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Glanbia plc, Glanbia House, Kilkenny, Ireland.
Tel. +353 56 777 2200 Fax. +353 56 777 2222
www.glanbia.com
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Glanbia plc is a leading international dairy foods and nutritional ingredients Group, headquartered
in Ireland. The Group is successfully developing a strategic international presence, which today
represents nearly 40% of revenue. At the same time, the Group continues to consistently improve
the cost base, productivity and long-term sustainability of the Irish operations. Combined these give
Glanbia a strong platform from which to continue to grow and develop.
Contents
Performance Highlights
Our Business
Chairman’s Statement
Group Managing Director’s Review
Our Strategy Explained
Business Review
Consumer Foods
Agribusiness and Property
Food Ingredients and Nutritionals
Nutritionals
Joint Ventures and Associates
Corporate Social Responsibility
Finance Review
Board of Directors
Management
Report of the Directors
Corporate Governance
Financial Statements
1
2
4
6
10
12
12
16
18
21
24
27
30
32
34
35
38
46
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Performance Highlights
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
1
Revenue billion
Operating profi t million
(Pre-exceptional)
Profi t before tax million
*
€2.1 €88.4 €74.4
€1.9 €85.6 €71.5
*
*
* Including share of results of joint ventures and associates
Operating margin
(Pre-exceptional)
Adjusted earnings
per share
Dividend per share
4.6% 22.6 cent 5.8 cent
(cid:127) 2006 was a good year for Glanbia. Results were in line with expectations,
despite a particularly tough fi rst half in Ireland.
(cid:127) Glanbia completed a major nutritionals acquisition and commissioned a
world-class dairy processing plant, both in the USA.
(cid:127) Key fi nancial performance indicators are trending positive and international
operations and joint ventures are progressing well.
(cid:127) As to the future, Glanbia is on target to deliver double digit earnings growth
in 2007 and the outlook is for sustained high growth.
2
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Our Business
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Glanbia is organised into three divisions and has
operations in Ireland, Europe and the USA, with
international joint ventures in the UK, USA and Nigeria.
2006 revenue amounted to €1.9 billion and was €2.1
billion, including the Group’s share of joint ventures
and associates, with approximately 40% generated by
international operations.
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IRELAND
Consumer Foods
Leading brands & market positions
Agribusiness & Property
Key linkage to farmer supply base
Food Ingredients Ireland
Largest dairy processor in Ireland
Business Review Page 12
Business Review Page 16
Business Review Page 18
Locations: 10 facilities in
Ireland.
Locations: Agribusiness: 61
locations nation-wide.
Description: Agribusiness is
the Group’s key linkage with
it’s large farmer supply base.
Property is newly formed and
is focused on maximising the
value of the Group’s property
portfolio.
Products: feed, fertilisers, farm
inputs and the CountryLife
retail range.
Brands: Gain Feeds,
IFI fertilisers, CountryLife.
Description: The key business
unit is dairy-based consumer
foods. The second business
is the processing of pigs and
the manufacture of pigmeat
products.
Products: Branded liquid milk,
dairy products, cheeses and
fresh soups; fresh pork and
bacon products.
Market positions:
No. 1 liquid milk
No. 1 cream brand
No. 1 pigmeat processor.
Brands: Avonmore, Yoplait,
Nash’s, CMP, Snowcream,
Premier, Kilmeaden.
Locations: Two manufacturing
facilities located at Virginia,
County Cavan and Ballyragget,
County Kilkenny.
Description: This business
unit processes one-third of the
total milk pool in Ireland and
markets over 190,000 tonnes of
dairy products and ingredients
on a business-to-business basis
worldwide.
Products: Butters, acid and
rennet casein, cheese, milk
powders, cream mixes and
other whey protein ingredients.
Market positions:
No. 1 dairy processor
No. 1 cheese processor
No. 1 casein producer in
Europe.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
3
TOTAL GROUP
(including joint ventures)
4,481
employees
5,312
milk suppliers
4.73 billion
litres of milk processed
370,000 tonnes
of cheese produced
210,000 tonnes
of food ingredients manufactured
INTERNATIONAL
Food Ingredients USA
Large scale, modern plants
Nutritionals
Science based innovation
Joint Ventures
Key element of growth strategy
Business Review Page 20
Business Review Page 21
Business Review Page 24
Locations: Three processing
plants in Idaho, which is the
fourth largest and fastest
growing milk state in the USA.
Description: This business unit
is a leading manufacturer of
cheese and whey-based food
ingredients. The operations
process 1.7 billion litres of milk
per annum.
Products: American-style
cheddar cheese and whey
products.
Market positions:
No. 1 American-style cheddar
No. 2 whey protein
No. 3 lactose.
Locations: Global operations
include Ireland, UK, Germany,
USA, South America and China.
Locations: UK, USA and
Nigeria.
Description: The Group
currently has three key
International joint ventures.
Glanbia Cheese in the UK,
Southwest Cheese in the USA
and Nutricima in Nigeria.
Products: Pizza cheese for the
UK and European markets.
Cheese and whey products in
the USA. Milk and milk powder
in Nigeria.
Market positions:
No. 1 pizza cheese supplier in
Europe.
Description: This new
business focuses on providing
science based nutritional
solutions in areas such as
sports & performance, weight
management, health & wellness
and infant nutrition.
Products: Whey protein
isolates and other whey
powders, lactose, calcium,
lactoferrin, vitamin & mineral
premixes.
Market positions:
No. 1 supplier of customised
nutrient premixes
Leading global supplier of
advanced technology whey
proteins and fractions.
Brands: Provon, Thermax,
Avonlac, Prolibra, Bioferrin,
Salibra, Barfl ex, Barpro, Bartex,
Barmax.
4
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Chairman’s Statement
2006 was a good year for the Group. Our results were in line with market expectations and taking
our share of the revenue of our joint ventures and associates into account, we delivered top line
revenue growth of 8% to €2.1 billion in 2006 (excluding joint ventures and associates revenue
increased by 1% to €1.9 billion). This 2006 performance was against a background of a particularly
tough fi rst half and ongoing challenges in Ireland.
A solid operating performance, the
changing mix of business and the benefi ts
of prior year rationalisation initiatives
improved profi tability and margins.
Operating profi t pre-exceptional was up
6% to €85.6 million (2005: €80.9 million)
and the operating margin pre-exceptional
increased 20 basis points to 4.6% (2005:
4.4%).
Net fi nancing costs pre-exceptional
increased by €0.9 million to €14.0
million (2005: €13.1 million). This refl ects
an increase in average debt in the year
primarily driven by the acquisition of
Seltzer, a leading USA nutritional solutions
business in the second half.
The Group’s share of results of joint
ventures and associates, post interest and
tax, increased to €2.8 million in 2006 (2005:
€0.9 million). This result primarily refl ects
the improved performance in Glanbia
Cheese, the Group’s UK joint venture
with Leprino Foods and a small fi rst time
contribution from Southwest Cheese in the
USA.
Profi t before tax pre-exceptional, including
share of joint ventures and associates,
increased 8% to €74.4 million (2005:€68.7
million). 2006 pre-exceptional tax charge
was €8.0 million (2005: €7.6 million). Profi t
after tax pre-exceptional increased 9% to
€66.4 million (2005:€61.1 million).
Net exceptionals for the year amounted
to €0.1 million (2005: €3.4 million). In
2006 exceptional costs associated with
the closure of the Pigmeat cannery
operations in Ireland and the disposal of
the remaining 25% interest in the Cheese
Company Holdings Limited were offset by
exceptional tax credits relating to former
UK operations. Earnings per share grew
14% to 22.5 cent (2005: 19.7 cent), while
adjusted earnings per share increased 8%
to 22.6 cent (2005: 20.9 cent).
Business environment
The EU dairy sector is in its fourth and
fi nal year of the implementation of the
Mid-Term Review (MTR) of the Common
Agriculture Policy. Managing a reduced
level of EU support to the dairy industry
was challenging in 2006, however world
market conditions improved in the latter
part of the year. Glanbia will continue to
respond to this changing environment,
seeking out new opportunities to offset
the challenges that have come from the
implementation of the MTR in a globalising
dairy market. It is becoming increasingly
apparent that Glanbia is well positioned
to supply the improvement in world
market conditions in light of its signifi cant
production platforms in Europe and the
USA.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
5
Changing EU policy, the potential evolution
of the WTO driven trade liberalisation and
changing supply and demand dynamics,
means that global dairy markets are in
transition. Global markets are reasonably
fi rm at present and the outlook is currently
positive for 2007. While this is a challenging
time for the industry and for farmers, there
is a sense of optimism with commercial
farmers taking a positive, long term
view supported by an ongoing Glanbia
response to changes in the market place.
Global demand for dairy products is
expected to grow at close to 2% per
annum. While developed markets will
continue to dominate dairy consumption
in absolute terms, in the near term,
signifi cant growth opportunities will
come from developing countries. It is
anticipated that global dairy supply may
slow down from a trading perspective in
the next fi ve years, arising from higher
costs of production - particularly in
grain reliant dairy economies, - inherent
supply constraints and changing climatic
conditions in Oceania. The continuation
of the quota regime in the EU up to
2015 also limits supply. However, some
movement on quota policy could occur
in advance of 2015. Other unknowns at
this time are the degree to which USA
dairy policy will be revised stemming
from the legislative debate taking place
in 2007. The outcome of the WTO Doha
negotiations remain uncertain. It is
essential that any possible agreement
would not go beyond the reforms
already undertaken by the dairy sector
under MTR.
The global nutritional market exhibited
strong growth in 2006, estimated at €127
billion (US$159 billion), with half of this
represented by the USA market. The
weight management, health and wellness,
sports and infant nutrition sectors are key
targets for Glanbia Nutritionals where
it is building strong positions. With the
acquisition of Seltzer in 2006, the Group
is now a leading global supplier of
customised nutrient premixes – a market
that is growing strongly year on year.
Corporate and Social Responsibility
Glanbia has a long and proud heritage of
social and community involvement and as
the organisation has evolved, so too has
our Corporate and Social Responsibility
Programme. In the last four years we
have adopted an integrated programme
that underpins our commitment to key
stakeholders through four key pillars:
Community, Workplace, Environment and
Marketplace. The programme respects
all stakeholders, encourages our role
in building strong communities, guides
our sustainable engagement with the
environment and ensures we deliver the
very best product to marketplace. This
programme integrates business unit
strategy with sustainability and is being
extended to all business units.
Dividends and Annual
General Meeting (AGM)
The Board is recommending a fi nal
dividend of 3.4 cent per share,
compared with a 3.2 cent per share fi nal
dividend in 2005. This brings the total
dividend for the year to 5.8 cent per share
(2005: 5.5 cent per share), representing
a 5% increase. Subject to shareholders
approval, dividends will be paid on
22 May 2007 to shareholders on the
register as at 27 April 2007. Irish dividend
withholding tax will be deducted at the
standard rate where appropriate. The
AGM will be held on Wednesday 16 May
2007 and the Annual Report post out
date is 13 April 2007.
Board changes
Two new Directors were elected to the
Board in May 2006, these are Patrick
Gleeson and Martin Keane, both farmers.
They replaced John Miller and Eric
Stanley, who retired as longstanding
Board members. On behalf of the Board I
would like to welcome the new Directors
to the Board and to thank John Miller
and Eric Stanley for their commitment
to Glanbia and their contributions to the
Board over the years.
Vision
The transformation of the Group to
date is a strong refl ection of the vision
and leadership provided by the Group
Managing Director, John Moloney,
supported by a strong management team
and expert staff throughout the Group.
8% top line
growth
including joint ventures
9% increase
in profi t
after tax
pre-exceptional items
Glanbia has a strong
strategic platform and
is on target to deliver
double digit growth in
2007 and beyond
The Board would like to thank the Group
Managing Director, management and
staff for their continued commitment
to building strong and sustainable
foundations for the future and our
customers for their continuous support
for Glanbia.
I am confi dent that with our growing
international presence and strong Irish
operations, Glanbia has a solid strategic
platform and is on target to deliver
double digit growth in 2007 and beyond.
Michael Walsh
Chairman
6
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Group Managing
Director’s Review
The 2006 results refl ect a year of growth and progress with
fi nancial performance indicators trending positively and
international operations and joint ventures progressing well.
We achieved key strategic milestones during the year including
the €81.8 million (US$105 million) Seltzer acquisition, which will
enhance the scope and scale of our Nutritionals Division. In
conjunction with our joint venture partner we also successfully
opened one of the largest natural cheese and whey processing
plants in the world, Southwest Cheese, which is a €151 million
(US$190 million) 50:50 joint venture and makes Glanbia the
No. 1 supplier of American-style cheddar in the USA. The Seltzer
acquisition is performing ahead of expectations. The Southwest
Cheese plant is fully commissioned and is producing product to a
world class standard.
Strategy
Glanbia’s vision is to be the most relevant
supplier in international cheese, nutritional
and dairy ingredients and selected
consumer foods. This relevance to our
customers will be achieved through a
focus on international scale, leading
technologies and growth markets.
Our strategic objectives are to achieve
and sustain double digit earnings
growth, to improve operating margins,
allocate capital to a mix of higher growth
opportunities and to diversify the Group’s
earning base to reduce volatility. Our
adjusted earnings per share targets
are within a range of 10% to 14%. Our
potential development spend in 2007 is
€150 million which we will fund within
robust fi nancial ratios.
Signifi cant progress was achieved in the
pursuit of our objectives in 2006. We
are developing a strategic international
presence, which at this time represents
nearly 40% of revenue. This gives the
Group a strong platform from which to
continue to grow and develop overseas.
The scale agenda is being progressed
through organic growth, acquisition and
joint ventures.
Glanbia has a clear acquisition strategy
focusing on value, extending our
geographic reach and achieving a strong
complementary fi t, particularly in the
nutritionals sector where our vision is to
be a key global provider of nutritional
ingredients and nutritional solutions. This
will be achieved by building a scalable,
sustainable business. As I referenced
above, the Seltzer acquisition last year is a
signifi cant milestone for the Group giving
scale to our Nutritionals business in strong
growth segments.
Acquisition capability remains and
is an ongoing focus for the Group.
In particular we continue to examine
nutritional ingredient companies with
specialist or complementary products and
technologies.
Joint ventures have become an important
part of Glanbia’s development strategy
over the last number of years as we
leverage our dairy and nutritionals
technology and operational strength in
strategic partnerships with complementary
world class companies. We are building
new businesses at fi rst cost from the
ground up, both in terms of physical asset
construction and market development
and now have a number of key platforms
in place to drive growth and earnings
momentum.
In Glanbia Cheese, with our partner,
Leprino Foods, we have leveraged
unique technology and this business
reported a good performance in 2006.
We are confi dent of a continued good
performance in 2007. In the case of
Nutricima in Nigeria, our joint venture
with PZ Cussons plc, this business is
expected to have annualised revenues
of approximately US$100 million by the
end of 2007. Southwest Cheese, the joint
venture with key milk supply organisations
in New Mexico, was commissioned on
time and on budget in 2006 and will
reach full capacity in 2007. We expect
annualised revenues of US$350 million in
2007. Overall revenue in our joint ventures
and associates grew strongly in 2006, with
Glanbia’s share of revenue growing to
€262.9 million from €131.4 million and we
expect to see strong growth in 2007.
Investment
During 2006 the Group committed
€50 million in development capital
expenditure, including €5 million to build
the Group’s fi rst nutritionals operation
in China and €22.5 million for a planned
capacity expansion and new plant in
the Nigerian joint venture, Nutricima.
Acquisition and investment expenditure in
2006 totalled €73.3 million which primarily
related to the acquisition of Seltzer. In
December 2006 we divested our remaining
25% interest in The Cheese Company
Holdings Limited realising €70 million for
the Group.
The Group has had a strong programme
of investment behind its growth strategy in
recent years with €214 million invested in
development opportunities since 2004.
Innovation
Continuous innovation and market
knowledge, clearly linked to the
business, is critical to Glanbia. Our
innovation platform is founded on an
ongoing investment in R & D, successful
commercialisation of research and effective
partnerships with third level educational
establishments. We have invested in
defi ned and strategically important
technical innovation skills around
nutritional and dairy ingredients that are
driving formats and applications and that
underpin our intellectual property offering
to customers.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
7
€214 million
development
investment since 2004
Glanbia has a clear
acquisition strategy
and acquisitions are
an ongoing focus
for the Group
8
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Group Managing
Director’s Review (continued)
Continuous innovation and
market knowledge, clearly
linked to the business, is
critical to Glanbia.
Glanbia innovation is based on a close
study of consumer lifestyle changes and
consumer food choices. In order to be
relevant and provide the most effective
nutritional solution to customers, the
Group continuously tracks health and
wellness developments. There is also a
growing market for convenient, on-
the-move products and foods aimed at
special diets. Trends like this provide
the fuel for innovation and ensures that
innovations are commercially relevant.
Our capabilities
We continue to underpin our strategic
development through the ongoing
evolution of our capabilities. We have
achieved world class manufacturing
skills in a wide variety of dairy products
and ingredients. These skills are
demonstrated in the large scale
operations in Ireland and the USA, where
excellent management of all aspects of
processing operations is a primary focus.
To deliver our stated strategy of being
increasingly relevant to our customers we
have developed the breadth, depth and
strength of our customer relations and
contacts in all key beverage, dairy food
and food ingredients segments through
strong technical and innovation skills.
We work with our customers driving new
solutions to meet consumer trends and
needs.
As stated earlier we have in 2006
developed our international joint
ventures with key partners. In our
Southwest Cheese joint venture in the
USA we delivered a commissioned,
large scale manufacturing facility from a
greenfi eld site. Similarly we are building
another business from the ground up
in Nigeria where with our partner, PZ
Cussons plc, we have committed further
expenditure to maximise the opportunity
afforded by the Nigerian consumer
food market. With our partners, we look
forward to the further development of
these operations.
Our capabilities stem from our people
and ultimately the implementation of the
Group growth strategy is dependant on
people. The ability of the Glanbia team
to change and adapt to the ever evolving
environment in which we operate, is the
basis for future growth and success.
Joint ventures have
become an important part
of Glanbia’s development
strategy over the last
number of years as we
leverage our dairy and
nutritionals technology
and operational strength
in strategic partnerships
with complementary world
class companies.
The Group has a constant focus on
people development, at all levels, and
operates three core programmes - senior
leadership, management development
and a graduate programme.
2007 outlook
Ireland will remain challenging in light
of the competitive retail environment
and the ongoing effects of the
implementation of EU dairy reform. Irish
operations continue to focus on key
aspects of business execution which
drive performance, productivity and cost
competitiveness. International operations
are expected to perform well in 2007
and are well positioned for good growth
going forward.
Glanbia is successfully developing a
strategic international presence, which
today represents nearly 40% of revenue.
This gives the Group a strong platform
from which to continue to grow and
develop overseas. At the same time,
the Group continues to consistently
and solidly improve the long-term
sustainability of the Irish operations.
As to the future, Glanbia is on target to
deliver double digit earnings growth
in 2007 and we believe the outlook is
positive for sustained high growth.
John Moloney
Group Managing Director
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
9
Glanbia is developing
a strategic international
presence, which today
represents nearly
40% of revenue.
Working with our
customers, driving
new solutions,
meeting consumer
trends and needs
10
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Our Strategy Explained
Glanbia is entering a different phase as the Group moves into 2007. It is timely,
therefore, to clearly set out the Group’s vision and strategic roadmap for the next
three years.
VISION
»
Glanbia’s vision is to be
the most relevant Group
in international cheese,
nutritional and dairy
ingredients and selected
consumer foods.
STRATEGIC OBJECTIVES
Our objectives are to:
»
Achieve and sustain double
digit earnings growth.
Improve operating margins.
FINANCIAL TARGETS
»
Adjusted earnings per share
growth
10-14%
Diversify the Group’s earning
base to reduce volatility.
Operating margin pre
joint ventures
We will achieve this
relevance for our
customers through a
focus on international
scale, leading
technologies and
growth markets.
Allocate capital to a mix of
higher growth opportunities.
5%+
Operating profi t from
international operations & joint
ventures
>50%
Potential development
spend 2007
€150 million
Free cash fl ow
€45 million+
EBIT interest cover
5-6 times
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
11
We are aware that we have a lot to deliver on. However, the investment and
rationalisation programme undertaken in recent years has created, we believe, an
excellent platform from which to drive the business forward.
STRATEGIC IMPERATIVES
»
KEY INITIATIVES
»
1
Deliver growth and performance in
the period 2007 to 2009.
Consumer Foods: expand beverages,
food service and convenience offering.
Pigmeat: maintain stable
performance.
Agribusiness: continue to reshape the
business to fi t changes in farming.
Property: to maximise the value of the
Group’s property assets.
Food Ingredients Ireland: sustain
cost competitiveness and manage
remaining MTR impacts.
Food Ingredients USA: deliver strong
growth including integration with
Southwest Cheese.
Nutritionals: Deliver organic growth/
NPD. Leverage Seltzer acquisition.
Joint ventures: drive growth and
earnings momentum.
GLANBIA’S CAPABILITIES
»
World class manufacturing skills in
a wide variety of dairy products and
ingredients.
Depth and strength of customer
relations and contacts in all key
beverage, dairy food and food
ingredients segments.
Strong technical and innovation skills
driving new formats, products and
services.
Partnering with leading companies
and organisations in high growth
markets.
