you saw in first half, second half last year because of the marketing balancing that we are doing as well over the year. We are trying to be I think, reasonable at this point of the year in terms of where we expect to be. And I think we can update you more, obviously, when we come out, we get our first quarter through and probably we will have fourth quarter way procured at that point in time. In terms of your question on trajectory during the year, so if you look at Nutritional Solutions, as I have said, you probably will have volumes a little bit in the – low-single digit positive in the first quarter. In fact, by the first half, I would expect the volumes in Nutritional Solutions to be pretty much as a guide range, so I am giving in terms of 3% to 5%. And you will see that then carry out through the year. So, it’s really just the dairy impact we are seeing in the first quarter versus the fourth quarter last year. And when you look at GPN, basically for the full year, as I have said, we are back a little bit in the first quarter. I think that by the time we get to the full year, you will see volumes obviously driving the overall position for the year. But price probably a 1% to 2% negative, I think by the time some of the promotional activity we will have during the year. So, it obviously means you will see more back half volume coming through as that marketing kicks in and the velocity that we expect will kick in as well. But that’s how we see the shape at this point and that helps.
Rashad Kawan: Thank you very much. Congrats on the results.
Hugh McGuire: Thank you.
Operator: Thank you. Our last question today is from Damian McNeela from Numis. Damian, please go ahead. Your line is open.
Damian McNeela: Hi. Thank you very much. Good morning Mark. Good morning Hugh. Just, I have two questions. The first one is on your marketing spend. I was just sort of wondering I know you were sort of weighted it last year by 200 bps. It’s going to be broadly stable this year as a percentage of sales. But I was just wondering whether within that, how much more Isopure and think! are getting if that’s the case, given the increased focus on those brands? And then the second question is on GLP. I was just wondering if you could give us a little bit more data on – or a bit more information on how large the study is that you are undertaking? How – what sort of timeframes are we looking at? Just any more granularity you can give would be helpful, please.
Hugh McGuire: Yes. When I have said that we have done a number of studies across multiple different consumer groups, so it would be hard to quantify the number, but they would be significant. But it’s more – they are also part of broader work we do around our brand portfolio anyway, Damian. So, it’s one component of it. And I think the business we are really interested in is the significant increased interest in protein. What we see from consumers is, yes, they are – but most definitely works, there is most definitely calorie reduction. But there is more consumers are looking for ways then to consume protein as part of that. And they are getting increasingly concerned about muscle mass as well as our medical practitioner. So, I think that speaks to opportunity across our broader portfolio of brands and ingredients, which we are excited about. In terms of marketing spend, look, we don’t break out the components. And it was greater than the 200 bps increase in marketing. We will sustain that as we go into next year. The two brands, think! and Isopure are small. But I would say, in context, albeit small, we have tripled Isopure marketing spend in the last 2 years, to give you some sense on how we are shifting our marketing spend around because we see significant opportunity. As I called out, it’s got very low household penetration just over one. It’s got very low distribution. It traditionally was a special e-commerce business, and it’s very much on trend in terms of the highest-quality protein zero carbs, fourth with vitamin and minerals and great position in target lifestyle consumers. So, we have – as we would always do in terms of our portfolio, we are pivoted to the brands that will drive greatest growth.
Damian McNeela: Okay. Thank you very much.
Operator: Thank you. This is all the questions we have today. So, I would like to pass it back to management for any further or closing remarks.
Hugh McGuire: So, that’s great. Thank you very much. Apologies for the excitement at the start of the call and technicians [ph], but thank you very much for joining, and I look forward to meeting most of you over the next couple of weeks.
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