Kilkenny, Ireland, June 18 - Irish dairy group Glanbia expects to return to earnings growth next year as global recession encourages consumers in the United States and Europe to dine on cheeseburgers and take-away pizza.
Glanbia warned in April it would not meet an earlier forecast for growing earnings this year due to losses at its Food Ingredients Ireland unit, which makes butter, cheese and other products from 1.4 billion litres of milk a year.
But Europe's biggest supplier of mozzarella cheese for pizzas and a major manufacturer of cheese for McDonalds and Burger King told Reuters on Thursday that its overseas units, including a profitable Nigerian joint venture, would drive the bottom line in 2010.
"At the end of the day people are not buying into Glanbia for that business (Food Ingredients Ireland)," Group Managing Director John Moloney told Reuters on Thursday, signalling that the Irish division was non-core.
Glanbia, which is majority owned by an Irish farmers' cooperative, expects adjusted earnings to drop to a range between 30 and 32 euro cents this year from 35.9 cents in 2008.
Next year it expects to return closer to the earnings growth path of around 10 to 14 percent which it targeted until April's profit warning, Moloney said.
Profit from its Nigerian joint venture Nutricima, the recently announced expansion of its U.S. joint venture Southwest Cheese and the growth of Optimum, a U.S. body building supplement maker acquired last year, will together overshadow problems at the Food Ingredients Ireland unit, Moloney said.
Glanbia's stock finished up 1 percent on Thursday at 2.344 euros, outperforming the general index, which closed flat. Glanbia's shares gained 10 percent since the start of the year compared with a 19 percent increase in the main index.
DAIRY BUSINESS
Moloney said the Irish milk processing industry faced inevitable consolidation to be able to compete with countries such as New Zealand with more unified sectors, and Glanbia was open to a reshuffle in the sector
"If our assets would make a contribution and take that forward to a better place we would certainly have an open mind in looking at that," Moloney said in an interview at the group's headquarters in Kilkenny, around 65 miles south of Dublin.
"It could form a joint venture with others."
After the expansion of Southwest Cheese, Glanbia will be the leading manufacturer of cheddar cheese in the United States with 20 percent of that market.
A lot of its U.S. output is turned into processed cheese which fills cheeseburgers at chains such as McDonalds and Burger King, which have benefited from consumers trading down in the recession, Moloney said. Glanbia, which also supplies the cream blended into Baileys Irish Cream liqueur, has seen slightly increased demand for its pizza cheese output -- bought by chains such as Domino's and Pizza Hut.
"The phenomenon we're seeing on the pizza side is we'd see year to date our volumes up a bit," Moloney said. "The chains focused on home delivery are doing well."