Project, plant and investment
management skills to deliver from
greenfi eld sites to full commissioning
large scale manufacturing facilities.
2
Extend growth and performance
beyond 2009.
Further acquisitions, with focus on
nutritionals.
Expansion of international operations.
Focus on cost reduction,
competitiveness and productivity
throughout the Group.
3
Improve fi nancial fl exibility.
Maintain progress towards fi nancial
fl exibility and improving ratios.
12
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
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(cid:204)(cid:133)(cid:136)(cid:152)(cid:142)(cid:111)
(cid:31)(cid:136)(cid:143)(cid:142)
(cid:195)
(cid:156)
(cid:213)
(cid:171)
(cid:195)
(cid:222)
(cid:156)
(cid:125)
(cid:213)
(cid:192)
(cid:204)
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G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
13
Consumer Foods
This division includes Consumer Foods
Ireland which incorporates nutritional
beverages, fresh dairy products and
cheeses, soups and spreads; and
Pigmeat, which produces a range of pork
and bacon products.
Revenue was up 3.5% to €511 million
(2005: €493.6 million), 28% of total Group
sales. Operating profi t was down 10%
to €24.5 million (2005: €27.1 million),
leading to a 70 basis points reduction
in the operating margin to 4.8% (2005:
5.5%). A steady performance from the
consumer foods business was more than
offset by diffi culties in Pigmeat, including
margin erosion due to lower prices
in certain segments and losses at the
cannery operation.
Consumer Foods Ireland
Consumer Foods Ireland is focused
on three distinct sectors of the Irish
fast moving consumer goods market:
nutritious beverages; fresh dairy products
and cheeses, soups and spreads. Glanbia
is the leading supplier of branded and
value-added milk, yogurts, cheddar
cheeses and fresh soups to the grocery
trade.
With household brands including
‘Avonmore’, ‘Premier’, ‘Yoplait’,
‘Kilmeaden’, ‘Snowcream’, ‘Petits Filous’
and ‘CMP’ Glanbia has No. 1 market
positions in fresh milk, fresh cream, fruit
yogurt, kids fromage frais, drinking yogurt
and fresh soup.
Consumer Foods Ireland employs over
800 people at 10 locations throughout
Ireland and processes 260 million litres
of milk annually. Overall the consumer
foods business had a demanding but
satisfactory year and revenue, operating
profi ts and margins were broadly similar
to last year. The business signifi cantly
increased marketing investment,
maintaining leading market share
positions in key categories. In the context
of increased energy and labour costs,
the re-structuring of the fresh dairy
production facilities at Inch, County
Wexford and the integration of CMP,
purchased from Dairygold in 2005, had a
positive impact.
The position of the brand portfolio in the
Top 100 list of grocery brands improved
signifi cantly in 2006 with Avonmore Fresh
Milk moving up from No. 5 to No. 3. Also
the launch of Yoplait Essence resulted
in a signifi cant increase in market share
position in the important functional
segment of the fresh dairy products
market.
Environment
The Irish grocery market is intensely
competitive and concentrated with
promotional activity a constant feature of
the fresh dairy market. In most categories
the share of retailer own brands increased
in 2006.
Health and convenience are the drivers
of new product development and
innovation in the Irish retail food sector.
According to independent research
conducted by both the Irish Food Board
and Glanbia Consumer Foods, Irish
consumers regard health and nutrition as
the most important factor affecting their
food purchase decisions, ahead of price.
When asked what they wanted most to
see next from their local convenience
store, over 70% of respondents said that
they wanted more health foods on-the-
go. Against this background Glanbia
continued its investment in product
innovation and extension during 2006
with a strong pipeline of healthy and
convenient offerings.
Nutritional beverages
The nutritional beverages business
includes milks and juices and this
business performed well in 2006,
retaining its leading market share
position in milk in the context of
increased Northern Ireland imports
and the growth of own label brands.
Consumer Foods Ireland increased its
marketing investment signifi cantly and
benefi ted from volume increases from
the integration of the CMP brand and the
ongoing launch of new products. Glanbia
commenced a series of Irish TV weather
sponsorships in 2006 which have proved
effective at driving awareness and recall
of the Avonmore brand nationally.
Colin Gordon
CEO Consumer Foods
Ireland
Jim Hanley
CEO Glanbia Meats
(cid:47)(cid:133)(cid:192)(cid:105)(cid:105)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:202)(cid:192)(cid:105)(cid:219)(cid:105)(cid:152)(cid:213)(cid:105)(cid:202)(cid:62)(cid:152)(cid:62)(cid:143)(cid:222)(cid:195)(cid:136)(cid:195)(cid:202)(cid:173)(cid:37)(cid:189)(cid:228)(cid:228)(cid:228)(cid:174)
(cid:123)(cid:120)(cid:163)(cid:93)(cid:163)(cid:211)(cid:123)
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(cid:120)(cid:163)(cid:163)(cid:93)(cid:228)(cid:211)(cid:211)
(cid:228)(cid:123)
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(cid:228)(cid:200)
Market Positions:
No.1 Liquid Milk
No.1 Cream Brand
No.1 Pigmeat Processor
14
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Consumer Foods
(continued)
Progress was also made in extending
the product range targeting the
growing consumer trend towards more
nutritious and healthier beverages.
The launch of Avonmore probiotic milk
extended the brand’s presence in the
all important functional area while the
launch of Avonmore coffee milk has
provided incremental volume growth
to the fl avoured milk range targeting
older consumers. Growth in the market
continues to be driven by demand for
more value added products where the
Avonmore brand has a leading share
position.
The CMP brand was integrated
successfully into existing operations,
allowing the business to extend its
beverage portfolio into water and juice
categories where performance was in line
with expectations.
The key opportunity for this business
will be to continue to deliver fresh and
convenient product solutions and to
extend the product range, focusing on
the growing consumer trend for more
innovative foods in convenient formats.
Strategy
The strategy of the business is to grow
market share by building the relevance
of the core brands, increased customer
partnerships and through sustained
innovation growth.
Outlook
Nutritious, fresh and natural continue
to be the key drivers for food and
beverages among Irish consumers.
However, the marketplace is becoming
more competitive which is driving the
need for a lower cost base. Against
this background Consumer Foods will
continue with its product innovation
and cost management programmes,
underpinned by strong marketing
investment to maintain the relevance of
its product portfolio to customers and
consumers.
Pigmeat
The pigmeat business, Glanbia Meats,
is the leading pork processor in Ireland
producing a range of pork and bacon
products for domestic and export
markets. The business, which employs
975 people, operates from three facilities
including two modern slaughtering
plants at Roscrea, County Tipperary and
Edenderry, County Offaly.
Fresh dairy products
In 2006 the business successfully
stabilised its overall market share and
improved its position in the growing
functional foods area with the launch
of products targeting health benefi ts.
The manufacturing cost base continues
to improve, despite increased energy
and labour costs, as a result of
competitiveness initiatives including the
rationalisation of the Yoplait production
facilities undertaken in 2005 together with
ongoing improvements in supply chain
management and capacity consolidation.
Within the functional segment, the
Yoplait brand increased its share position
signifi cantly as a result of the launch of
its Essence range of health shots while
Everybody/Everykid had a positive year
overall, assisted by brand extensions.
Cheese, soups and spreads
A concerted marketing and innovation
focus helped Glanbia’s cheese, soup
and spreads businesses defend and
grow their overall market share positions
in these increasingly competitive food
categories during 2006.
Kilmeaden cheese extended its offering
further into the premium segment of the
market, which saw it grow its leading
market share position in the natural block
cheese segment, while Avonmore cheese
also defended its position.
Avonmore soup retained its leading
market position and achieved overall
market growth in this sector. Soups also
benefi ted from the re-launch of the
core range with a more contemporary
image and the introduction of a new fresh
soup meal, under the Avonmore Fresh
Fare banner, which brings greater
convenience and freshness to today’s
time conscious consumer.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
15
Environment
2006 was a satisfactory year for European
pork markets with product prices high
during the summer due to strong
demand on domestic and export markets.
Production of pigs in Ireland declined by
3% in 2006, continuing the trend of the
last few years. The business expectation
is for Irish pig production to stabilise as
confi dence returns to the sector.
Consumption of pork continues to
grow on a global basis by 1% annually
and demand from Asia remains strong
as a result of population growth and
increasing wealth. Domestic demand in
Ireland strengthened within retail and
foodservice channels and this has been
as a result of strong population growth,
a growing consumer preference for
added value products (where pig meat
is often the protein of choice) as well as
the comparative price advantage that pig
meat enjoys relative to prime beef cuts.
Strategy
The Glanbia Meats strategy is to focus
activities on primary pork processing.
The business continues to hold a very
strong position as supplier of choice
to all of the major multiples and value
added processors in Ireland and it
has strengthened its relationship with
customers in all key export markets.
Outlook
The outlook for the pigmeat business is
for an improved performance in 2007. Pig
production is expected to stabilise and
improvements in operational effi ciency
continue as a consequence of ongoing
consolidation and modernisation of the
sector.
In 2006 Glanbia Meats processed 1.3
million animals, or 50% of national
supply. Products include a wide range of
boneless pork and bacon cuts. Sales are
evenly split between domestic and export
markets. Key export markets in 2006 were
the UK, Japan, China and Russia.
Segments of the business had a diffi cult
2006 and its overall performance
declined. The two key factors affecting
performance were margin erosion due to
lower prices in certain segments of the
business and the accelerated decline of
the cannery operation leading eventually
to the decision to close this business in
November 2006. Investment in labour
and energy saving projects as well as
improved operational effi ciency and
product and customer mix, helped to
offset market diffi culties.
The closure of the cannery operation
gave rise in 2006 to an exceptional
item of €3.3 million primarily relating
to redundancy costs. The overall cost
associated with this rationalisation is
expected to be largely neutral when
the property element of this business is
disposed of in due course.
Primary processing
The slaughtering and deboning business
performed satisfactorly in 2006 with sales
improvement domestically and on export
markets, in particular in the Russian
market where consumer buying power is
increasing year on year.
Canned meats
The canned meats sector has been in
decline as a result of changing consumer
needs and a growing preference for fresh
and chilled foods. As a result, signifi cant
competitive pressures had built up
within the sector and this, together with
signifi cant increases in meat, tinplate
and energy prices in 2006, resulted in the
decision to focus investment on primary
meat processing and to close the cannery
operation in Ireland.
Over 70%
of consumers tell us
they want more health
foods-on-the-go from
their local stores
16
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Agribusiness and Property
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(cid:20)(cid:143)(cid:62)(cid:152)(cid:76)(cid:136)(cid:62)(cid:202)(cid:13)(cid:195)(cid:204)(cid:62)(cid:204)(cid:105)(cid:195)
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Agribusiness and Property
Revenue was up 15% to €264.5 million
(2005: €229.1 million). Operating profi t
was up 58% to €16.9 million (2005:
€10.7 million), substantially driven by
Property. The operating margin was up
170 basis points to 6.4% (2005: 4.7%). The
Agribusiness margin was 3.7% (2005: 3.6%).
Agribusiness
Agribusiness is the primary interface through
which Glanbia trades with its farmer suppliers.
The business is engaged primarily in feed
milling, grain processing and marketing,
and the retailing of a range of farm inputs,
including fertilisers, feed and grain, as well
as a broader CountryLife product offering.
Glanbia Agribusiness also has a modest
involvement in the bio energy sector through
a shareholding in Eilish Oils, a County
Wicklow based business which pioneered the
commercial production and use of pure plant
oil biofuel from oilseed rape.
With a strong portfolio of leading brands,
Glanbia Agribusiness is market leader
in animal feeds, fertilisers, seed grain,
chemicals and veterinary product sales.
Among the brands in the range are:
CountryLife, Gain Feeds, IFI, Mastercrop
and Mastervet. In recent years Agribusiness
has reorganised its retail branch structure
and now operates from 61 locations – of
which nine are CountryLife stores. The
business employs 400 people and operates
in 16 counties in Ireland.
Environment
2006 was a satisfactory year for the business
with some improvement in revenue, profi ts
and margins. This performance is measured
against a background of ongoing challenges
in farming due to the implementation of EU
policy changes under MTR.
The 2006 result was driven by good demand
in key segments, such as feed and fertiliser,
and growth in market share as a result of
competitive pricing and strong promotional
activity. The business continued to rollout
the Countrylife format with nine branches
redeveloped to date.
As a key assembler of tillage crops in Ireland,
Glanbia has called for a meaningful level
of Government support for the fl edgling
bio energy industry to encourage energy
diversity and the establishment of a
domestic bio fuels infrastructure linked to
agricultural production.
Strategy
The strategy for the business is to grow
market share in core sectors while continuing
to reshape the business to fi t the changing
face of farming. Irish agriculture is in
transition from an era characterised by
strong price support systems to one with
reduced production supports, concerns for
environmental management and greater
reliance on direct income payments. While
undoubtedly 2006 was a challenging time for
farmers, there is a sense of optimism as the
industry reaches the fi nal year of MTR with
commercial farmers taking a positive, long
term view.
Glanbia is responding to these changes
with a tailored service to meet the needs of
farmers while also recognising the potential
created by growing rural populations. The
needs of farmers are such that Agribusiness
is moving inputs from factory to farm at
minimum cost and selling these inputs at
competitive prices. To be relevant to the
part-time farmer and also non farmers living
in rural Ireland, the business is building on
strategic branch locations with a wider range
of retail products under the CountryLife
concept. The retailing strategy is to capture
the convenience needs of a growing rural
population for pet food, gardening, hardware
and outdoor clothing through CountryLife
while also catering for the needs of the core
farmer customer base. It is planned that 19
branches will be redeveloped under this
CountryLife concept by the end of 2007.
The competitiveness of the business is also
sustained by continuous cost effi ciency
programmes and technology upgrades,
which are an integral element in the
reshaping of the business.
Outlook
Agribusiness will continue to evolve with a
continued expansion of the product offering.
In particular Agribusiness continues to work
to meet the challenges of the implications
of EU Reform and to remain relevant and
competitive for its growing customer base.
Property
In 2005 Glanbia established a dedicated
property business to create a strategic focus
on the Group’s property portfolio which for
many years has been an integral feature of
the Irish businesses.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
17
Colm Eustace
CEO Glanbia
Agribusiness
Ger Mullally
CEO Glanbia Property
(cid:47)(cid:133)(cid:192)(cid:105)(cid:105)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:202)(cid:192)(cid:105)(cid:219)(cid:105)(cid:152)(cid:213)(cid:105)(cid:202)(cid:62)(cid:152)(cid:62)(cid:143)(cid:222)(cid:195)(cid:136)(cid:195)(cid:202)(cid:173)(cid:37)(cid:189)(cid:228)(cid:228)(cid:228)(cid:174)
(cid:211)(cid:211)(cid:199)(cid:93)(cid:206)(cid:200)(cid:110)
(cid:211)(cid:211)(cid:153)(cid:93)(cid:163)(cid:123)(cid:211)
(cid:211)(cid:200)(cid:123)(cid:93)(cid:123)(cid:153)(cid:211)
(cid:228)(cid:123)
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(cid:228)(cid:200)
Agribusiness has 61 locations
nationwide including nine
CountryLife outlets
The remit of this business, based in Ireland
and trading as Glanbia Estates, is to
maximise the potential value of the Group’s
property portfolio and to review options for
key sites.
2006 was a good year for the business which
successfully completed the disposal of
non-core assets arising mainly as a result of
Agribusiness branch network rationalisation.
Property values in Ireland grew strongly in
2006 with residential prices increasing by
approximately 15% and development activity
in both residential and commercial sectors
reaching record levels.
Outlook
Glanbia Estates has identifi ed a pipeline
of potential transactions and these are
expected to be completed at a steady pace
over the medium term.
18
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Food Ingredients and Nutritionals
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Food Ingredients and Nutritionals
Revenue decreased by 3% to €1.08
billion (2005: €1.11 billion) due to lower
market prices in dairy ingredients.
Despite lower revenue, operating profi t
was up 3% to €44.2 million (2005: €43.1
million) and the operating margin grew 20
basis points to 4.1% (2005: 3.9%), mainly
because of the increased contribution
from the higher margin Nutritionals
business. Overall, this division delivered
a good performance, particularly in light
of the diffi cult market environment in the
fi rst half.
Food Ingredients Ireland
Glanbia is the largest dairy ingredients
business in Ireland, assembling a milk
pool of 1.4 billion litres from the Group’s
5,000 Irish milk suppliers and processing
it into butter, cheese, milk proteins and
whey derivatives. It markets over 190,000
tonnes of dairy products and ingredients
on a business-to-business basis to
customers in over 40 countries.
Food Ingredients Ireland employs over
400 people at two locations, Ballyragget,
County Kilkenny and Virginia, County
Cavan.
The Ballyragget facility is the largest
integrated dairy site in Europe,
processing 20% of the Irish milk pool and
has a signifi cant whey output, with 40%
of the Irish whey pool processed into a
range of infant formula and nutritional
ingredients. Food Ingredients Ireland is
the largest supplier of lactose and other
whey proteins to the three largest infant
formula manufacturers in the world, all
of which have production facilities in
Ireland. It is also the largest manufacturer
of casein – another protein found in milk
– and the Ballyragget facility produces
both acid casein and rennet casein for
European and USA markets.
The Virginia facility in County Cavan
produces a range of fat fi lled milk
powders and fresh cream. It has been the
principal cream supplier to Baileys Irish
Cream Liqueurs for over thirty years. It is
also the main supplier of milk powder to
Nutricima, the Glanbia PZ Cussons plc
joint venture in Nigeria.
Environment
2006 was the third year of implementation
of EU reform through MTR, and as such
was a particularly challenging time for
both producers and processors in the
Irish dairy industry. The reduction of
market supports to dairy processors
progressed aggressively in 2006, with a
number of supports, including casein aid,
reduced to zero. Market returns in the
fi rst half of the year were weak with the
added diffi culty of reduced milk supply
due to diffi cult weather conditions. The
second half was stronger with an increase
in volumes and more stable world
markets.
Energy costs eased somewhat in the
second half of 2006 following a period of
historically high prices.
The case for rationalisation of the industry
at both supplier and processor level
remains compelling in an Irish context.
Consequently the Irish Government
launched a €100 million Dairy Capital
Fund in 2006 which offers grant aid of
up to 50% for capital projects, subject
to competitive tender. Glanbia has
submitted a number of projects for
consideration and the outcome is
expected in quarter two 2007.
Strategy
Food Ingredients Ireland continues
to strive to maximise product mix
in a changing global dairy market.
Recognising that EU policy changes are
rebalancing the relative performance
of certain dairy products, we are
restructuring our product offerings to
refl ect global trends and are exploring
opportunities in growing segments of the
market.
The Irish manufacturing environment
continues to present cost and
competitive challenges. The business
maintains its relentless pursuit of
effi ciencies to offset these challenges
and our cost reduction programmes are
delivering considerable benefi ts in plant
performance, conversion effi ciencies
and quality development. We further
augmented the management team in
2006 which we believe will strengthen
the business in meeting challenges and
maximising the opportunities ahead.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
19
Jeff Williams
President Glanbia
Foods Inc
Jim Bergin
CEO Food
Ingredients Ireland
(cid:47)(cid:133)(cid:192)(cid:105)(cid:105)(cid:202)(cid:222)(cid:105)(cid:62)(cid:192)(cid:202)(cid:192)(cid:105)(cid:219)(cid:105)(cid:152)(cid:213)(cid:105)(cid:202)(cid:62)(cid:152)(cid:62)(cid:143)(cid:222)(cid:195)(cid:136)(cid:195)(cid:202)(cid:173)(cid:37)(cid:189)(cid:228)(cid:228)(cid:228)(cid:174)
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Process and manufacturing
capability to a world class
standard
20
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Food Ingredients
and Nutritionals (continued)
Strategy
The business strategy is to be the number
one supplier of American-style cheese
to key industrial customers. Glanbia
markets the cheese and whey output
of the Southwest Cheese joint venture
in New Mexico and the successful
commissioning of this plant further
consolidated Glanbia’s position of scale
in regions with growing milk supply. In
2006 Glanbia Foods Inc made signifi cant
progress in integrating the supply chain
network comprising the Idaho plants and
Southwest Cheese.
Glanbia Foods Inc has strong and long
standing relationships with customers
of scale who are linked to growth
opportunities in the consumer market
place. These relationships are the
bedrock of the business and are based
on shared strategic direction. Joint new
product and innovation projects focus
on new consumer trends, such as the
growing demand for organic and BST
free products. The business strives for
product excellence and regularly is an
award winner at the World and USA
Cheese Championships. In addition
constant innovation is essential to expand
the product offering and develop product
variants which utilise existing assets,
expertise and routes to market.
Outlook
In the USA, demand and milk availability
are expected to be strong in 2007. Idaho
milk supply is forecast to grow further in
the current year and our USA operations
are expected to run at full capacity. This
business is expected to perform well
in 2007 and will continue its focus on
operational excellence and increasing it’s
market position.
Implementation of our co-operation
agreement with Dairygold was completed
in 2006 with the contract manufacture
by Dairygold of cheese for Glanbia and
by Glanbia of butter for Dairygold. Our
joint venture with Corman SA, which is
the largest butterfat processor in the
world, progressed steadily through
2006. Advanced butter fractionation
has commenced and will enable the
production of butter fractions for
customised solutions in the bakery and
confectionery industries.
The Glanbia Innovation Centre provides
a further platform for our innovation
programme. The demands of our new
consumer business in Nigeria in addition
to joint innovation programmes with
our leading customers underpin our
commitment to organic growth through
our experience and technical capabilities.
Outlook
The outlook for 2007 is for another
challenging year, notwithstanding a more
favourable dairy market outlook and a
less penal energy environment.
Cheese
Over 80% of the Idaho milk supply goes
into cheese production, with Glanbia
producing half of Idaho cheese output.
Glanbia Foods Inc processes 1.7 billion
litres of milk into over 180,000 tonnes of
cheese in its two Idaho cheese factories.
Cheese is sold on a business to business
basis to USA customer s predominantly
as “natural” American-style cheese in
a block format, for the retail or food
service sectors. Approximately a quarter
of production is in a 500 pound barrel
format sold primarily to the food service
channel as an American “processed”
cheese slice which is used in quick serve
restaurants.
Nutritional ingredients
Glanbia is a global leader in the supply
of dairy based nutritional ingredients,
producing over 47,000 tonnes. The
world market for dairy based nutritional
ingredients, and in particular for whey
products, is growing as consumers
become more familiar with the benefi ts
of whey.
Global dairy markets are currently
reasonably fi rm. In Ireland, the fi nal year
of MTR continues to affect producers and
processors and there is no expectation
of a material uplift in performance from
Food Ingredients Ireland. However,
this business continues to pursue
productivity, quality and effi ciency gains
and is reorganising it’s product offering to
refl ect changes in market demand.
Environment
Cheese is a growing market in the USA
with American-style cheese production
growing at 3.3% in 2006. American-style
cheddar is the most popular cheese type,
representing approximately 42% of the
total cheese production in the USA. This
category has a historical average annual
growth rate of 1.8%, however, it grew at a
robust rate of 4% in 2006.
Food Ingredients USA
Glanbia Foods, Inc. with our joint
venture Southwest Cheese, is the largest
manufacturer of American-style cheddar
cheese in the USA , with a market share of
16% and also is one of the worlds leading
producers of whey based nutritional
ingredients. Glanbia Foods Inc. is located
in Idaho - the third fastest growing
milk state in the USA behind Texas and
New Mexico. It employs 540 people
and operates three plants - two cheese
facilities at Twin Falls and Gooding, which
is the largest barrel cheese plant in the
world, as well as a specialist nutritionals
facility at Richfi eld.
Production volumes in Glanbia Foods
Inc. reached record levels in 2006 and
demand was excellent for all cheese
types. Milk supply in Idaho was up 7%
year on year. While cheese pricing was
volatile, there was a strong demand for
dairy proteins, especially in the second
half of the year and this lifted whey
protein and lactose prices to near record
levels by the year end.
Food Ingredients USA delivered a good
performance in 2006 with excellent
management of manufacturing costs.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
21
Nutritionals
Glanbia Nutritionals
Glanbia Nutritionals is a growing
business in a growth market, delivering
innovative, science-based nutritional
solutions to the global nutrition industry.
Glanbia is a leading supplier of
advanced technology whey proteins
and fractions and in recent years has
expanded its portfolio to include
customised nutrient vitamin and mineral
premixes and olive-based antioxidants.
Glanbia’s growth in the premix market
was strengthened considerably with the
acquisition of Seltzer, a leading USA
nutritional solutions company.
Environment
The global nutritional market exhibited
strong growth in 2006, estimated
at US$159 billion with half of this
represented by growth in the USA.
Key sectors, such as weight
management, sports nutrition,
health/wellness and infant
nutrition had positive growth
trends during the year.
Glanbia Nutritionals services the
health and wellness, functional
foods, sports nutrition, infant and
clinical nutrition sectors with a range
of patented or branded products.
Through these patents and brands
the Company is building a worldwide
reputation for customised products,
innovative processing technologies
and outstanding customer service.
The business produces a wide range
of speciality whey proteins and other
nutritional ingredients for use by food
and beverage companies in ready-
to-drink and powdered beverages,
nutritional bars, dairy products, snacks
and confectionery applications.
The business continues to evolve with
over 240 employees at global locations
in Ireland (Kilkenny); USA (Wisconsin,
Idaho, Illinois and California); Germany;
UK; Belgium; Brazil; Uruguay; Argentina;
China and Singapore.
22
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Science of Nutritionals
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Development/Investments
During 2006 additional investments were
made in building a strong team with a
blend of science based research and
development, marketing and operational
skills to drive the business forward.
The most signifi cant development in this
business in 2006 was the acquisition of
Seltzer in September. This acquisition is
a strong fi t with the existing Nutritionals
business and with its strategy of building
a nutritional premix business of scale to
pursue global growth in this fast growing
sector. This acquisition, combined with
the Glanbia premix business in Germany
and the planned €5 million investment
in a new facility in China, will further
advance the international development
of the Glanbia Nutritonals strategy.
Innovation
The development work in the Group’s
Innovation Centres in the USA and
Ireland, assisted by teams in Germany
and the UK, led to a number of
commercial developments in 2006.
The business continues to develop
products and solutions that match a
market need, or a customer requirement,
working closely with universities and
other research agencies. During 2006
we invested heavily in a number of
clinical trials to support the products
and applications being developed in the
innovation centres.
Outlook
The Nutritionals business is expected
to deliver a strong performance in 2007.
Existing operations are expected to
continue to grow organically and Seltzer
will contribute for a full year in 2007.
Nutritionals
(continued)
With over 300 million adults obese
worldwide (reference: WHO and the
International Obesity Task Force), the
anti-obesity effect of dietary calcium
- supported by cellular, animal, human
epidemiological studies and clinical trials
- presents a strong growth opportunity
for Glanbia.
The sports nutrition market is expected
to grow at 4% to 6% per annum over the
next three years due to the increasing
popularity of sports supplements. This
market is valued at US$2.4 billion and
Glanbia Nutritionals, with its guaranteed
scale supply of whey protein, has a strong
position within the sector.
Glanbia Nutritionals is a leading supplier
to the infant nutrition market, which is
worth US$15 billion and growing at 3% to
4% per annum. China, with a population
of 1.3 billion and growing at 0.9% per
annum, is expected to become the
largest market in the world for infant
formula by 2009. Glanbia will further
augment its position in the infant formula
sector when the €5 million investment
in a nutritional manufacturing facility in
China is complete in 2008.
A development focus of Glanbia
Nutritonals is the growing premix market.
Key markets are beverages, cereals and
functional foods all of which exhibit
positive growth trends.
Strategy
The vision of Glanbia Nutritionals is
to become one of the most relevant
players in the delivery of science-based
nutritional solutions to the global
nutrition industry. This will be achieved
through acquisition and joint venture,
capacity expansion and through
continued investment in research and
development, in both dairy and non dairy
sectors, to deliver new and innovative
products and solutions that will afford
Glanbia a point of difference in the
market and deliver value added to
customers. A key platform in successful
delivery is strong customer partnerships
- based on continuous research and a
clear focus on fi nding innovative solutions
to achieve commercialisation.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
23
Jerry O’Dea
CEO Glanbia Nutritionals
Americas
Hugh McGuire
CEO Glanbia Nutritionals
Europe and Asia Pacifi c
Wayne Seltzer
President of Seltzer
Companies Inc.
Nutritional solutions
Consumer products
Protein fortifi cation
Bars and drinks
Sports and performance nutrition
Ready to mix powders
Weight management
Bars and beverages
Health and wellness
Bars and protein fortifi ed drinks
Nutrition bar solutions
Mineral and vitamin premixes
24
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Joint Ventures and Associates
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(cid:42)(cid:136)(cid:226)(cid:226)(cid:62)(cid:202)(cid:69)(cid:202)(cid:42)(cid:62)(cid:195)(cid:204)(cid:62)(cid:202)(cid:1)(cid:195)(cid:195)(cid:156)(cid:86)(cid:136)(cid:62)(cid:204)(cid:136)(cid:156)(cid:152)(cid:202)(cid:32)(cid:105)(cid:220)(cid:202)
(cid:22)(cid:152)(cid:125)(cid:192)(cid:105)(cid:96)(cid:136)(cid:105)(cid:152)(cid:204)(cid:202)(cid:156)(cid:118)(cid:202)(cid:204)(cid:133)(cid:105)(cid:202)(cid:57)(cid:105)(cid:62)(cid:192)(cid:202)(cid:1)(cid:220)(cid:62)(cid:192)(cid:96)(cid:202)
Joint Ventures and Associates
Revenue (€'000)1
Profi t after interest
and tax (€'000)2
Up100%
2006: €262,871
2005: €131,444
Up 205%
2006: €2,842
2005: €932
(1) Not included in Group revenue
(2) Included in the income statement as share
of results of joint ventures and associates
The Group currently has three key
international joint ventures which leverage
Glanbia’s strength in world class dairy
operations and are an important part of
the Group’s growth strategy. These are
Glanbia Cheese in the UK, Southwest
Cheese in the USA and Nutricima in
Nigeria.
Overall the joint ventures and associates
grew strongly in 2006 with Glanbia’s share
of revenue up 100% to €262.9 million and
profi t after interest and tax up 205% to
€2.8 million. This result primarily refl ects
the improved performance in Glanbia
Cheese, the Group’s UK joint venture
with Leprino Foods and a small fi rst time
contribution from Southwest Cheese in
the USA.
UK - Glanbia Cheese
Glanbia has a 51% interest in Glanbia
Cheese which is a joint venture with
Leprino Foods in the USA. Glanbia
Cheese produces mozzarella cheese for
the European market in QLC, chilled,
shredded, ribbon, block and string
formats. It is the number one mozzarella
supplier to the European market.
The business employs 350 people at
three sites, which includes two cheese
processing facilities at Magheralin,
Northern Ireland, Llangefni, North Wales
and an administrative centre in Northwich,
England.
Glanbia Cheese reported an improved
performance in 2006 arising from
increased demand and the benefi ts of
product development for existing and
new customers. In the last fi ve years
Glanbia Cheese has invested €52 million
(Stg£35 million) in the introduction of
the Leprino patented and proprietary
technology to its manufacturing facilities.
The Glanbia Cheese strategy is to
maintain and build on its position as
the leading supplier of mozzarella
cheese in Europe. This will be achieved
through a combination of on-going
innovation in mozzarella production
technology - product quality, fl exibility
and functionality. These value offerings
enable the business to offer signifi cantly
differentiated products to the
marketplace.
Outlook
The ongoing investment in technology
transfer will continue in 2007 with a new
string cheese plant in Magheralin.The
business had a good performance in 2006
and this is expected to continue in 2007.
Nigeria - Nutricima
Glanbia entered a 50:50 joint venture
with PZ Cussons plc - Nutricima - which
supplies evaporated milk and milk
powder to the local Nigerian market.
Glanbia brings to this joint venture a
knowledge of the operation of food
plants and food innovation, while PZ
Cussons, which has over a century of
experience in trading in Nigeria has
signifi cant knowledge of the Nigerian
marketplace.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
25
International joint
ventures are a key
platform in developing a
strategic international
presence
Building new
businesses
at fi rst cost, from
the ground up
26
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Joint Ventures and Associates
(continued)
Nutricima employs 244 people at
its facility – an evaporated milk
manufacturing plant and a milk powder
packing facility. Much of the milk
powder packed and sold in Nigeria is
sourced in Ireland. In December 2006
the partners announced plans to double
the capacity of the evaporated milk
facility and to develop a second facility
to produce a further range of beverages
to meet the increasing requirements
of Nigeria’s fast growing, dynamic
consumer market. Glanbia is to invest
€22.5 million in these projects over the
next two years.
Despite strong competition Nutricima
grew market share and delivered strong
top line growth in 2006. The business
performed satisfactorily although overall
results were impacted by signifi cant
market development expenditure. The
product portfolio was strengthened
in 2006 with two new brands ‘Coast’ a
powdered milk product and ‘Powerfi st’
an energy drink, complementing the
successful ‘Nunu’ powdered milk brand.
A pipeline of new products, including
fl avoured milk powders under the
‘Nunu’ brand and capacity expansion is
underway and this business is forecast to
achieve further top line growth in 2007.
USA: Southwest Cheese
Southwest Cheese, located in Clovis,
New Mexico, is one of the largest
natural cheese and high protein whey
processing plants in the world. It is a
€151 million (US$190 million) 50:50 joint
venture between Glanbia plc and the
Greater Southwest Agency.
Given our knowledge of large scale dairy
operations, Glanbia was responsible for
the plant design and construction of the
Southwest Cheese facility, which was
commissioned on time and on budget
in 2006. Glanbia Foods Inc and Glanbia
Nutritionals sell the cheese and whey
produced by Southwest Cheese on a
commission basis. The milk is supplied
by the Greater Southwest Agency who
co-ordinate supplies from Dairy Farmers
of America, Select Milk Producers, Inc.,
Lone Star Milk Producers and Zia Milk
Producers.
During 2006 both the cheese line and
the whey plant were commissioned. At
full capacity in 2007, Southwest Cheese
will process 250 million gallons of milk
and 230 million gallons of high value-
added whey per annum into American-
style cheeses and proteins for the global
nutritional market. The large scale,
automated, state of the art plant allows
Southwest Cheese to produce a high
quality product in high volume to meet
the needs of the national and growing
international markets.
Milk supply continues to grow in the
New Mexico/West Texas region. Sales
of natural cheese in the USA continues
to grow at 1% to 2% per annum and
also global demand for high quality
milk proteins continues to grow. During
its fi rst year of operation, in addition
to serving the domestic USA market,
Southwest Cheese product has been
sold into markets in Mexico, Africa,
South America, Asia and Europe.
Southwest Cheese has built a strong
team capable of delivering world class
performance in an ever changing
marketplace. Currently over 200 people
are employed at Southwest Cheese
where quality, consistency and effi ciency
are the key drivers of success.
Outlook
Southwest Cheese will continue its ramp
up to full capacity in 2007. It is already
producing product to world class
standards and is forecast to perform as
planned in 2007.
Overall Outlook
Glanbia is successfully developing a
strategic international presence and our
international joint ventures are a key
platform for this development. We are
pleased with the progress made in 2006
and our international joint ventures are
all well positioned for growth in 2007.
Corporate Social Responsibility
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
27
As a Group whose origins are rooted in the founding principles of the Co-Operative Movement,
Glanbia has evolved a strong Corporate & Social Responsibility (CSR) programme which respects
all stakeholders, encourages our role in building strong communities, guides our sustainable
engagement with the environment and ensures we deliver the very best product to the marketplace.
Over the last number of years the Group has established the four key pillars of its CSR programme:
Community, Workplace, Environment and Marketplace. Through strong and progressive programmes
we are seeking to further deploy the principles across all elements of the Group’s businesses, bringing
more employees and stakeholders into the process of operating a holistic CSR programme.
“Glanbia is a wonderful
supporter of the
Boys and Girls Clubs
and through their
contributions have
allowed us to provide
nutritious meals for
club members from
our new modern
commercial kitchen”
Don Hall,
Executive Director,
Boys and Girls Club, Magic Valley
(cid:127) Character & Leadership Development
(cid:127) Education & Career Development
(cid:127) Health & Life Skills
(cid:127) The Arts
(cid:127) Sports, Fitness & Recreation
During 2006, local Champions hosted a
number of initiatives to raise funds and
widened the circle of awareness of the
Boys and Girls Club.
Overall 2006 was a successful year for the
USA Champions who helped to install
a full commercially enhanced kitchen
for the Magic Valley Club and plans are
progressing rapidly on the development
of a new Club in the neighbouring town of
Buhl.
Community – Ireland
In 2006 the employees of Glanbia
operations in Ireland hosted a number of
events for their chosen charity, Our Lady’s
Children’s Hospital, Crumlin, Dublin.
Community
Glanbia endeavours to be an active and
willing participant in local communities in
the areas in which it operates. A formal
community programme encourages
and facilitates a range of initiatives
– principally in Ireland and the USA – to
foster this spirit of community involvement.
The Group’s key community initiatives
include: a programme of corporate
giving to employee nominated charities,
a volunteering programme with Junior
Achievement Ireland and local sports
sponsorships that link in to the Group
ethos.
Through a policy of volunteering, Glanbia
employees elect to become ‘Community
Champions’ which means that employees,
in the corporate giving programme, direct
not only the selection of charities but also
the area of giving within these initiatives.
Community – USA
In 2006, the Food Ingredients USA
employees hosted a number of events for
their chosen charity, The Boys & Girls Club
of Magic Valley, Idaho.
The mission of the Boys & Girls Clubs of
Magic Valley is "to inspire and enable
all young people, especially those
from disadvantaged circumstances, to
realise their full potential as productive,
responsible and caring citizens". It has fi ve
core programming areas:
28
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Corporate Social
Responsibility (continued)
“Glanbia‘s enormous
commitment to
helping others is highly
commended by all the
staff in Our Lady’s”
Eamonn Coghlan,
Director Fundraising & Development,
Our Lady’s Children’s Hospital
Our Lady's Children’s Hospital Crumlin
is an acute paediatric teaching hospital
with 243 beds, employing 1,200 staff. It is
Ireland's largest paediatric hospital and is
responsible for the provision of the majority
of tertiary care services for children and
medical research for childhood illnesses.
In 2006 the Glanbia corporate contribution
to the hospital commissioned seven
much needed food trolleys to improve
transportation, at optimum temperature,
from kitchen to patient.
Complementing the corporate contribution
the Glanbia Champions raised a total of
€35,000 by organising a variety of fund-
raising events with the end goal of fi tting
out of a dedicated Air Ambulance for
the hospital. During the year a number
of female employees ran in the Dublin
Mini Marathon and the Champions
organised a special sponsored cycle. A
golf classic, which brought together teams
of employees, customers and suppliers,
proved a success both from a funding and
a general awareness perspective.
Community
Workplace
What we have in place
(cid:127) Employee driven programmes for
corporate charities - USA and Ireland.
(cid:127) Commitment to local sports and well
being sponsorships.
What we have in place
(cid:127) Extensive employee communication
via face to face briefi ngs and other
mediums.
(cid:127) A commitment to achieving an injury
(cid:127) A volunteering programme with Junior
free work environment.
Achievement Ireland.
(cid:127) A Health and Safety Forum which
allows sharing of best practice and
discussion and review of legislation
changes.
Environment
Marketplace
What we have in place
(cid:127) Integrated environmental and business
What we have in place
(cid:127) We consider consumer needs and
unit goals.
(cid:127) ISO 14001 accredited environmental
management at all Irish sites.
(cid:127) In the USA all manufacturing sites
have adopted the EPA framework and
are accredited to this environmental
management system.
wants in framing all consumer
communications.
(cid:127) Commitment to Guideline Daily
Amount (GDA) communication.
(cid:127) Both the Idaho and Ballyragget
ingredients businesses won gold for
their cheese at the USA and World
Cheese Awards 2007.
In September the Champions brought
the cause to the heart of the farming
community, with another fundraising event
at the National Ploughing Championships,
Ireland’s biggest annual outdoor festival.
All these and a number of other events
contributed to this year’s special Air
Ambulance project, which made its
inaugural fl ight in early 2007.
In Ireland, a signifi cant number of Glanbia
personnel contribute their time to another
company cause, Junior Achievement
Ireland. Junior Achievement is helping to
create a culture of enterprise within the
education system. Programmes begin at
primary school level, teaching children how
they can impact the world around them
as individuals, employees and consumers
and continue through to secondary
school, preparing students for their future
careers. Business volunteers recruited from
supporting organisations teach the Junior
Achievement programmes including 15
Glanbia volunteers who taught over 460
pupils in 2006.
Glanbia continued its support for the GAA
in 2006 with the sponsorship of the Kilkenny
and Waterford senior hurling teams. These
sponsorships – which reach deep into these
local communities - provide a positive link
between the GAA, which represents strong
community values and actively promotes
health and fi tness and Glanbia as a food
and nutrition business.
The workplace
The Group employs 3,926 people
worldwide and is proud to be regarded as
an employer of choice in what is a dynamic
and challenging food industry environment.
In our unfolding Workplace programme our
objective in 2006 was twofold - to enhance
Internal Communications and Health and
Safety.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
29
Internal communication
The internal communications policy
encourages and facilitates dialogue
and face-to-face communication.
Internal communication methodology
was enhanced in 2006 with systems
and solutions deployed to enable
quicker and more open channels of
communications. Communication tools,
such as publications, magazines and an
intranet function, were further enhanced
to complement the face-to-face meetings
and bring Group wide news and events
consistently to Group employees.
Health and Safety
The Group’s Health and Safety policy
places the utmost importance on the
safety of our staff, contractors and the
public. A Group Health and Safety Task
Forum is in place to facilitate the sharing
of best practice and review legislative
changes and impacts on health and
safety policy. The Forum also ensures
that policy is clearly communicated to all
employees and implemented throughout
the organisation. In addition we have
implemented an annual health and safety
audit to measure the effectiveness of the
policy.
The environment
Our primary objective is to manage
our business in an environmentally
responsible manner. We are deeply
conscious of our role in managing
our environmental impacts and are
committed to sustainable growth in
harmony with our environment and the
communities where we operate. This
commitment is delivered by:
(cid:127) Environmental goals and risk
management being intrinsic to overall
business strategy;
(cid:127) Ongoing communications with local
communities and authorities, regulatory
agencies and interest groups;
(cid:127) recycling and re-using raw materials
and reducing discharges to land, air or
water;
(cid:127) maintaining an environmental
management system at all our
manufacturing plants.
In 2006 the Group achieved the ISO14001
Environmental Management System at all
Irish manufacturing plants.
In the USA our new wastewater treatment
facility, commissioned in 2006 at our
Gooding, Idaho plant was awarded
the Pacifi c Northwest Clean Water
Association Idaho Outstanding Water
Reuse Award.
The marketplace
The objective of the marketplace
programme is to manage our corporate
brand reputation. As a business we are
conscious that we must bring to the
market the very best product we can.
This requires a strong commitment to
customers and consumers, from the
public consumer to industrial user. These
relationships are the very foundation of
our brand.
During 2006 the Irish Consumer Foods
business brought forward initiatives
involving greater market research,
a strong investment in nutritional
education, as well as a new programme
for tracking and reporting complaints,
consumer satisfaction and measuring
consumer satisfaction within a qualitative
matrix.
As part of the nutritional education
initiative, Guideline Daily Amount
communication has been adopted
by Glanbia to appear in 2007. This
development complements our
commitment to highlighting the
BIG 8 (information on the content of key
nutrients) on all packaging.
30
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Finance Review
Accounting policies
The consolidated fi nancial statements
of the Group have been prepared
in accordance with EU endorsed
International Financial Reporting
Standards (“IFRS”), IFRIC interpretations
and Companies Acts, 1963 to 2006
applicable to companies reporting under
IFRS. Further details of the basis of
preparation and signifi cant accounting
policies of the Group are included in
pages 55 to 64.
Results
Revenue grew by 1% in 2006 to €1.9
billion primarily driven by growth in
the Consumer Foods, Nutritionals and
Agribusiness segments of the business.
Including the Group’s share of revenue of
its joint ventures and associates, revenue
grew by 8% in 2006 to €2.1 billion. A solid
operating performance, the changing
mix of business and the benefi ts of prior
year rationalisation initiatives improved
profi tability and margins. Operating
profi t pre-exceptional was up 6% to
€85.6 million (2005: €80.9 million) and
the operating margin pre-exceptional
increased 20 basis points to 4.6%. Pre-
exceptional profi t before taxation was up
8% to €74.4 million. The Group’s pre-
exceptional net fi nancing cost increased
€0.9 million to €14.0 million in 2006.
Details of divisional operating
performance are given in the Business
Review on pages 12 to 26.
Net fi nance cost ratios
2006
2005
2004
EBIT: Net fi nance
cost (times)
Net debt: EBITDA (times)
6.1
1.9
6.2
2.1
5.4
2.3
These ratios are a measure of
performance and fi nancial strength of
the Group which has been improving in
recent years. The Group has strong net
fi nance cost cover and despite signifi cant
development expenditure, which has
amounted to €214 million since 2004, net
debt to EBITDA ratios have declined.
Operating margins
Ireland
International
Group
2006
2005
2004
4.3%
5.3%
4.6%
4.4%
4.5%
4.4%
5.2%
4.2%
4.9%
International operations now represent
almost 40% of total Group revenue.
The Group’s international margins grew
by 80 basis points to 5.3% in 2006,
demonstrating continued successful
expansion of the Group’s international
operations. Ireland continues to remain
challenging with the Group’s focus
on business execution, improving
productivity and management of the cost
base.
Exceptional items
Net exceptional loss for the year
amounted to €0.1 million compared with
a restated 2005 loss of €3.4 million. The
2006 exceptional items include, €3.3
million restructuring costs related to the
closure of Pigmeat Cannery operations,
€9.1 million relating to disposal of the
Group’s remaining 25% interest and
related Stg£35 million loan note from The
Cheese Company Holdings Limited and
an exceptional credit of €12.3 million
which is the recognition of a deferred tax
asset relating to tax losses in former UK
operations which are now being utilised.
Joint ventures and associates
The Group has three key international
joint ventures, producing cheese, whey
and milk products; Glanbia Cheese, in
the UK, Southwest Cheese in the USA
and Nutricima in Nigeria. Glanbia’s share
of revenues increased 100% in 2006 to
€262.9 million, driven by strong growth
in Southwest Cheese. The Group’s share
of profi t after interest and tax increased
205% to €2.8 million. This result primarily
refl ects the improved performance in
Glanbia Cheese and a small fi rst time
contribution from Southwest Cheese.
Joint ventures and associates
€ million (Glanbia share) 2006
2005
2004
Revenues
262.9
131.4
95.0
Operating profi t after
interest and tax
2.8
0.9
(1.5)
The Group has invested signifi cantly in its
joint ventures and associates, whose net
assets were €66.4 million at December
2006. The Group has committed to further
investments of €22.5 million in Nutricima
during 2007.
Geoff Meagher
Group Finance Director
Taxation
2006 Group tax of €8.0 million (2005:
€7.6 million) was offset by an exceptional
tax credit of €12.3 million, which was
the recognition of a deferred tax asset
relating to tax losses in former UK
operations which are now being utilised.
The pre-exceptional taxation charge of
€8.0 million represents an effective tax
rate of 11%, refl ecting the mix of profi ts in
the various tax jurisdictions in which the
Group operates.
Earnings per share
Earnings per share grew 14% to 22.5 cent
(2005: 19.7 cent), while adjusted earnings
per share increased 8% to 22.6 cent (2005:
20.9 cent).
Cash generation
Summary cash fl ows for 2006, 2005 and
2004 are set out on page 31. Net cash
generated from operations amounted to
€33.2 million compared to €137.6 million
in 2005. 2006 net cash generated from
operations included a €40 million working
capital increase arising from continued
business expansion and year end cash
fl ow timing. Acquisition and investment
expenditure during the year amounted
to €73.3 million, consisting primarily of
the purchase of Seltzer, a leading USA
nutritionals solutions business. The Group
realised €70 million from the disposal
of the Group’s remaining interest in The
Cheese Company Holdings Limited.
The Group has made solid progress
in strengthening its cash generation
characteristics, which has ensured that
debt levels at December 2006 remain
consistent with 2005.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
31
Cash fl ow
2006
€'000
2005
€'000
2004
€'000
Profi t for the year (pre-exceptional items)
Exceptional items
Depreciation, amortisation
and other adjusting items
66,404
(134)
61,123
(3,410)
70,625
1,294
32,692
33,017
41,009
Cash generated from operations
pre working capital movements
Working capital movements
Net interest and taxes paid
98,962
(40,476)
(25,241)
90,730
73,105
(26,284)
112,928
(29,481)
(15,821)
Net cash generated from operations
33,245
137,551
67,626
Cash fl ows from investing activities
Acquisitions and investments
Capital expenditure
Disposals of assets and investments
Cash fl ows from fi nancing activities
Share capital issued
Dividends paid
(73,298)
(37,962)
83,349
(24,580)
(46,214)
18,665
(65,368)
(60,946)
84,686
312
(16,472)
2,376
(15,612)
761
(14,814)
Net (increase)/decrease in net debt
(10,826)
72,732
11,399
Net debt at the beginning of the year
Effect of exchange rate changes,
fair value and IFRS adjustments
(224,152)
(272,167)
(269,556)
10,484
(24,717)
(14,010)
Net debt at the end of the year
(224,494)
(224,152)
(272,167)
Balance sheet
Equity shareholders’ funds increased by €76.8 million to
€200.5 million at the end of 2006. This increase was delivered
through profi t for the year of €66.3 million and a reduction
of €40.1 million in the defi cit in the Group’s defi ned benefi t
pension schemes. The benefi t of actuarial gains, combined
with improvements in investment returns resulted in an overall
reduction in the Group’s retirement benefi t obligation to €124.9
million (€113.2 million net of deferred tax asset). The Group
continues to invest in capital projects to support its growth
strategy and capital expenditure of €37.9 million amounted
to 1.27 times depreciation (2005:1.69 times). Group net debt
of €224.5 million remains consistent with the restated 2005
level of €224.2 million. The Group’s net debt as a percentage
of shareholder’s equity has improved to 112% from 181% in
2005, as has the Group’s net debt as a percentage of market
capitalisation, with an improvement to 26% (2005: 32%)
Financial instruments and derivative fi nancial instruments
The conduct of its ordinary business operations necessitates
the holding and issuing of fi nancial instruments and derivative
fi nancial instruments by the Group. The main risks arising from
issuing, holding and managing these fi nancial instruments
typically include liquidity risk, interest rate risk and currency
risk. The Group approach is to centrally manage these risks
against comprehensive policy guidelines. The Board agrees and
regularly reviews these guidelines.
Currency risk
The Group has signifi cant investment in overseas subsidiaries.
As a result the Group’s Euro denominated balance sheet can
be signifi cantly affected by rate movements. The Group seeks
to mitigate the effects of these structural currency exposures by
borrowing in the same currencies as the operating or functional
currencies of its main operating entities, thereby matching to
some extent the currency of its borrowings with that of its assets.
The Group also has transactional currency exposures that arise
from sales or purchases by an operating entity in currencies other
than the operating functional currency. The Group requires all
its operating entities to mitigate such currency exposures under
strategies agreed by the Board and utilising approved currency
hedging instruments.
Liquidity risk
The Group’s objective is to maintain a balance between
the continuity of funding and fl exibility through the use of
borrowings with a range of maturities. In order to preserve
continuity of funding, the Group’s policy is that, at a minimum,
committed facilities should be available at all times to meet
the full extent of its anticipated fi nance requirements, arising
in the ordinary course of business, during the succeeding two
year period. At the year end, the Group had multi-currency
committed bank term facilities of €622.1 million of which €138.3
million was undrawn. The weighted average period to maturity of
these facilities was 4.3 years.
Finance and interest rate risk
The Group’s objective in relation to interest rate management is
to minimise the impact of interest rate volatility on interest costs
in order to protect reported profi tability. The Group borrows
at both fi xed and fl oating rates of interest and uses interest
rate swaps to manage the Group’s exposure to interest rate
fl uctuations.
At the year end 41% (2005: 50%) of debt was held at fl oating
rates. Further information on borrowings and fi nancial liabilities is
contained in note 30 to the fi nancial statements.
Share price
The Company’s ordinary shares traded in the range €1.93 to
€3.13 during 2006. The year end share price was €2.96 (2005:
€2.40), representing a capital appreciation in 2006 of 23%.
Summary
2006 was a good year for the Group with earnings growth and
further strengthening of the Group’s balance sheet. The Group
continues its programme of investment behind its growth
strategy within robust fi nancial parameters. With the positive
trends achieved in key fi nancial performance indicators, the
Group is well positioned to take advantage of value enhancing
development opportunities.
Geoff Meagher
Deputy Group Managing Director/Group Finance Director
32
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Board of Directors
1
4
2
3
5
6
7
8
Executive Directors
1. John J Moloney B.Agr.Sc., MBA, (aged 52) is
Group Managing Director since 2001. He was appointed
to the Board in 1997. He was appointed Deputy Group
Managing Director in 2000 and assumed the responsibilities
of Chief Operating Offi cer in 2001. He joined the Group in
1987 and held a number of senior management positions
including Chief Executive of the Food Ingredients and
Agricultural Trading Divisions. He previously worked with
the Department of Agriculture, Food and Forestry and in
the meat industry in Ireland. He is a Director of The Irish
Dairy Board Co-operative Limited and a Council Member of
both the Irish Business and Employers Confederation and
the Irish Management Institute.
2. Geoffrey J Meagher CPA, (aged 57) joined the
Board as Group Finance Director in 1993 and is also Deputy
Group Managing Director since June 2005. He joined the
Group in 1975 and held a number of positions including
that of Group Financial Controller. Prior to that he trained
and worked with PricewaterhouseCoopers, Chartered
Accountants.
3. Kevin E Toland FCMA, (aged 41) was appointed
to the Board in 2003. He is CEO & President Glanbia USA
& Nutritionals, having previously held the positions of
Group Development Director and Chief Executive of the
Consumer Foods Division. Prior to joining Glanbia in 1999,
he held a number of senior management positions with
Coca-Cola Bottlers in Russia and with Grand Metropolitan
plc in Ireland and Central Europe.
Non-Executive Directors
4. Michael J Walsh (aged 64) is Chairman of Glanbia
plc. He was appointed to the Board in 1989, was appointed
Vice-Chairman of the Company in 1996 and was appointed
Chairman of the Company in 2005. He is also Chairman of
Glanbia Co-operative Society Limited and is a director of a
number of other Irish societies including Irish Co-operative
Organisation Society Limited and The Irish Dairy Board Co-
operative Limited. He farms at Coolroe, Graiguenamanagh,
Co. Kilkenny.
8. Paul Haran (aged 49) was appointed to the Board in
2005. He also serves on the Court of Directors of the Bank
of Ireland and the Board of the Mater Private Hospital. He
is a member of the Road Safety Authority. He is Principal
of the UCD College of Business and Law. Paul Haran chairs
the Boards of the UCD Michael Smurfi t Graduate School of
Business, the National Qualifi cations Authority and Edward
Dillon and Company. He also chairs the Working Group on
Legal Costs. He retired in 2004 as Secretary General of the
Department of Enterprise, Trade and Employment.
5. Liam Herlihy (aged 55) is Vice-Chairman of Glanbia
plc. He was appointed to the Board in 1997 and was
appointed Vice-Chairman of the Company in 2001. He
is also Vice-Chairman of Glanbia Co-operative Society
Limited and a Director of Irish Co-operative Organisation
Society Limited. He completed the Institute of Directors
Development Programme (2006) and holds a certifi cate
of merit in Corporate Governance from the Institute of
Directors Centre for Corporate Governance at UCD. He
also completed the ICOS Diploma in Corporate Direction
in 2002. He farms at Headborough, Knockanore, Tallow, Co.
Waterford.
6. John V Quinlan B.Agr.Sc., (aged 61) is Vice-
Chairman of Glanbia plc. He was fi rst appointed to the
Board in 1996, re-appointed in 2001 and appointed Vice-
Chairman of the Company in June 2005. He is Chairman
of Irish Co-operative Society Limited and a Director of a
number of Irish companies including Malting Company
of Ireland Limited. He completed the ICOS Diploma in
Corporate Direction in 2004. He farms at Baptistgrange,
Lisronagh, Clonmel, Co. Tipperary.
7. John E Callaghan FCA, FIB, (aged 64) was
appointed to the Board in 1998. He is a Director of a
number of Irish companies including Rabobank Ireland plc
and Vivas Insurance Limited. He was formerly Managing
Partner of KPMG (Ireland), Chief Executive of Fyffes plc and
Chairman of First Active plc.
9. Jerry V Liston B.A., MBA, (aged 66) was appointed
to the Board in 2002. He is Chairman of the Irish Aviation
Authority and holds directorships in various other
companies including Balcas Timber Limited and Kevin
Broderick Limited. He was formerly Chief Executive of
United Drug plc, a past Chairman of the Irish Management
Institute and past Executive Chairman of the Michael
Smurfi t Graduate School of Business.
10. William G Murphy B. Comm, (aged 61) retired
as Deputy Group Managing Director of Glanbia plc in 2005.
He joined the Group in 1977 and has held a number of
senior management positions. He was appointed to the
Board in 1989. He is a Director of IAWS plc and a number of
unlisted companies.
The following non-executive Directors are
farmers and are also Directors of Glanbia
Co-operative Society Limited:
11. Henry V Corbally (aged 52) completed the
ICOS Diploma in Corporate Direction in 2002. He is also
Vice-Chairman of the National Dairy Council and a Director
of Kilmainhamwood Community Employment Scheme
Limited. He farms at Kilmainhamwood, Kells, Co. Meath.
12. John G Fitzgerald (aged 51) farms at Ross,
Kilmeaden, Co. Waterford. He has completed an ICOS
course in co-operative training.
13. Edward P Fitzpatrick (aged 59) is a Director
of both South Eastern Cattle Breeding Society Limited
and Castlegannon Show Limited. He completed the ICOS
Diploma in Corporate Direction in 2003. He farms at
Knockmoylan, Mullinavat, Co. Kilkenny.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
33
9
14
18
10
15
19
11
16
20
12
17
21
13
22
14. James A Gilsenan (aged 47) completed the
ICOS Diploma in Corporate Direction in 2003. He farms at
Drogheda Road, Collon, Co. Louth.
15. Patrick Gleeson (aged 45) was appointed to the
Board in May 2006. He is also a Committee Member of
Centenary Thurles Co-operative Society Limited and farms
at Loughmore, Templemore, Co. Tipperary.
16. Christopher L Hill B.Agr.Sc., (aged 48) is a
Director of Wicklow Rural Partnership Limited and a
member of the Wicklow County Development Board. He
completed the ICOS Diploma in Corporate Direction in
2002. He farms at Johnstown House, Arklow, Co. Wicklow.
17. Martin Keane (aged 51) was appointed to the
Board in May 2006. He is also a Director of Donaghmore
Famine Work House and Agricultural Museum Co-operative
Society Limited and farms at Errill, Portlaoise, Co. Laois.
18. Michael Keane (aged 54) farms at Foxhall,
Ballinamona, Ardmore, Youghal, Co. Waterford.
19. Matthew Merrick (aged 55) is the Vice-Chairman
of the County Offaly Enterprise Board and a board member
of IFAC Accountants. He farms at Shean, Edenderry,
Co. Offaly.
20. Michael Parsons (aged 57) is Chairman of
Kilkenny Co-operative Livestock Market Limited and
a Director of Kilkenny, Carlow and District Farm Relief
Services Society Limited. He farms at Outrath, Kilkenny.
21. Eamon M Power (aged 52) completed the ICOS
Diploma in Corporate Direction in 2004 and is a Master
Farmer. He also represents the Group on the Tus Forum and
the Progressive Genetic Advisory Committee. He farms at
Corse, Fethard-on-Sea, Co. Wexford.
Directors offering themselves for
re-appointment
The following Directors are retiring by rotation in
accordance with the Articles of Association of the
Company and, being eligible, offer themselves for
re-appointment:
JE Callaghan (aged 64)
CL Hill (aged 48)
JJ Moloney (aged 52)
WG Murphy (aged 61)
M Parsons (aged 57)
Messrs Mn Keane and P Gleeson were appointed to the
Board of Directors during the year and retire in accordance
with the Articles of Association and, being eligible, offer
themselves for re-election.
In accordance with the provisions of the 2003 Combined
Code on Corporate Governance of the Irish and London
Stock Exchanges, Messrs MJ Walsh, JV Quinlan and L
Herlihy, being directors who have each served a period in
excess of nine years on the Board will retire at the AGM
and, being eligible, offer themselves for re-appointment.
All are farmers and are Directors with the exception of JE
Callaghan, JJ Moloney and WG Murphy.
Board Committees
Audit Committee
JE Callaghan-Chairman, HV Corbally, JG Fitzgerald, PM
Haran, L Herlihy, JV Liston, EM Power, JV Quinlan.
Remuneration Committee
JV Liston -Chairman, JE Callaghan, PM Haran,
L Herlihy, JV Quinlan, MJ Walsh.
Nomination Committee
MJ Walsh-Chairman, JE Callaghan, PM Haran, JV Liston.
Secretary and Registered Offi ce
22. Michael Horan B. Comm, FCA, Glanbia House,
Kilkenny, Ireland.
Registrar and Transfer Offi ce
Computershare Investor Services (Ireland) Limited, Heron
House, Corrig Road, Sandyford Industrial Estate,
Dublin 18, Ireland.
Auditors
PricewaterhouseCoopers, Ballycar House, Newtown,
Waterford, Ireland.
Principal Bankers
ABN AMRO Bank N.V., Allied Irish Banks, p.l.c., Bank of
Ireland, BNP Paribas S.A., Barclays Bank Ireland PLC,
Citibank, N.A., IIB Bank Limited, National Irish Bank Limited,
Rabobank Ireland plc, Ulster Bank Ireland Limited.
Solicitors
Arthur Cox, Earlsfort Centre, Earlsfort Terrace,
Dublin 2, Ireland.
Pinsent Masons, 3 Colmore Circus,
Birmingham B4 6BH, UK.
Stockbroker
J & E Davy, 49 Dawson Street,
Dublin 2, Ireland. (Corporate Broker)
Oriel Securities Limited, 125 Wood Street,
London EC2V 7AN. (London Broker)
Shareholder Enquiries
All shareholders’ enquiries should be addressed to the
Registrar, Computershare Investor Services (Ireland)
Limited, Heron House, Corrig Road, Sandyford Industrial
Estate, Dublin 18. The Registrar can be contacted
on telephone number 01 2475349 (within Ireland),
00353 1 247 5349 (outside Ireland), or by e-mail to
webqueries@computershare.ie
Shareholders may check their accounts on the Company’s
Share Register by accessing the Company’s website at
www.glanbia.com, clicking on “Investors” and “Shareholder
Information”. Shareholders may check their shareholdings,
recent dividend payment details and can also download forms
required to notify the Registrar of changes in their details.
Electronic Communication
For Shareholders who wish to avail of the convenience of
electronic communication, you may register your e-mail
address by accessing our Registrar’s website at www.
computershare.com/register/ie , selecting Glanbia plc from
the drop down menu “Company Selection” and clicking
on ”submit”. You will need your Shareholder Reference
Number (SRN) which is located on your share certifi cate or
dividend counterfoil. This will allow shareholders to receive
communications (interim/annual reports, etc) as soon as
they are published and should benefi t the environment
and reduce the Company’s costs. We also have a system to
allow you to submit your proxy via the internet and via the
CREST system. Please see proxy form for details of how to
operate such systems.
34
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Senior Management
Group CEO’s
A Senior Executive Management team is chaired by John
Moloney, Group Managing Director and oversees the
development and execution of the Group’s strategy. It also has
overall responsibility for achieving business results.
Members:
John Moloney, Group Managing Director
Geoff Meagher, Deputy Group Managing Director and Group
Finance Director
Kevin Toland, CEO and President, Glanbia USA and Nutritionals
Siobhan Talbot, Deputy Group Finance Director
Jim Bergin, CEO , Food Ingredients Ireland
Colin Gordon, CEO, Consumer Foods Ireland
Brian Phelan, Group HR Director
The Group CEO’s are as follows:
Consumer Foods – Colin Gordon
Pigmeat – Jim Hanley
Agribusiness – Colm Eustace
Property – Ger Mullally
Food Ingredients Ireland – Jim Bergin
Food Ingredients USA – Jeff Williams
Nutritionals USA – Jerry O’Dea
Nutritionals Europe and Asia Pacifi c – Hugh McGuire
Seltzer Companies Inc. – Wayne Seltzer
Biographies
John Moloney B.Agr.Sc., MBA, (aged 52) is Group Managing Director since 2001. He
was appointed to the Board in 1997. He was appointed Deputy Group Managing Director
in 2000 and assumed the responsibilities of Chief Operating Offi cer in 2001. He joined
the Group in 1987 and held a number of senior management positions including Chief
Executive of the Food Ingredients and Agricultural Trading Divisions. He previously worked
with the Department of Agriculture, Food and Forestry and in the meat industry in Ireland.
He is a Director of The Irish Dairy Board Co-operative Limited and a Council Member of
both the Irish Business and Employers Confederation and the Irish Management Institute.
Geoff Meagher CPA, (aged 57) joined the Board as Group Finance Director in 1993
and is also Deputy Group Managing Director since June 2005. He joined the Group in 1975
and held a number of positions including that of Group Financial Controller. Prior to that he
trained and worked with PricewaterhouseCoopers, Chartered Accountants.
Biographies
Jim Hanley age 44, was appointed Chief Executive of Glanbia Meats in March 2007. He
joined the Group in 1989 and has worked in the pigmeat sector for 25 years. Since joining
Glanbia he has held a number of positions including General Sales Manager and more
recently Deputy CEO for Meats.
Ger Mullally (B.Agr Sc. MBA) age 49, is Chief Executive of Glanbia Estates. He was
appointed to this role in November 2005 after six years as Chief Executive of Agribusiness.
He joined the Group in 1980 where he has held a number of senior positions within
Agribusiness.
Colm Eustace ((B. Agr Sc. MBA) age 46, is CEO for Glanbia Agribusiness since
November 2005. He joined the Group in 1986 where he has held a number of senior
positions.
Kevin Toland FCMA, (aged 41) was appointed to the Board in 2003. He is CEO &
President Glanbia USA & Nutritionals, having previously held the positions of Group
Development Director and Chief Executive of the Consumer Foods Division. Prior to joining
Glanbia in 1999, he held a number of senior management positions with Coca-Cola Bottlers
in Russia and with Grand Metropolitan plc in Ireland and Central Europe.
Jeff Williams (BSC Sc. Marketing, MBA) age 50, is President of Glanbia Foods, Inc., a
position he has held since January 2005. He joined the Group in 1990 during which time
he has held a number of senior positions. Prior to this he was involved in Commercial and
Investment Banking. He is a member of the International Dairy Foods Association Board,
National Cheese Institute Board and the Leadership Idaho Agriculture Board of Trustees.
Siobhan Talbot (B.Comm, FCA) age 43 was appointed Deputy Group Finance Director
of Glanbia plc in June 2005. She was formerly Group Secretary. Prior to this she held a
number of senior positions in fi nance since she joined the Group in 1992, including Group
Operations Controller. Prior to joining the Group she worked with PricewaterhouseCoopers
in Dublin and Sydney, Australia.
Hugh McGuire (M.Sc, Dip Finance) age 36, is CEO for Glanbia Nutritionals in Europe
and Asia Pacifi c. He joined the Group in 2003 from McKinsey & Co. where he worked as
a Consultant across a range of industry sectors. Prior to this he worked in the consumer
goods industry with Nestle and Leaf.
Brian Phelan (B. Comm, FCA) age 40, is Group Human Resources Director of Glanbia
plc. Brian was appointed to this role in 2004. Prior to this he was Chief Financial Offi cer of
the Consumer Foods Division. He also worked in Glanbia Ingredients in Ireland and the
USA. Prior to joining the Group in 1994 he worked with KPMG.
Jerry O’Dea (BSC Food Sc., MBA) age 47, is President of Glanbia Nutritionals, Inc.,
a position he has held since October 2002. He joined the Group in 1981 and has held
a number of senior positions including Vice President, General Manager of Glanbia
Ingredients USA. He is a member of the Nominations Committee of the United States Dairy
Export Council (USDEC) and the board of the American Dairy Products Institute (ADPI).
Jim Bergin (B. Comm, MSc Mngt Practice) age 44 is Chief Executive of Glanbia
Ingredients Ireland. He was appointed in March 2005. He joined the Group in 1984 and has
held a number of senior positions including Group IT Manager and subsequently Group
Business Process Director. He joined the Ingredients Business as Operations Manager in
May 2003.
Wayne Seltzer age 64, is President of Seltzer Companies Inc., which he founded in
1981. He is a graduate of University of California at Los Angeles and has been with the
Group since Glanbia acquired Seltzer in September of last year. Prior to establishing Seltzer
Companies he held a senior position at Gillies International.
Colin Gordon (BBS, MBS, FMII) age 45, is Chief Executive of Glanbia Consumer Foods
Ireland. He joined the Group in March 2006. He previously worked in C&C Group plc, the
drinks and snack food company where he held a number of senior positions including, most
recently Managing Director of C&C (Ireland) Ltd.
In February 2007 John Madden, CEO of Glanbia Meats, retired after 12 years
in the organisation.
Report of the Directors
for the year ended 30 December 2006
Introduction
The Directors are pleased to present their report to
shareholders together with the audited fi nancial statements
for the year ended 30 December 2006.
Principal activities
Glanbia plc is an international dairy, consumer foods and
nutritional products company. It is principally engaged in
the processing and marketing of cheese, dairy-based food
ingredient and nutritional products; dairy-based consumer
products and meat products; manufacture of animal feedstuffs
and trading in agricultural products; and maximising the value
of the Group’s property assets. Group processing operations
are located in Ireland, the UK, Germany and the USA. Sales
and marketing activities are undertaken in various European
countries and in the USA, South America, Asia and Africa. The
Group serves a broad customer base in the retail, food service
and food and beverage processing sectors.
The Group’s strategy is to build international relevance
in cheese, nutritional ingredients and selected consumer
foods, balancing it’s strong market positions in Ireland
with an increasing presence in overseas markets. The joint
ventures in Nigeria and the USA are central to this strategic
development, as is the continuing development of its
Nutritionals business.
Business review
Full-year results were in line with market expectations, despite
a tough fi rst half and ongoing challenges in Ireland. A solid
operating performance, the changing mix of business and
the benefi ts of prior year rationalisation initiatives improved
profi tability and margins. Key fi nancial performance indicators
are trending positively and international operations and joint
ventures are progressing well.
The highlights of the results for the year were as follows:
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
35
Key strategic milestones were reached during the year
including a US$105 million US Nutritionals acquisition,
Seltzer, and the opening of one of the largest natural
cheese and whey processing plants in the world, Southwest
Cheese, which is a US$190 million 50:50 joint venture. The
Seltzer acquisition is performing ahead of expectations.
The Southwest Cheese plant is fully commissioned and is
manufacturing product to a world class standard.
A further €50 million of development capital expenditure was
committed in 2006, including €5 million to build the Group’s
fi rst nutritionals operation in the Asia Pacifi c region and €22.5
million for a planned capacity expansion and new plant in the
Nigerian joint venture.
The Group Managing Director’s review on pages 6 to 9
provides an overview of the Group’s vision and strategy for
the next three years. The Business Review on pages 12 to 26
includes analysis, by operational division, of the 2006 results,
trading environment and current business outlook of each
business unit including joint ventures. The Finance Review on
pages 30 to 31 analyses the fi nancial results for 2006 including
commentary on the fi nancial ratios and Group balance sheet.
2006
2005
(as restated)
Change
Revenue
Operating profi t pre-exceptional
Operating margin pre-exceptional
Net fi nancing costs pre-exceptional
Share of results of joint ventures and associates after interest and tax
Profi t before tax pre-exceptional
Profi t after tax pre-exceptional
Exceptional items
Earnings per share
Adjusted earnings per share
Dividend per share in respect of the year
Net debt
€1,853.4 m €1,830.0 m
€80.9 m
4.4%
€85.6 m
4.6%
(€14.0 m)
€2.8 m
€74.4 m
€66.4 m
(€0.1 m)
22.5 c
22.6 c
5.8 c
€224.5 m
Up 1%
Up 6%
Up 20 bps
(€13.1 m) Up €0.9 m
Up 205%
Up 8%
Up 9%
See note
Up 14%
Up 8%
Up 5%
Similar
€0.9 m
€68.7 m
€61.1 m
(€3.4 m)
19.7 c
20.9 c
5.5 c
€224.2 m
Exceptional items are €3.3 million restructuring costs relating to the closure of the Pigmeat cannery operation, €9.1 million being the cost of the disposal of the Group’s remaining
25% interest and related loan note in The Cheese Company Holdings Limited to Milk Link Limited for €70 million and €12.3 million being the recognition of a deferred tax asset
relating to the Group’s former UK operations.
36
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Report of the Directors (continued)
for the year ended 30 December 2006
Outlook
The Group’s aim is to achieve strong leadership positions in
markets that offer profi table long-term growth. The Group
looks to achieve this through a combination of being relevant
to its customers, growing its existing businesses, acquiring
complementary new businesses, with emphasis on Nutritionals
opportunities and achieving a high level of operational
effi ciency and productivity.
Ireland will remain challenging in light of the competitive retail
environment and the ongoing effects of the implementation
of the Mid Term Review of the Common Agricultural Policy.
Irish operations continue to focus on key aspects of business
execution which drive performance, productivity and cost
competitiveness. International operations are expected to
perform well in 2007 and are well positioned for good growth.
The Group is successfully developing a strategic international
presence, which today represents nearly 40% of revenue. This
gives the Group a strong platform from which to continue
to grow and develop overseas. At the same time, the Group
continues to consistently and solidly improve the long-term
sustainability of the Irish operations.
As to the future, the Group is on target to deliver double digit
earnings growth in 2007 and the Group believe the outlook is
positive for sustained high growth.
Share Capital
The authorised share capital of the Company is 306,000,000
ordinary shares of €0.06 each. The issued share capital as at 30
December 2006 was 293,238,684 ordinary shares of €0.06 each.
Dividends
On 4 October 2006 an interim dividend of 2.4c per share on
the ordinary shares amounting to €6.9 million was paid to
shareholders on the register of members as at 15 September
2006. The Directors have recommended the payment of a
fi nal dividend of 3.4c per share on the ordinary shares which
amounts to €10 million. Subject to shareholders approval this
dividend will be paid on Tuesday, 22 May 2007 to shareholders
on the register of members as at Friday, 27 April 2007, the
record date.
Directors
Messrs GE Stanley and JJ Miller retired on 24 May 2006.
Messrs P Gleeson and MN Keane were appointed to the
Board on 24 May 2006. In accordance with the Articles of
Association of the Company, they will retire at the 2007 Annual
General Meeting and, being eligible, offer themselves for re-
appointment.
In accordance with the Articles of Association of the Company,
Messrs JE Callaghan, CL Hill, JJ Moloney, WG Murphy and M
Parsons retire from the Board by rotation and, being eligible,
offer themselves for re-appointment.
In accordance with the provisions of the 2003 Combined
Code on Corporate Governance of the Irish and London Stock
Exchanges, Messrs MJ Walsh, L Herlihy and JV Quinlan, being
Directors who have each served a period in excess of nine
years on the Board will retire at the AGM and, being eligible,
offer themselves for re-appointment.
None of the Directors proposed for re-appointment has a
service contract with the Company.
The Chairman wishes to confi rm that following the completion
of the performance evaluation process all Directors proposed
for re-election continue to be effective and these Directors
continue to demonstrate commitment to their roles.
Employees
The Group’s 3,926 employees are the key to building
sustainable growth through delivery of the strategy. The
Group provides opportunity, development and reward to
those who enjoy working in a challenging delivery focussed
environment and is proud to be an employer of choice at its
worldwide locations.
Research and development
The Group is committed to an ongoing and extensive
innovation programme to support a customer-led business
and marketing approach. There is growing consumer
awareness of the link between health and diet and the
Group is committed to achieving the highest standards of
best practice in relation to science-based innovation. It is
directed towards the development of technically superior
dairy-based food ingredient and nutritional products, cheese,
high value consumer food products, other products and the
enhancement of proprietary technologies and processes.
Through its research and development facilities in Kilkenny and
Idaho, USA, the Group’s business has developed and launched
advanced, differentiated and branded ingredients and
consumer products targeted at a range of nutritional benefi ts
such as weight management and immune enhancement.
Substantial Interests
As at 23 February 2007, the Company has been advised of the
following notifi able interests in its ordinary share capital:
Shareholder
No. of
ordinary:
shares
% of
issued
share
capital
Glanbia Co-operative Society Limited
Bank of Ireland Nominees Limited*
Bank of Ireland Asset Management
Limited**
160,277,308
25,309,608
54.7%
8.6%
14,163,481
4.8%
* Bank of Ireland Nominees Limited has confi rmed that it has
no benefi cial interest in the 25,309,608 shares.
** Bank of Ireland Asset Management Limited has confi rmed
that it has no benefi cial interest in the 14,163,481 shares
of which 14,038,750 are included in the Bank of Ireland
Nominees Limited holding.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
37
Directors’ and Secretary’s share interests
The interests of the Directors and Group Secretary and
their spouses and minor children in the share capital of the
Company, subsidiary companies and the holding society are
disclosed in note 42 to the fi nancial statements.
Principal risks and uncertainties and
fi nancial risk management
Under Irish company law (Statutory Instrument 116.2005-
European Communities (International Financial Reporting
Standards and Miscellaneous Amendments) Regulations
2005), the Group is required to give a description of the
principal risks and uncertainties which it faces. These appear
on page 44 of the Corporate Governance Report.
A comprehensive analysis on the fi nancial risk management
objectives and policies of the Company and the Group,
including the policy for hedging each major type of
forecasted transaction for which hedge accounting is used
and the exposure of the Company and the Group to price
risk, credit risk, liquidity risk and cash fl ow risk, is contained in
notes 3, 30 and 36 to the fi nancial statements.
Subsidiary and associated undertakings
A list of the principal subsidiary and associated undertakings
is included in note 43 to the fi nancial statements.
Political donations
The Electoral Act, 1997 requires companies to disclose all
political donations over €5,079 in aggregate made during
the fi nancial year. The Directors, on enquiry, have satisfi ed
themselves that no such donations in excess of this amount
have been made by the Company.
Books of account
The measures taken by the Directors to secure compliance
with the Company’s obligations to keep proper books of
account are the use of appropriate systems and procedures
and employment of competent persons. The books of
account are kept at Glanbia House, Kilkenny, Ireland.
Corporate governance
The Directors of the Company are committed to maintaining
the highest standards of corporate governance and a
statement of how the Company applies the main and
supporting principles of the 2003 Combined Code on
Corporate Governance of the Irish and London Stock
Exchanges (“the Combined Code”) appears on pages
38 to 41.
Auditors
The auditors, PricewaterhouseCoopers, have expressed their
willingness to continue in offi ce in accordance with Section
160(2) of the Companies Act, 1963.
Special business at the Annual General Meeting
Notice of the 2007 Annual General Meeting with details of the
special business to be considered at the meeting is set out in
a separate circular which is enclosed with this Annual Report.
Authority to allot shares
Under the fi rst item of special business, shareholders are
being asked to renew the Directors’ authority to allot relevant
securities, within the meaning of Section 20 of the Companies
(Amendment) Act, 1983, up to an aggregate nominal amount
of €765,678.96.
Disapplication of Pre-Emption Rights, Purchase of Company
Shares and Treasury Shares
Under the second item of special business, shareholders
are being asked to renew the authority to disapply the strict
statutory pre-emption provisions in the event of a rights
issue or in any other issue up to an aggregate amount of
€765,678.96 in nominal value of ordinary shares, representing
4.4% of the nominal value of the Company’s issued ordinary
share capital for the time being. This authority will expire on
the earlier of the close of business on 15 August 2008 or the
date of the Annual General Meeting of the Company in 2008.
At the last Annual General Meeting of the Company
shareholders passed a resolution to give the Company, or
any of its subsidiaries, the authority to purchase up to 10%
of its own shares. This authority will expire on 16 May 2007.
Under the third item of special business, shareholders are
being asked to extend this authority until the earlier of the
close of business on 15 August 2008 or the date of the Annual
General Meeting of the Company in 2008. While the Directors
do not have any current intention to exercise this power, this
authority is being sought as it is common practice for public
companies.
Shareholders are also being asked under the fourth item of
special business to pass a resolution authorising the Company
to reissue such shares purchased by it and not cancelled
as treasury shares. Such purchases would be made only at
price levels which it considered to be in the best interests
of the shareholders generally, after taking into account
the Company’s overall fi nancial position. Furthermore the
authority being sought from shareholders will provide that the
minimum price which may be paid for such shares shall not be
less than the nominal value of the shares and the maximum
price will be 105% of the then market price of such shares.
On behalf of the Board
MJ Walsh
Chairman
JJ Moloney
Group Managing Director
Glanbia House
Kilkenny
6 March 2007
38
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Directors’ Statement of Corporate Governance
Glanbia plc (“the Company”) has primary listings on the Irish
and London Stock Exchanges.
The Directors of the Company are committed to maintaining
the highest standards of corporate governance and this
statement describes how the Company applies the main
and supporting principles of the 2003 Combined Code
on Corporate Governance of the Irish and London Stock
Exchanges (“the Combined Code”).
Board of Directors
Role
The Board is responsible for the leadership, direction and
control of the Company and its subsidiary companies (“the
Group”) and is accountable to shareholders for fi nancial
performance.
The Board has a formal schedule of matters reserved to it for
decision such as the approval of annual and strategic business
plans, capital expenditure, any change in Group strategy
and any acquisition or disposal of Group assets, the approval
of any dividends and Group treasury and risk management
policies.
The role of the Chairman, which is non-executive, is separate
(and always has been separate) from the role of the Group
Managing Director. The division of responsibilities between
the Chairman and Group Managing Director have been clearly
established, set out in writing and agreed by the Board.
Board composition
The Company is a subsidiary of Glanbia Co-operative Society
Limited (“the Society”). The Society nominates from its
Board of Directors, which is elected on a three-year basis,
fourteen non-executive Directors for appointment to the
Board of the Company. The Society, an Irish industrial and
provident society, owns 54.7% of the share capital of the
Company and many of its members supply milk and trade with
Irish subsidiaries of the Company. The remaining Directors
comprise three executive Directors and four non-executive
Directors. Biographies of each of the Directors are set out on
pages 32 and 33.
The Board considers that the Directors bring to the Company
the range of skills, knowledge and experience, including
international experience, necessary to lead the Group.
All Directors have been advised of their fi duciary duties and of
their obligation to bring an independent judgement to bear
on the issues of strategy, performance, resources, including
key appointments and standards of conduct. All Directors
receive monthly Group fi nancial statements and reports and
full Board papers are sent to each Director in suffi cient time
before Board meetings. Any required further information is
available to all Directors on request.
Chairman and Vice-Chairmen
Mr MJ Walsh has been Chairman of the Board since 9
June 2005. The Chairman is responsible for the effi cient
and effective working of the Board. He ensures that Board
agendas cover the key strategic issues confronting the Group
and that Directors receive accurate, timely, clear and relevant
information. While Mr MJ Walsh holds a number of other
directorships (see details on page 32) and farms at Coolroe,
Graiguenamanagh, County Kilkenny, the Board considers that
these do not interfere with the discharge of his duties to the
Group.
The Company has two Vice-Chairmen, Mr L Herlihy and Mr JV
Quinlan.
Senior Independent Director
Mr JE Callaghan is the Senior Independent Director. As
Senior Independent Director, Mr Callaghan is available to
shareholders if they have concerns, which contact through the
normal channels has failed to resolve.
Managing Director
The day to day management of the Group has been
delegated to the Group Managing Director, Mr JJ Moloney,
whose appointment to that position was effective from July,
2001. His responsibilities include the formulation of strategy
and related plans and, subject to Board approval, their
execution. He is also responsible for ensuring an effective
organisation structure, for the appointment and direction of
the senior executive management and for the operational
management of all the Group’s businesses.
Company Secretary
Mr M Horan is the Group Secretary. All Directors have access
to the advice and service of the Group Secretary who is
responsible to the Board for ensuring that Board procedures
are complied with and that applicable rules and regulations
are followed. Both the appointment and removal of the
Secretary is a matter for the Board.
Terms of appointment
The terms and conditions of appointment of non-executive
Directors are available for inspection at the Company’s
registered offi ce during normal business hours and at the
Annual General Meeting of the Company.
Information on professional development
Directors are provided with a comprehensive information
pack on joining the Company and advised of their legal
and other duties and obligations as a director of a listed
company. In addition, all new Directors receive induction on
their appointment covering such matters as the operation
and activities of the Company and the Group, the role of the
Board and the Group’s corporate governance procedures.
As part of this programme, major shareholders are offered an
opportunity to meet new non-executive Directors.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
39
Directors are also briefed, where appropriate, on changes to
legislation, regulation or market practices, as well as receiving
briefi ngs from business groups throughout the year.
All Directors have access to independent professional advice
at the Group’s expense where they judge it necessary to
discharge their responsibilities as Directors. Committees are
provided with suffi cient resources to undertake their duties.
Fourteen of the remaining fi fteen non-executive Directors
are nominated by the Board of Glanbia Co-operative Society
Limited for appointment to the Board of the Company.
Additionally, Mr WG Murphy retired as Deputy Group
Managing Director in 2005 but remains on the Board as a non-
executive Director. The Board recognises that these Directors
do not meet the criteria for independence as specifi ed in the
Combined Code however, the Board considers that they are
independent in character and judgement.
Eight of the Directors nominated to the Board by Glanbia
Co-operative Society Limited have completed the ICOS
Diploma in Corporate Direction.
All of the non-executive Directors bring an independent
perspective to their advisory and monitoring roles.
Performance evaluation
During the year a performance evaluation has been
conducted of the Board, its Committees and individual
Directors which was led by the Chairman.
In completing the performance evaluation, the Chairman met
with each Director individually to discuss the performance
of the Board and individual Directors. In advance of the
meetings, the Chairman circulated a comprehensive
questionnaire to Directors for their consideration and
encouraged the Directors to raise any other issues on Board
matters during the meetings. Based on the verbal and
written feedback from the Directors, the Chairman then
prepared a report for the Board summarising the outcome
of the performance evaluation process and recommending a
number of actions.
The performance of the Chairman was considered at a
meeting of the non-executive Directors which was chaired by
Mr JE Callaghan, the Senior Independent Director.
The Board also evaluated the performance of the Audit
Committee, Nomination Committee and Remuneration
Committee.
Independence
The Board has evaluated the independence of the non-
executive Directors under the guidelines specifi ed in the
Combined Code.
Following this assessment, the Board has determined that
throughout the reporting period, Mr JE Callaghan, Mr P Haran
and Mr JV Liston were independent. In particular, the Board
reviewed the position of Mr JE Callaghan in the context of
the guidance in the Combined Code and determined that,
despite his 9 years on the Board, he remains independent.
In the same manner as the other non-executive Directors,
he discharges his duties in a proper and consistently
independent manner and constructively and appropriately
challenges the executive Directors and the Board.
Share ownership and dealing
In order to maintain investor confi dence in the stock markets,
quoted companies have an obligation to ensure that their
directors and employees, and anyone closely associated or
connected to them, do not place themselves in positions
where investors might suspect them of abusing inside
information. For this reason, the Company issued in early
2006 revised rules covering share dealings by Directors and
employees who regularly, or even occasionally, have access to
inside information.
The main principle underlying the rules is that no one should
trade in shares of the Company while in possession of inside
information about the Company. Likewise, no one should
deal in the shares of the Company, if it would give rise to
a suspicion that they are abusing inside information. As a
safeguard against any actual or potential abuse of these rules,
the Company has appointed as Compliance Offi cers, the
Group Secretary and the Deputy Group Finance Director from
whom approval must be obtained, in advance, for any share
dealings by persons to whom the rules apply.
The interests of the Directors and Secretary and their spouses
and minor children in the share capital of the Company, the
holding society and subsidiary companies/societies are set
out on pages 103.
Board succession planning
The Board plans for its own succession with the assistance of
the Nomination Committee. In so doing, the Board considers
the knowledge and experience necessary to allow it to meet
the strategic vision for the Company and the Group.
Meetings
There were 12 scheduled meetings of the Board during 2006.
Details of Directors’ attendance at those meetings are set out
in the table on the next page:
40
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Directors’ Statement of Corporate Governance (continued)
MJ Walsh
L Herlihy
JV Quinlan
JJ Moloney
JE Callaghan
HV Corbally
EP Fitzpatrick
JG Fitzgerald
JA Gilsenan
P Gleeson**
P Haran
CL Hill
Mn Keane**
Ml Keane
JV Liston
GJ Meagher
M Merrick
JJ Miller*
WG Murphy
M Parsons
EM Power
GE Stanley*
KE Toland
Board
B
12
12
12
12
12
12
12
12
12
8
12
12
8
12
12
12
12
4
12
12
11
4
9
A
12
12
12
12
12
12
12
12
12
8
12
12
8
12
12
12
12
4
12
12
12
4
12
Audit
Committee
B
A
Nomination
Committee
B
A
Remuneration
Committee
B
A
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
2
2
5
5
5
5
5
5
5
5
5
5
5
5
5
4
5
4
Column A indicates the number of meetings held during the period the Director was a member of the Board and /or Committee.
Column B indicates the number of meetings attended during the period the Director was a member of the Board and /or the Committee.
* Retired 24 May 2006 ** Appointed 24 May 2006
Board Committees
The Board has established a committee structure to assist it
in the discharge of its responsibilities. The committees and
their membership are detailed on page 33 of this report. All
committees of the Board have written terms of reference
dealing with their role and authority delegated by the Board
and are available on the Group’s website at www.glanbia.com.
Membership of the Nomination, Audit and Remuneration
Committees is comprised exclusively of non-executive
Directors. The Group Secretary acts as secretary to each of
these committees.
Nomination Committee
Fourteen non-executive Directors are nominated by the Board
of Glanbia Co-operative Society Limited (“the Society”) for
appointment to the Board of the Company. For the remaining
non-executive and executive Directors, the Nomination
Committee of the Company leads the process for Board
appointments.
The appointment to the Board of non-executive Directors
nominated by the Society is subject to and co-terminus with
their appointment as Directors of the Society and is further
subject to their removal as Directors under the Articles of
Association. The remaining non-executive Directors are
appointed to the Board on the basis of a 3-year term which
may be renewed and are also subject to early removal under
the Articles.
All Directors are subject to election by shareholders at the fi rst
Annual General Meeting after their appointment and to re-
election thereafter at intervals of no more than three years. In
addition, in accordance with the provisions of the Combined
Code, non-executive Directors serving for more than nine
years must seek re-election annually.
The Nomination Committee did not use an external search
consultancy or open advertising in the appointment of
the new non-executive Directors, Messrs Mn Keane and P
Gleeson, as they were nominated by the Board of the Society
for appointment to the Board. The Nomination Committee
uses industry and professional contacts to identify suitable
candidates for the appointment of independent Directors.
The Nomination Committee also considers and recommends
the appointment of the Chairman of the Company and
the Vice-Chairmen. It is the custom and practice that the
Chairman and Vice-Chairmen of the Society are also Chairman
and Vice-Chairmen of the Company.
The Chairman of the Company chairs meetings of the
Nomination Committee except when it is dealing with
the appointment of a successor to the Chairmanship. The
Chairman of the Nomination Committee reports to the Board
after each meeting of the Committee.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
41
Audit Committee
The main role and responsibilities of the Audit Committee are
set out in written terms of reference which are available on the
Group’s website at www.glanbia.com and include:
• to monitor the integrity of the fi nancial statements of the
Company, and any formal announcements relating to the
Company’s fi nancial performance, reviewing signifi cant
fi nancial reporting judgements contained in them;
• to review the Company’s internal fi nancial controls and,
unless expressly addressed by a separate board risk
committee composed of independent directors, or by the
board itself, to review the Company’s internal control and
risk management systems;
• to monitor and review the effectiveness of the Company’s
internal audit function;
• to make recommendations to the Board, and to the
shareholders for their approval in general meeting, in
relation to the appointment, re-appointment and removal of
the external auditors and to approve the remuneration and
terms of engagement of the external auditors;
• to review and monitor the external auditors’ independence
and objectivity and the effectiveness of the audit process,
taking into consideration relevant Irish professional and
regulatory requirements;
• to develop and implement policy on the engagement of the
external auditors to supply non-audit services, taking into
account relevant ethical guidance regarding the provision of
non-audit services by the external audit fi rm; and to report
to the board, identifying any matters in respect of which it
considers that action or improvement is needed and making
recommendations as to the steps to be taken; and
• to review the arrangements by which staff of the Company
may, in confi dence, raise concerns about possible
improprieties in matters of fi nancial reporting or other
matters.
In discharging its responsibilities the Audit Committee met
fi ve times during the period. It reviewed the interim and fi nal
results for the Group prior to their submission to the Board
for approval. It approved the Internal Audit Plan and reviewed
progress against this plan at intervals during the year. The
Chairman and Members of the Audit Committee received an
executive summary of all audit reports issued by the Internal
Audit Department and maintains dialogue with the Group
Internal Auditor on a regular basis.
The Audit Committee has approved a policy on the
engagement of the external auditors to provide non-audit
services. This policy provides that the Group shall not retain its
independent auditors to provide services other than audit and
audit related services other than in exceptional circumstances.
The following services are prohibited unless approved under
the terms of the Policy:
• Bookkeeping or other administrative services related to the
Group’s accounting records or fi nancial statements;
• Financial information systems design and implementation
• Internal audit services;
• Management functions, executive searches for the Group
Managing Director or Group Finance Director and legal
services.
Mr Callaghan is Chairman of the Audit Committee and he
reports to the Board after each meeting of the Committee.
US Advisory Board
During 2005, a US Advisory Board was established to assist
the Board in developing a greater awareness of activities
and market trends in the relevant USA industry sectors.
Mr T Corcoran, Glanbia Group Chairman from 2000 to 2005,
is Chairman of the US Advisory Board. The membership of
the Advisory Board also currently comprises Mr JE Callaghan,
Senior Independent Director, Mr K Toland, Executive Director,
Mr L Herlihy, Mr JV Quinlan, Vice Chairmen, and Messrs
J McCullough and P Rogers and Ms S Davis, USA based
members.* The Group Chairman and Group Managing
Director also attend meetings of the US Advisory Board.
* Mr McCullough recently retired as Chief Executive Offi cer
of CRH Americas Products and Distribution. He joined
CRH in 1979 and has held a number of senior management
positions with that company.
Mr Rogers, retired, was previously President of Nabisco
Foods Americas and held a variety of other senior positions
in food companies.
Ms Davis is Chairperson of Susan Davis International, a
Washington D.C based public affairs agency.
Remuneration Committee
The Remuneration Committee determines, on behalf of the
Board, the Group’s framework of executive remuneration and
the specifi c packages and conditions of employment for each
of the executive Directors and certain senior executives, as
decided by the Board. The Committee consults the Group
Managing Director regarding remuneration proposals and
obtains internal and external professional advice as deemed
appropriate. The Remuneration Committee operates the
Company’s Share Option and Long Term Incentive Schemes.
The remuneration of the non-executive Directors is
determined by the Remuneration Committee within the total
amount approved by the Company’s shareholders in general
meeting from time to time.
The terms of reference of the Remuneration Committee,
including its role and the authority delegated to it by the
Board, are available on the Group’s website at
www.glanbia.com.
Mr Liston is Chairman of the Remuneration Committee and
formally reports to the Board after each meeting of the
Committee.
42
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Directors’ Statement of Corporate Governance (continued)
Remuneration
Remuneration Policy
Remuneration policy is based on attracting, retaining
and motivating executives to ensure that they perform
in the best interests of the Group and its shareholders.
Performance-related elements of remuneration form a
signifi cant proportion of the total remuneration package of
executive Directors. The Remuneration Committee obtains
external advice on remuneration in comparable companies as
necessary and has given full consideration to the Combined
Code.
Currently the components of the remuneration package
for executive Directors are basic salary and benefi ts,
performance-related annual bonus, participation in the Long
Term Incentive Plan (“LTIP”) and participation in a defi ned
benefi t pension scheme. Executive Directors also participated
in the share option scheme of the Company which expired in
August 1998.
Basic Salaries and Benefi ts
The basic salaries of executive Directors are reviewed annually
having regard to personal performance, competitive market
practice or where a change of responsibility occurs. Benefi ts-
in-kind consist principally of a company car. No fees are
payable to executive Directors for their attendance at board
meetings.
Performance-Related Annual Bonus
The Group operates a performance-related bonus scheme for
executive Directors, senior executives and other management.
Payments under the scheme for executive Directors depend
on the achievement of pre-determined goals for Group
performance and an assessment of individual performance
against agreed objectives.
Long Term Incentive Plan
In 2002 the shareholders approved the introduction of a
Long Term Incentive Plan (“2002 LTIP”) for selected Group
employees in order to further align the interests of key Group
personnel with those of shareholders. Under the 2002 LTIP
options cannot be exercised before the expiration of three
years from the date of grant and can only be exercised if a
predetermined performance criterion for the Company has
been achieved. The performance criterion is that there has
been an increase in the adjusted earnings per share of the
Company of at least the increase in the Consumer Price Index
plus 5% compounded over a three year period.
To encourage participating executives to hold the shares
issued to them on the exercise of their options, share awards
specifi ed as a percentage of the shares held will be made on
the second and fi fth anniversary of the exercise of the option.
The number of shares which may be the subject of such
awards may not exceed 20% and 10% of the number of shares
so held on the respective anniversaries.
Benefi ts under the 2002 LTIP are not pensionable.
Employee Savings Related Share Options Scheme
In 2002 the shareholders approved the introduction of
an employee Savings Related Share Option (“Sharesave
Scheme”). In 2002 options were granted over 2,988,622
ordinary shares under the Sharesave Scheme. During the year,
101,982 ordinary shares were transferred to employees of the
Group who exercised their options under the Scheme. The
options granted under the Sharesave Scheme in 2002 expired
on 31 March 2006.
Pension Benefi ts
Pension benefi ts for executive Directors are calculated on
basic salary only. Benefi ts, which are agreed on appointment,
are designed to provide a percentage of basic salary at
retirement for full service.
Service Contracts
No Director has a service contract with a notice period in
excess of one year or with provisions for pre-determined
compensation on termination which exceed one year’s salary
and benefi ts-in-kind.
Directors’ Emoluments and Attributable Pension Benefi ts
Details of Directors’ emoluments and attributable pension
benefi ts are set out in note 9 and details of share options are
included in note 42 to the fi nancial statements.
Other Directorships
The Group Managing Director, Mr JJ Moloney, is a Director
of The Irish Dairy Board Co-operative Limited for which he
received fees of €12,000 which he retained.
Share Options
Options outstanding under the Company’s 1988 Share Option
Scheme and the LTIP as at 30 December 2006 amounted
to 2,734,000 ordinary shares (31 December 2005: 3,116,913
inclusive of 109,913 options outstanding as at 31 December
2005 under the Sharesave Scheme, which expired on 31 March
2006 ) made up as follows:
Share option scheme
and 2002 LTIP
No of
Price
Dates
ordinary shares
range
exercisable
2,734,000 €1.55 - €4.25
GBP£2.90
2006 – 2016
2006 – 2008
As detailed in note 42 to the fi nancial statements at 30
December 2006, 262,503 ordinary shares were held in an
employee benefi t trust for the purpose of the Sharesave
Scheme (“the Employees’ Share Trust”).
Corporate Social Responsibility
The Group’s Corporate Social Responsibility Programme relies
on a careful balance of economic, environmental and social
policies while the Group aims to fulfi l its strategic goals of
building a sustainable business and long term growth. Group
policies and implementation systems are summarised on
pages 27 to 29.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
43
Accountability and Audit
Financial Reporting
Directors’ responsibilities for preparing the fi nancial
statements for the Company and the Group are detailed on
page 35. The external auditors’ report details the respective
responsibilities of Directors and auditors.
Going Concern
After making enquiries the Directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operation and existence for the
foreseeable future, and accordingly they continue to adopt a
Going Concern basis in preparing the fi nancial statements.
Internal Control
The Directors are required by the Combined Code to maintain
a sound system of internal control to safeguard shareholders’
investment and the Group’s assets.
The Board confi rms that there are ongoing procedures for
identifying, evaluating and managing signifi cant risks faced
by the Group. These, or their equivalent, have been in place
for the year covered in this Annual Report and fi nancial
statements and up to the date of its approval and are
themselves regularly reviewed by the Board and accord with
the Turnbull guidance which the Board has fully adopted.
The Board has also reviewed the effectiveness of the current
system of internal control specifi cally for the purpose of this
statement.
While acknowledging its responsibility for the system of
internal control, the Board is aware that such a system is
designed to manage rather than eliminate the risk of failure to
achieve business objectives, and can only provide reasonable
and not absolute assurance against material misstatement or
loss.
The risk appetite of the Group is set by the Board. The
strategy for managing risk is formulated by the Group’s
Executive Committee, a management committee chaired
by the Group Managing Director, and recommended to the
Board.
In judging the effectiveness of the Group’s controls, the
Board monitors the reports of the Audit Committee and
management. Without diminishing its own responsibilities the
Board has delegated certain acts to the Audit Committee.
These include detailed reviews of key risks inherent in the
business and of the systems for managing these risks. The
Chairman of the Audit Committee reports to the Board after
each meeting of the Committee.
The Group’s control systems include:
• a Code of Conduct that defi nes a set of agreed standards
and guidelines for corporate behaviour;
• an organisational structure with clearly defi ned lines of
responsibility and delegation of authority;
• appropriate terms of reference for Board committees with
responsibility for policy areas;
• a formal schedule of matters specifi cally referred to the
Board for its decision;
• a comprehensive system of fi nancial reporting to the
Board, based on an annual budget with monthly reports
against actual results, analysis of variances, review of key
performance indicators and regular re-forecasting;
• clearly defi ned guidelines for capital expenditure, including
detailed budgeting, appraisal and post-investment review;
• a Group fi nancial management manual that clearly sets out
the accounting policies and fi nancial control procedures to
be followed by business units;
• a treasury risk management policy approved by the Board
which ensures that foreign exchange and interest rate
exposures of the Group are managed within defi ned
parameters;
• a Group-wide risk assessment process which is maintained
by business unit management reporting to the Group
Executive and Board as required;
• a Group internal audit function operating globally which
monitors and supports the internal fi nancial control system
and reports to the Audit Committee and management.
Internal audit work is focused on the areas of greatest risk
to the Group determined on the basis of a risk management
approach to audit; and
• the Audit Committee, a formally constituted committee of
the Board comprising non-executive Directors only, meets
with internal and external auditors to satisfy itself that
control procedures are in place and are being followed.
Finally, the Directors, through the use of appropriate
procedures and systems, have ensured that measures are in
place to secure compliance with the Company’s obligation to
keep proper books of account. These books of account are
kept at the registered offi ce of the Company.
44
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Directors’ Statement of Corporate Governance (continued)
Principal Risks and Uncertainties and Financial Risk
Management
Under Irish Company Law (Statutory Instrument 116.2005 −
European Communities (International Financial Reporting
Standards and Miscellaneous Amendments) Regulations
2005), the Company is required to give a description of the
principal risks and uncertainties which it faces. The principal
risks are set out below:
1. Food Safety
The Board is committed to maintaining the highest
standards of food safety. To manage food safety risks,
our processing sites operate world class quality and food
safety systems which are regularly reviewed to ensure
they remain effective and follow best practice, including
compliance with all regulatory requirements.
2. Environment
Protection and preservation of the environment and
natural resources lies at the heart of our objective to
manage our business in an environmentally responsible
manner. The Group continues to be committed to
sustainable growth in harmony with the environment and
the communities in which it operates, which is achieved
by attention to such elements as:
•
the inclusion of environmentally friendly goals and
risk management as part of the overall business
strategy;
the maintenance of relationships with local
communities and authorities, regulatory agencies
and interest groups to create better understanding
and co-operation; and
the recycling and the re-using of raw materials and
the reducing of discharges to land, air and water.
•
•
3. Health and Safety
The Board are committed to protecting the health, safety
and welfare of all employees, visitors and the public in
general. Processes have been put in place to ensure
that workplace conditions, practices and procedures are
maintained to the highest possible level of safety and in
full compliance with relevant health, safety and welfare
legislation.
4. Energy
The effi cient consumption of energy is a key objective
for the Company. In order to minimise the impact on
energy costs of price volatility, the Company will, where
necessary, enter into fi xed price arrangements to cover
certain future energy requirements.
5. Loss of a Major Site
The Group operates from many key sites the loss or
signifi cant destruction of any one of which would present
signifi cant operational diffi culties. The Group’s operations
have business continuity and communication plans in
place to manage the impact of such an event. The Group
also has insurance programmes designed to mitigate the
fi nancial consequences.
6. Growth
The Group pursues a strategy of growth through
acquisitions and investment in existing businesses. There
is a risk to the business if the Group is unable to continue
to grow as outlined in its business plan due to an inability
to identify attractive targets, complete acquisitions and
integrate the operations of the acquired businesses. The
Group’s management team has signifi cant experience
in the areas of both pre-acquisition due diligence and
post acquisition integration. Where appropriate, external
resources are engaged to assist with acquisitions and
investments.
7. Legislation and Regulation
The Group’s operations in the processing, distribution,
packaging and labelling of food are governed by
extensive legislation, regulations, codes of practice and
guidance. The Group conforms to international and local
food safety, quality and environmental regulations and
is committed to sustainable growth in harmony with the
environment and the communities where it operates.
8. Competition
The Group operates in competitive markets. Signifi cant
product innovations, technical advances or the
intensifi cation of price competition could adversely
affect the Group. The Group invests in research and
development and ensures that the introduction of new
products and improved production processes positions
the Group well in its chosen markets. The Group also
continually works to streamline its cost base to ensure it
remains competitive.
9.
Attracting and Retaining High Quality Senior
Management and Staff
The on-going success of the Group is dependent on
attracting and retaining high quality senior management
and staff. The Group mitigates any risk associated with
loss of key personnel through robust succession planning,
strong recruitment processes, long term management
incentives and retention initiatives.
10. Supply Chain
The Group’s ability to fulfi l the demand for its products
is dependent on no signifi cant disruptions to its supply
chain. The Group mitigates this risk by maintaining a
broad supplier base and the Group is committed to
ensuring that suppliers continue to choose the Group as
the partner of choice.
A comprehensive analysis on the fi nancial risk management
objectives and policies of the Company and the Group,
including the policy for hedging each major type of forecasted
transaction for which hedge accounting is used and the
exposure of the Company and the Group to price risk, credit
risk, liquidity risk and cash fl ow risk, is contained in note 3 to
the fi nancial statements.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
45
Relations with Shareholders
Dialogue with Institutional Shareholders
The Company has dialogue with institutional shareholders
during the year and immediately following the announcement
of the half year and full year results. The Company presents
these results to investors and analysts. The Chairman
discusses governance and strategy with major shareholders.
Non-executive Directors are offered an opportunity to attend
meetings with major shareholders. The Senior Independent
Director has also attended meetings with major shareholders.
The Company responds to enquiries from all shareholders and
welcomes their attendance at the Annual General Meeting.
The Group’s website, www.glanbia.com, provides the full
text of the Annual and Interim Reports and presentations to
analysts and investors through the Investors Section. Stock
Exchange announcements are also made available in the
Investors Section of the website, after release to the Stock
Exchange.
Annual General Meeting
The Notice of the 2006 Annual General Meeting was
despatched to shareholders not less than 20 working days
before the meeting. Separate resolutions were proposed at
the meeting on each substantially separate issue, including
a resolution to receive and consider the 2005 fi nancial
statements and the reports of the Directors and auditors
thereon. The level of proxy votes for and against was
announced after each resolution had been passed on a show
of hands.
It is our policy for all Directors to attend the Annual General
Meeting. In normal circumstances, the Chairman of the
Audit, Nomination and Remuneration Committee attend the
Annual General Meeting and are available to answer relevant
questions.
Compliance
The Board believes that, except in relation to the composition
of the Board and Remuneration Committee, as noted above,
the Company has complied throughout the fi nancial period
with the principles and provisions of the Combined Code.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual report
and the fi nancial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare fi nancial
statements for each fi nancial year. Under that law the
Directors have prepared the group and parent company
fi nancial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union. The fi nancial statements are required by law to give
a true and fair view of the state of affairs of the Company
and the Group and of the profi t or loss of the Group for that
period.
In preparing these fi nancial statements the Directors are
required to:
• Select suitable accounting policies and then apply them
consistently;
• Make judgements and estimates that are reasonable and
prudent;
• State that the fi nancial statements comply with IFRSs as
adopted by the European Union;
• Prepare the fi nancial statements on the going concern
basis, unless it is inappropriate to presume that the Group
will continue in business, in which case there should be
supporting assumptions or qualifi cations as necessary.
The Directors confi rm that they have complied with the above
requirements in preparing the fi nancial statements.
The Directors are responsible for keeping proper books of
account that disclose with reasonable accuracy at any time
the fi nancial position of the Company and the Group and to
enable them to ensure that the fi nancial statements comply
with the Companies Acts 1963 to 2006 and, as regards the
group fi nancial statements, article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and
integrity of the web site. Legislation in the Republic of Ireland
concerning the preparation and dissemination of fi nancial
statements may differ from legislation in other jurisdictions.
On behalf of the Board
MJ Walsh
Chairman
JJ Moloney
Group Managing Director
Glanbia House
Kilkenny
6 March 2007
46
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Financial Statements contents
Independent auditors’ report: to the members of Glanbia plc
Consolidated income statement
Consolidated statement of recognised income and expense
Consolidated balance sheet
Consolidated cash fl ow statement
Company balance sheet
Company statement of recognised income and expense and cash fl ow statement
Notes to the fi nancial statements
Inventories
Segment information
Exceptional items
Employee benefi t expense
Summary of signifi cant accounting polices
Financial risk management
Intangible assets
Investments in associates
Investments in joint ventures
Investments
1 General information
2
3
4 Critical accounting estimates and assumptions
5
6 Operating profi t
7
8
9 Directors’ remuneration
10 Finance income and costs
11
Income taxes
12 Earnings per share
13 Dividends
14 Property, plant and equipment – Group
15
16
17
18
19 Trade and other receivables
20
21 Cash and cash equivalents
22 Reconciliation of changes in equity
23 Share capital
24 Other reserves
25 Retained earnings
26 Own shares (Company and Group)
27 Capital reserves
28 Merger reserve – Group
29 Minority interests
30 Borrowings
31 Deferred income taxes
32 Retirement benefi t obligations
33 Provisions for other liabilities and charges
34 Capital grants
35 Trade and other payables
36 Derivative fi nancial instruments
37 Contingent liabilities
38 Commitments
39 Cash generated from operations
40 Business combinations
41 Related party transactions
42 Directors’ and Secretary’s interests
43 Principal subsidiary and associates undertakings
47
49
50
51
52
53
54
55
55
55
64
65
66
70
71
71
72
73
74
75
75
76
78
79
80
81
82
83
83
84
85
87
88
88
89
89
89
90
92
93
96
96
97
97
98
98
99
99
101
103
106
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
47
Independent auditors’ report: to the members of Glanbia plc
We have audited the Group and Parent Company fi nancial statements (the “fi nancial statements”) of Glanbia plc for the year ended
30 December 2006, which comprise the consolidated income statement, the consolidated and Parent Company balance sheets, the
consolidated and Parent Company cash fl ow statements, the consolidated and Parent Company statement of recognised income and
expense and the related notes. These fi nancial statements have been prepared under the accounting policies set out therein.
Respective responsibilities of Directors and auditors
The Directors’ responsibilities for preparing the Annual Report and the fi nancial statements, in accordance with applicable Irish
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, are set out in the Statement of
Directors’ Responsibilities.
Our responsibility is to audit the fi nancial statements in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the
Company’s members as a body in accordance with Section 193 of the Companies Act, 1990 and for no other purpose. We do
not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the Group fi nancial statements give a true and fair view, in accordance with IFRSs
as adopted by the European Union. We report to you our opinion as to whether the Parent Company fi nancial statements give
a true and fair view, in accordance with IFRSs as adopted by the European Union, as applied in accordance with the provisions
of the Companies Acts, 1963 to 2006. We also report to you whether the fi nancial statements have been properly prepared
in accordance with Irish statute comprising the Companies Acts, 1963 to 2006 and Article 4 of the IAS Regulation. We state
whether we have obtained all the information and explanations we consider necessary for the purposes of our audit, and
whether the fi nancial statements are in agreement with the books of account. We also report to you our opinion as to:
• whether the Company has kept proper books of account;
•
•
whether the Directors’ Report is consistent with the fi nancial statements; and
whether at the balance sheet date there existed a fi nancial situation which may require the Company to convene an
extraordinary general meeting of the Company; such a fi nancial situation may exist if the net assets of the Company, as
stated in the Company balance sheet, are not more than half of its called-up share capital.
We also report to you if, in our opinion, any information specifi ed by law or the Listing Rules of the Irish Stock Exchange
regarding Directors’ remuneration and Directors’ transactions is not disclosed and, where practicable, include such information
in our report.
We review whether the Corporate Governance Statement which is included in the Directors’ Report, refl ects the Company’s
compliance with the nine provisions of the 2003 FRC Combined Code specifi ed for our review by the Listing Rules of the Irish
Stock Exchange, and we report if it does not. We are not required to consider whether the Board’s statements on internal
control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or
its risk and control procedures.
We read the other information contained in the Annual Report and consider whether it is consistent with the audited fi nancial
statements. The other information comprises only the Directors’ Report, the Chairman’s Statement, the Group Managing
Director’s Report, the Operating Review and the Financial Review. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the fi nancial statements. Our responsibilities do not
extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the
fi nancial statements. It also includes an assessment of the signifi cant estimates and judgments made by the Directors in the
preparation of the fi nancial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in
order to provide us with suffi cient evidence to give reasonable assurance that the fi nancial statements are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the fi nancial statements.
48
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Independent auditors’ report: to the members of Glanbia plc
(continued)
Opinion
In our opinion:
•
•
•
the Group fi nancial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union,
of the state of the Group’s affairs as at 30 December 2006 and of its profi t and of its cash fl ows for the year then ended;
the Parent Company fi nancial statements give a true and fair view, in accordance with IFRSs as adopted by the European
Union, as applied in accordance with the provisions of the Companies Acts, 1963 to 2006, of the state of the Parent
Company’s affairs as at 30 December 2006 and cash fl ows for the year then ended;
the fi nancial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2006 and Article 4 of
the IAS Regulation.
We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our
opinion proper books of account have been kept by the Company. The Company balance sheet is in agreement with the books
of account.
In our opinion the information given in the Directors’ Report is consistent with the fi nancial statements.
The net assets of the Company, as stated in the Company balance sheet are more than half of the amount of its called-up share
capital and, in our opinion, on that basis there did not exist at 30 December 2006 a fi nancial situation which under Section 40 (1)
of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the Company.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Waterford
6 March 2007
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
49
Consolidated income statement
for the year ended 30 December 2006
Pre-
Pre-
exceptional
Exceptional
Total
exceptional
Exceptional
2006
2006
2006
2005
2005
Total
2005
Notes
€’000
€’000
€’000
(as restated)
€’000
(as restated)
€’000
(as restated)
€’000
5 1,853,427
(1,596,547)
- 1,853,427
- (1,596,547)
1,830,012
(1,589,686)
256,880
-
256,880
240,326
-
-
-
1,830,012
(1,589,686)
240,326
7
6
10
10
(105,724)
(65,589)
-
(12,455)
(105,724)
(78,044)
(94,743)
(64,651)
-
(5,041)
(94,743)
(69,692)
85,567
(12,455)
73,112
80,932
(5,041)
75,891
4,883
(18,918)
2,842
-
-
-
4,883
(18,918)
4,209
(17,358)
-
(5,304)
4,209
(22,662)
2,842
932
-
932
74,374
(7,970)
(12,455)
12,321
61,919
4,351
68,715
(7,592)
(10,345)
6,935
58,370
(657)
11
Revenue
Cost of sales
Gross profi t
Distribution expenses
Administration expenses
Operating profi t
Finance income
Finance costs
Share of results of joint
ventures and associates
Profi t before taxation
Income taxes
Profi t for the year
66,404
(134)
66,270
61,123
(3,410)
57,713
Attributable to:
Equity holders of the Parent
Minority interests
Basic earnings per share (cent)
Diluted earnings per share (cent)
12
12
65,934
336
66,270
22.51
22.47
57,396
317
57,713
19.69
19.62
On behalf of the Board
MJ Walsh
Directors
JJ Moloney GJ Meagher
50
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Consolidated statement of recognised
income and expense for the year ended 30 December 2006
Actuarial gain/(loss) - defi ned benefi t schemes
Deferred tax on actuarial gain/(loss)
Share of actuarial gain - joint venture
Currency translation differences
Fair value adjustments
- Group
- Joint venture
Net income/(expense) recognised directly in equity
Profi t for the year
Total recognised income for the year
Attributable to:
Equity holders of the Parent
Minority interest
Effects of changes in accounting policy (adoption of IAS 32 and IAS 39):
Equity holders of the Parent
Minority interest
Notes
2006
2005
32
31
22
22
22
22
€’000
(as restated)
€’000
36,852
(3,923)
230
(9,401)
2,367
367
(42,303)
4,054
-
889
(873)
-
26,492
66,270
(38,233)
57,713
92,762
19,480
92,426
336
19,163
317
92,762
19,480
-
-
-
(2,592)
-
(2,592)
On behalf of the Board
MJ Walsh
Directors
JJ Moloney GJ Meagher
Consolidated balance sheet
as at 30 December 2006
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
51
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Investments in joint ventures
Available for sale investments
Trade and other receivables
Derivative fi nancial instruments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative fi nancial instruments
Cash and cash equivalents
Total assets
EQUITY
Issued capital and reserves attributable to equity holders of the Parent
Share capital
Other reserves
Retained earnings
Minority interests
LIABILITIES
Non-current liabilities
Borrowings
Deferred tax liabilities
Trade and other payables
Retirement benefi t obligations
Provisions for other liabilities and charges
Derivative fi nancial instruments
Capital grants
Current liabilities
Borrowings
Provisions for other liabilities and charges
Trade and other payables
Current tax liabilities
Derivative fi nancial instruments
Total liabilities
Total equity and liabilities
On behalf of the Board
MJ Walsh
Directors
JJ Moloney GJ Meagher
Notes
2006
2005
€’000
(as restated)
€’000
14
15
16
17
18
19
36
31
20
19
36
21
335,152
138,724
10,933
58,668
12,527
-
2,095
23,923
340,503
57,963
11,090
59,832
29,511
56,874
1,825
15,869
582,022
573,467
145,158
169,540
6,776
259,311
144,250
143,610
1,125
104,405
580,785
393,390
1,162,807
966,857
23
24
25
29
22
30
31
35
32
33
36
34
30
33
35
36
98,304
113,696
(18,116)
193,884
6,635
97,964
120,192
(100,737)
117,419
6,299
200,519
123,718
444,570
38,611
11,373
124,888
6,032
3,406
10,660
327,424
34,471
-
165,016
6,072
-
14,855
639,540
547,838
39,235
7,110
270,773
1,942
3,688
1,133
8,433
278,583
4,605
2,547
322,748
295,301
962,288
843,139
1,162,807
966,857
52
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Consolidated cash fl ow statement
for the year ended 30 December 2006
Cash fl ows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax paid
Net cash from operating activities
Cash fl ows from investing activities
Acquisition of subsidiary, net of cash acquired
Purchase of property, plant and equipment
Purchase of available for sale investments
Disposal of subsidiary, net of cash disposed
Disposal of available for sale investments
Repayment of loan note
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash fl ows from fi nancing activities
Proceeds from issue of ordinary shares
Sharesave Scheme
Increase/(decrease) in borrowings
Finance lease principal payments
Dividends paid to Company’s shareholders
Repayment of minority interest
Capital grants received
Net cash from/(used in) fi nancing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Notes
39
2006
€’000
2005
€’000
58,486
1,000
(19,967)
(6,274)
163,835
670
(23,177)
(3,777)
33,245
137,551
(69,892)
(38,085)
(3,406)
(323)
22,185
52,822
8,665
(19,366)
(46,979)
(5,214)
(147)
14,394
-
4,418
(28,034)
(52,894)
23
13
190
122
169,851
(1,077)
(16,472)
-
123
731
2,191
(20,242)
(1,449)
(15,612)
(7)
772
152,737
(33,616)
157,948
51,041
104,405
(3,042)
51,625
1,739
Cash and cash equivalents at the end of the year
21
259,311
104,405
Reconciliation of net cash fl ow to movement in net debt
Net increase in cash and cash equivalents
Cash (outfl ow)/infl ow from debt fi nancing
Debt acquired with subsidiaries
Fair value of interest rate swaps qualifying as fair value hedges
Exchange translation adjustment on net debt
Movement in net debt in the year
Net debt at the beginning of the year
Net debt at the end of the year
On behalf of the Board
MJ Walsh
Directors
JJ Moloney GJ Meagher
2006
€’000
2005
€’000
157,948
(168,774)
51,041
21,691
(10,826)
-
3,978
6,506
72,732
(1,786)
-
(24,717)
(342)
(224,152)
46,229
(270,381)
(224,494)
(224,152)
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
53
Company balance sheet
as at 30 December 2006
ASSETS
Non-current assets
Investments in associates
Investments in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY
Issued capital and reserves attributable to equity holders of the Company
Share capital
Retained earnings
Capital reserve
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Notes
2006
€’000
2005
€’000
16
18
1,395
510,412
1,395
510,469
511,807
511,864
19
21
1,881
4,376
6,257
934
16,281
17,215
518,064
529,079
23
25
27
453,572
47,924
4,674
453,232
47,437
4,503
506,170
505,172
30
-
3,397
35
11,894
20,510
11,894
23,907
518,064
529,079
On behalf of the Board
MJ Walsh
Directors
JJ Moloney GJ Meagher
54
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Company statement of recognised income and
expense and cash fl ow statement for the year ended 30 December 2006
Company statement of recognised income and expense
Profi t for the year
Total recognised income for the year
Company cash fl ow statement
Cash fl ows from operating activities
Cash generated from operations
Interest received
Net cash from operating activities
Cash fl ows from investing activities
Disposal of available for sale investments
Dividends received
Net cash used in investing activities
Cash fl ows from fi nancing activities
Proceeds from issue of ordinary shares
Sharesave Scheme - receipt from Trustees
Decrease in borrowings
Dividends paid to Company’s shareholders
Net cash used in fi nancing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
2006
€’000
2005
€’000
16,959
23,964
16,959
23,964
Notes
2006
€’000
39
(4,981)
2,125
2005
€’000
8,281
2,053
(2,856)
10,334
-
10,508
916
16,214
10,508
17,130
23
13
190
122
(3,397)
(16,472)
731
2,191
-
(15,612)
(19,557)
(12,690)
(11,905)
14,774
16,281
1,507
Cash and cash equivalents at the end of the year
21
4,376
16,281
As permitted by Section 148(8) of the Companies Act, 1963 and Section 7(1A) of the Companies Amendment Act, 1986 the
Parent Company is availing of the exemption from presenting its separate income statement in these fi nancial statements
and from fi ling it with the Registrar of Companies. The profi t for the year dealt with in the fi nancial statements of Glanbia plc,
amounts to €16,959,000 (2005: €23,964,000).
On behalf of the Board
MJ Walsh
Directors
JJ Moloney GJ Meagher
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
55
Notes to the fi nancial statements
for the year ended 30 December 2006
1 General information
Glanbia plc (“the Company”) and its subsidiaries (together “the Group”) is an international dairy, consumer foods and
nutritional products group with operations in Ireland, Europe, the USA and Nigeria. Business units are structured around
developing the Group’s strategic focus on the consumer foods, food ingredients and nutritionals markets.
The Company is a public limited company incorporated and domiciled in Ireland. The address of its registered offi ce is
Glanbia House, Kilkenny, Ireland.
The Company shares are quoted on the Dublin and London Stock Exchanges.
These consolidated fi nancial statements have been approved for issue by the Board of Directors on 6 March 2007.
2 Summary of signifi cant accounting polices
The principal accounting policies adopted in the preparation of these fi nancial statements are set out below.
These policies have been consistently applied to all years presented, unless otherwise stated.
(a) Basis of preparation
These consolidated fi nancial statements have been prepared in accordance with EU endorsed International Financial
Reporting Standards (“IFRS”), IFRIC interpretations and the Companies Acts, 1963 to 2006 applicable to companies
reporting under IFRS. The consolidated fi nancial statements have been prepared under the historical cost convention as
modifi ed by use of fair values for available for sale fi nancial assets and derivative fi nancial instruments. A summary of the
more important Group accounting policies is set out below.
The preparation of the fi nancial statements in conformity with IFRS requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the fi nancial statements and the reported amounts
of revenues and expenses during the reporting period. Although these estimates are based on management’s best
knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.
These fi nancial statements are prepared for a 52 week period ending on 30 December 2006, comparatives are for the 52
week period ended 31 December 2005. The balance sheets for 2006 and 2005 have been drawn up as at 30 December
2006 and 31 December 2005 respectively.
(b) Consolidation
The Group fi nancial statements incorporate:
(i)
The fi nancial statements of Glanbia plc (the Company) and enterprises controlled by the Company (its subsidiaries).
Control is achieved where the Company has the power to govern the fi nancial and operating policies of an entity so as
to obtain benefi ts from its activities.
Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated
from the date that control ceases. The purchase method of accounting is used to account for the acquisition of
subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities
incurred or assumed at the date of acquisition plus costs directly attributable to the acquisition. The excess of the cost of
acquisition less the fair value of the net assets of the subsidiary acquired is recorded as goodwill. If the cost of acquisition
is less than the fair value of the Group’s share of the identifi able net assets acquired, the difference is recognised directly
in the income statement. Inter-company transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Where necessary, the accounting policies for subsidiaries have been changed to ensure
consistency with the policies adopted by the Group.
(ii)
The Group’s share of the results and net assets of associated companies and joint ventures are included based on the
equity method of accounting. An associate is an enterprise over which the Group has signifi cant infl uence, but not
control, through participation in the fi nancial and operating policy decisions of the investee. A joint venture is an entity
subject to joint control by the Group and other parties. Under the equity method of accounting, the Group’s share
of the post-acquisition profi ts and losses of associates and joint ventures is recognised in the income statement and
its share of post acquisition movements in reserves is recognised directly in equity. The cumulative post acquisition
movements are adjusted against the cost of the investment. Unrealised gains on transactions between the Group
and its associates and joint ventures are eliminated to the extent of the Group’s interest in the associate or joint
venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. When the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the
associate or joint venture, the Group does not recognise further losses, unless the Group has incurred obligations or
made payments on behalf of the associate or joint venture.
56
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
(c) Segment reporting
The Group reports segment information by class of business and by geographical area. A business segment is a group
of assets and operations engaged in providing products or services that are subject to risks and returns that are different
to those of other business segments. The Group’s primary reporting segment, for which more detailed disclosures are
required, is by class of business.
A geographic segment is a distinguishable component of the Group that is engaged in providing products or services
within a particular economic environment.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the fi nancial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (the ‘functional currency’). The consolidated fi nancial
statements are presented in euro, which is the Company’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
date of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate
of exchange ruling at the balance sheet date. Currency translation differences on monetary assets and liabilities are
taken to the income statement, except when deferred in equity as qualifying cash fl ow hedges.
Translation differences on non-monetary fi nancial assets and liabilities held at fair value through profi t or loss are
recognised in the income statement as part of the fair value gain or loss. Translation differences on non-monetary fi nancial
assets such as equities classifi ed as available for sale are included in the fair value reserve in equity.
(iii) Group companies
The income statement and balance sheet of Group companies that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
• assets and liabilities at each balance sheet date are translated at the closing rate at the date of the balance sheet;
• income and expenses in the income statement are translated at average exchange rates for the year.
Resulting exchange differences are taken to a separate currency reserve within equity. When a foreign entity is sold,
such exchange differences are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as local currency assets
and liabilities of the foreign entity and are translated at the balance sheet rate. In accordance with IFRS 1, the
cumulative translation differences on foreign subsidiaries was set to zero on IFRS transition date (4 January 2004).
(e) Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less subsequent depreciation less any impairment loss.
Historic cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers
from equity of any gains/losses on qualifying cash fl ow hedges of foreign currency purchases of properties, plant and
equipment.
Certain items of property, plant and equipment that had been revalued prior to the date of transition to IFRS (4 January
2004) are measured on the basis of deemed cost, being the revalued amount depreciated to date of transition. Items of
property, plant and equipment that were fair valued at date of transition are also measured at deemed cost, being the fair
value at date of transition.
Depreciation is calculated on the straight-line method to write-off the cost of each asset over their estimated useful life at
the following rates:
Land
Buildings
Plant and equipment
Motor vehicles
%
Nil
2.5 – 5
5 – 33
20 – 25
The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
57
Assets held under fi nance leases are depreciated over their expected useful lives on the same basis as owned assets or,
where shorter, the term of the relevant lease.
Property, plant and equipment is tested for impairment when indicators arise. Where the carrying amount of an asset is
greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in
operating profi t.
Repairs and maintenance are charged to the income statement during the fi nancial period in which they are incurred.
The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic
benefi ts in excess of the originally assessed standard of performance of the existing asset will fl ow to the Group. Major
renovations are depreciated over the remaining useful life of the related asset.
(f)
Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifi able assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in intangible assets. Goodwill associated with the acquisition of associates is included within
the investment in associates.
Goodwill is carried at cost less accumulated impairment losses, if applicable. Goodwill is tested for impairment on an
annual basis. Goodwill impairments are not reversed.
In accordance with IFRS 1, goodwill written off to reserves prior to date of transition to IFRS remains written off. In respect
of goodwill capitalised and amortised at transition date, its carrying value at date of transition to IFRS remains unchanged.
The fair values of intangible assets acquired as part of business combinations are based on the discounted cash fl ows
expected to be derived from the eventual use and sale of those assets, unless impaired. Goodwill is allocated to cash
generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups
of cash generating units that are expected to benefi t from the business combination in which the goodwill arose.
(ii) Development costs
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to
the design and testing of new or improved products) are recognised as intangible assets when it is probable that the
project will be a success, considering its commercial and technological feasibility, and costs can be measured reliably.
Development costs are amortised using the straight line method over their estimated useful lives, which is normally 5
to 8 years.
(iii) Intellectual property
Expenditure to acquire intellectual property is capitalised and amortised using the straight-line method over its useful
life, which is normally between 15 and 20 years.
(iv) Computer software
Costs incurred on the acquisition of computer software are capitalised, as are costs directly associated with developing
computer software programmes, if they meet the recognition criteria of IAS 38. Computer software costs recognised as
assets are written off over their estimated useful lives, which is normally between 5 and 10 years.
(g) Investments
The Group classifi es all its investments as available for sale fi nancial assets. They are initially recognised at fair value and are
subsequently adjusted to fair value at each balance sheet date. Unrealised gains and losses arising from changes in the fair
value of investments classifi ed as available for sale are recognised in equity. When such investments are sold or impaired,
the accumulated fair value adjustments are included in the income statement as gains or losses from investments.
The fair values of quoted investments are based on current bid prices. If the market for a fi nancial asset is not active the
Group establishes fair value using valuation techniques. Where the range of reasonable fair values is signifi cant and the
probability of various estimates cannot be reasonably assessed, the Group measures the investment at cost.
Investments in subsidiaries held by the Company are carried at cost.
58
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
(h) Leases
Leases of assets where the Group has substantially all the risks and rewards of ownership are classifi ed as fi nance leases.
A determination is also made as to whether the substance of an arrangement could equate to a fi nance lease, considering
whether fulfi lment of the arrangement is dependant upon the use of a specifi c asset and the arrangement contains the
right to use an asset. If the specifi ed criteria are met, the arrangement is classifi ed as a fi nance lease. Finance leases
are capitalised at the inception of the lease at the lower of the fair value of the leased asset or the present value of the
minimum lease payments. Each lease payment is allocated between the liability and fi nance charges so as to achieve a
constant rate on the fi nance balance outstanding. The corresponding rental obligation, net of fi nance charges, is included
in borrowings, split between current and non-current as appropriate. The interest element of the fi nance cost is charged
to the income statement over the lease period. The property, plant and equipment acquired under fi nance leases is
depreciated over the shorter of the useful life of the asset or the lease term.
Leases where a signifi cant portion of the risks and rewards of ownership are retained by the lessor are classifi ed as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the
income statement on a straight-line basis over the period of the lease.
(i)
Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is determined by the fi rst-in, fi rst-out (“FIFO”)
method. The cost of fi nished goods and work in progress comprises raw materials, direct labour, other direct costs and
related production overheads (based on normal capacity). Net realisable value is the estimated selling price in the ordinary
course of business, less the cost of selling expenses.
(j) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method less provision for impairment. A provision for impairment of trade receivables is established when there
is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial
reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.
The amount of the provision is the difference between the asset’s carrying value and the estimated future cash fl ows.
The carrying amount of the asset is reduced through the use of a provision account and the amount of the loss is
recognised in the income statement within distribution costs. When a trade receivable is uncollectible, it is written off
against the provision account for trade receivables. Subsequent recoveries of amounts previously written off are credited
against distribution costs in the income statement.
Loan receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. These are classifi ed as non-current assets, except for those maturing within
12 months of the balance sheet date.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of 3 months or less and bank overdrafts. In the balance sheet, bank overdrafts,
if applicable, are included in borrowings in current liabilities.
(l)
Income taxes
Current tax represents the expected tax payable or recoverable on the taxable profi t for the period, taking into account
adjustments relating to prior years.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the fi nancial statements. Tax rates enacted or substantively enacted by
the balance sheet date are used to determine deferred income tax.
Deferred tax assets are recognised to the extent that it is probable that future taxable profi t will be available against which
the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint
ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that
the temporary difference will not reverse in the foreseeable future. Deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profi t or loss.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
59
(m) Employee benefi ts
(i) Pension obligations
Group companies operate various pension schemes. The schemes are generally funded through payments to
insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both
defi ned benefi t and defi ned contribution plans.
The liability recognised in the balance sheet in respect of defi ned benefi t pension plans is the present value of the
defi ned benefi t obligation at the balance sheet date less the fair value of the plan assets, together with adjustments for
unrecognised past-service costs. The defi ned benefi t obligation is calculated annually by independent actuaries using
the projected unit credit method. The present value of the defi ned benefi t obligation is determined by discounting
the estimated future cash outfl ows using interest rates of high-quality corporate bonds that are denominated in the
currency in which the benefi ts will be paid, and that have terms to maturity approximating to the terms of the related
pension liability. The fair value of plan assets are measured at their bid value.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or
credited to equity in the Statement of Recognised Income and Expense in the period in which they arise.
Past-service costs are recognised immediately in the income statement, unless the changes to the pension
plan are conditional on the employees remaining in service for a specifi ed period of time (the vesting period).
In this case, the past-service costs are amortised on a straight-line basis over the vesting period.
Payments to defi ned contribution schemes are charged as an expense when they fall due.
(ii) Share based payments
The Group operates a number of equity settled share based compensation plans which include executive share option
schemes, employee sharesave schemes and share awards.
The charge to the income statement in respect of share-based payments is based on the fair value of the equity
instruments granted and is spread over the vesting period of the instrument. The fair value of the instruments is
calculated using the Trinomial model. In accordance with the transition arrangements set out in IFRS 2 (Share Based
Payments), this standard has been applied in respect of share options granted after 7 November 2002 which had not
vested by transition date (4 January 2004).
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest.
At each balance sheet date, the Group revises its estimates of the number of options that are expected to vest. It
recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding
adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share
capital (nominal value) and share premium when the options are exercised.
(n) Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will
be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred
and recognised in the income statement over the period necessary to match them with the costs they are intended to
compensate. Government grants relating to the purchase of property, plant and equipment are included in non-current
liabilities and are credited to the income statement on a straight-line basis over the expected lives of the related assets.
(o) Revenue recognition
Revenue comprises the fair value of the sale of goods and services to external customers net of value added tax, rebates
and discounts. Revenue from the sale of goods is recognised when signifi cant risks and rewards of ownership of the goods
are transferred to the buyer, which generally arises on delivery, or in accordance with specifi c terms and conditions agreed
with customers. Revenue from the rendering of services is recognised in the period in which the services are rendered.
Interest income is recognised using the effective interest method. Dividends are recognised when the right to receive
payment is established. Revenue from the sale of property is recognised when there is an unconditional and irrevocable
contract for sale.
60
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
(p) Impairment of assets
(i) Financial assets
The Group assesses at each balance sheet date whether there is objective evidence that a fi nancial asset or a group
of fi nancial assets is impaired. In the case of equity securities classifi ed as available for sale, a signifi cant or prolonged
decline in the fair value of the security below its cost is considered an indicator that the securities are impaired. If any
such evidence exists for available for sale fi nancial assets, the cumulative loss measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that fi nancial asset previously recognised in the
profi t or loss is removed from equity and recognised in the income statement. Impairment losses recognised in the
income statement on equity instruments are not reversed through the income statement. Impairment testing of trade
receivables is described in (j) above.
(ii) Non-fi nancial assets
Assets which have a fi nite useful life are subject to amortisation and reviewed for impairment when events or changes
in circumstance indicate that the carrying value may not be recoverable. Goodwill is reviewed at least annually
for impairment. An impairment loss is recognised to the extent that the carrying value of the assets exceeds its
recoverable amount. The recoverable amount is the higher of the assets fair value less costs to sell and its value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifi able cash fl ows (cash generating units).
(q) Share capital
Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction from the proceeds.
Own shares
The cost of own shares, held by an Employee Share Trust in connection with the Company’s Sharesave Scheme,
is deducted from equity.
(r) Dividends
Dividends to the Company’s shareholders are recognised as a liability of the Company when approved by the Company’s
shareholders.
(s) Derivative fi nancial instruments
The activities of the Group expose it primarily to the fi nancial risks of changes in foreign currency exchange rates and
interest rates. The Group uses derivative fi nancial instruments such as foreign exchange contracts and options, interest rate
swap contracts and forward rate agreements to hedge these exposures.
The Group accounts for fi nancial instruments under IAS 32 (Financial Instruments: Disclosure and Presentation) and IAS
39 (Financial Instruments: Recognition and Measurement). Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured at their fair value at balance sheet date.
The fair value of forward foreign currency contracts is estimated by discounting the difference between the contractual
forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on
government bonds).
The fair value of interest rate swaps is based on discounting estimated future cash fl ows based on the terms and maturity of
each contract and using market interest rates for a similar instrument at the measurement date.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:
(1) hedges of the fair value of recognised assets or liabilities or a fi rm commitment (fair value hedge); (2) hedges of a particular
risk associated with a recognised asset or liability or a highly probable forecast transaction (cash fl ow hedge).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in fair values or cash fl ows of hedged items.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income
statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the
hedged risk.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
61
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged
item for which the effective interest method is used is amortised to profi t or loss over the period to maturity.
(ii) Cash fl ow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash fl ow hedges
are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income
statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects
profi t or loss (for instance when the forecast sale that is hedged takes place). The recycled gain or loss relating to
the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement
within ‘fi nance costs’. The recycled gain or loss relating to the effective portion of forward foreign exchange contracts
hedging export sales is recognised in the income statement within revenue. However, when the forecast transaction
that is hedged results in the recognition of a non-fi nancial asset (for example, inventory) or a non-fi nancial liability, the
gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of
the cost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction
is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
(iii) Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to cash fl ow hedges. Any gain or loss on
the hedging instrument relating to the effective portion of the hedge is recognised in equity; the gain or loss relating
to the ineffective portion is recognised immediately in the income statement. Gains and losses accumulated in equity
are transferred to the income statement when the foreign operation is partially disposed of or closed.
(iv) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instruments that do not qualify for hedge accounting are recognised immediately in the income statement.
(v) Financial guarantee contracts
Financial guarantee contracts are issued to banking institutions by the entity Glanbia plc on behalf of certain of
its subsidiaries. These subsidiaries engage in ongoing fi nancing arrangements with these banking institutions.
Under the terms of amended IAS 39 (Financial Instruments: Recognition and Measurement) fi nancial guarantee
contracts are required to be recognised at fair value at inception and subsequently measured as a provision under
IAS 37 (Provisions, Contingent Liabilities and Contingent Assets) on the Glanbia plc company balance sheet.
(t) Earnings per share
Earnings per share represents the profi t in cent attributable to equity holders of the Company, divided by the weighted
average number of equity shares in issue in respect of the period.
Adjusted earnings per share is calculated by excluding exceptional items. Diluted earnings per share is calculated by
adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential
ordinary shares.
(u) Borrowing costs
Borrowing costs incurred for assets under construction are capitalised during the period of time that is required to
complete and prepare the asset for its intended use. Other borrowing costs are expensed.
(v) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in
the income statement over the period of the borrowings using the effective interest method.
Preference shares, which are mandatorily redeemable on a specifi c date, are classifi ed as liabilities. The dividends on these
preference shares are recognised in the income statement as interest expense.
Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date.
62
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
(w) Provisions
Provisions are recognised when the Group has a constructive or legal obligation as a result of past events; it is more likely
than not that an outfl ow of resources will be required to settle the obligation; and the amount has been reliably estimated.
(x) Termination benefi ts
Termination benefi ts are payable when employment is terminated by the Group before the normal retirement date, or
whenever an employee accepts voluntary redundancy in exchange for these benefi ts. The Group recognises termination
benefi ts when it is demonstrably committed to either; terminating the employment of current employees according to
a detailed formal plan without possibility of withdrawal; or providing termination benefi ts as a result of an offer made to
encourage voluntary redundancy.
(y) Exceptional items
The Group has adopted an income statement format, which seeks to highlight signifi cant items within the Group results for
the year. Such items may include restructuring, impairment of assets, profi t or loss on disposal or termination of operations,
litigation settlements and profi t or loss on disposal of investments. Judgement is used by the Group in assessing the particular
items, which by virtue of their scale and nature, should be disclosed in the income statement and notes as exceptional items.
(z) Business combinations
The purchase method of accounting is employed in accounting for the acquisition of subsidiaries by the Group.
The cost of a business combination is measured as the aggregate of the fair values at the date of exchange of assets
given, liabilities incurred or assumed and equity instruments issued in exchange for control together with any directly
attributable costs. To the extent that settlement of all or any part of a business combination is deferred, the fair value of the
deferred component is determined through discounting the amounts payable to their present value at the date of exchange.
The discount component is unwound as an interest charge in the income statement over the life of the obligation.
Where a business combination agreement provides for an adjustment to the cost of the combination contingent on future
events, the amount of the adjustment is included in the cost at the acquisition date if the adjustment can be reliably
measured. Contingent consideration is included in the acquisition balance sheet on a discounted basis.
The assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition.
When the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values
allocated to the identifi able assets, liabilities and contingent liabilities are made within 12 months of the acquisition date.
Intangible assets acquired as part of a business combination are capitalised separately from goodwill if the intangible asset
meets the defi nition of an asset and the fair value can be reliably measured on initial recognition.
In accordance with IFRS 1, business combinations that took place before the transition date (4 January 2004) have not been
restated. All goodwill written off to reserves or amortised prior to the transition date remains written off.
(aa) New accounting standards and IFRIC interpretations
Certain new accounting standards and IFRIC interpretations are mandatory for accounting periods beginning on or after
31 December 2006. The Group’s assessment of the impact of these new standards and interpretations is set out below;
(i)
IFRS 7 – Financial Instruments: Disclosures, and a complementary amendment to IAS 1, Presentation of Financial
Statements - Capital Disclosures
The Group assessed the impact of IFRS 7 and the amendment to IAS 1 and concluded that the main additional
disclosures will be the sensitivity analysis to market risk and the capital disclosures required by the amendment to IAS 1.
The Group will apply IFRS 7 and the amendment to IAS 1 for annual periods beginning on or after 31 December 2006.
Amendments to existing standards and interpretation effective in 2006 and adopted by the Group:
The following amendments and interpretations of existing standards have been adopted by the Group in the current
period and have resulted in a change in accounting policy for the Group:
IAS 21 (Amendment) – Net Investment in a Foreign Operation,
-
IAS 39 and IFRS 4 (Amendment) – Financial Guarantee Contracts, and
-
-
IFRIC 4 – Determining whether an Arrangement contains a Lease.
These changes in accounting policies are outlined in more detail at note (bb).
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
63
Standards, amendments and interpretations effective in 2006 but not relevant to the Group’s operations:
The following standards, amendments and interpretations are mandatory for the Group for accounting periods beginning
on or after 1 January 2006 but are not relevant to the Group’s operations:
-
-
-
-
IAS 39 (Amendment) – Cash Flow Hedge Accounting of Forecast Intragroup Transactions;
IAS 39 (Amendment) – the Fair Value Option;
IFRS 6 – Exploration for and Evaluation of Mineral Resources;
IFRS 1 (Amendment) – First-time Adoption of International Financial Reporting Standards and IFRS 6 (Amendment),
Exploration for and Evaluation of Mineral Resources;
IFRIC 6 – Liabilities arising from Participating in a Specifi c Market - Waste Electrical and Electronic Equipment;
IFRIC 5 – Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds.
-
-
Standards and interpretations to existing standards that are not yet effective and have not been early adopted by the Group
The following standards, amendments to and interpretations to existing standards have been published and are mandatory for
future accounting periods and have not been early adopted:
(ii)
IFRS 8 – Operating segments
This standard is effective for accounting periods beginning on or after 1 January 2009. IFRS 8 sets out the requirements for
disclosure of fi nancial and descriptive information about an entity’s operating segments and also about the entity’s products
and services, the geographical areas in which it operates, and its major customers. The IFRS replaces IAS 14 Segment
Reporting. The Group will apply IFRS 8 from 1 January 2009 and is currently considering the impact of this standard on its
disclosures.
(iii) IFRIC 7 – Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinfl ationary Economies (effective
for periods beginning on or after 1 March 2006)
IFRIC 7 provides guidance on how to apply requirements of IAS 29 in a reporting period in which an entity identifi es the
existence of hyperinfl ation in the economy of its functional currency, when the economy was not hyperinfl ationary in the
prior period. As none of the Group entities have a currency of a hyperinfl ationary economy as its functional currency, IFRIC 7
is not relevant to the Group’s operations;
(iv) IFRIC 8 – Scope of IFRS 2 (effective for annual periods beginning on or after 1 May 2006)
IFRIC 8 requires consideration of transactions involving the issuance of equity instruments – where the identifi able
consideration received is less than the fair value of the equity instruments issued – to establish whether or not they fall
within the scope of IFRS 2. The Group will apply IFRIC 8 from 31 December 2006, but it is not expected to have any impact
on the Group’s fi nancial statements;
(v)
IFRIC 9 – Reassessment of embedded derivatives (effective for annual periods beginning on or after 1 June 2006)
IFRIC 9 requires an entity to assess whether an embedded derivative is required to be separated from the host contract and
accounted for as a derivative when the entity fi rst becomes a party to the contract. Subsequent reassessment is prohibited
unless there is a change in the terms of the contract that signifi cantly modifi es the cash fl ows that otherwise would be
required under the contract, in which case reassessment is required. IFRIC 9 is not expected to have any impact on the
Group’s fi nancial statements.
(vi) IFRIC 10 – Interim Financial Reporting and Impairment (effective for annual periods beginning on or after
1 November 2006)
IFRIC 10 prohibits the impairment losses recognised in an interim period on goodwill, investments in equity instruments
and investments in fi nancial assets carried at cost to be reversed at a subsequent balance sheet date. The Group will apply
IFRIC 10 from 31 December 2006, but it is not expected to have any impact on the Group’s fi nancial statements.
(vii) IFRIC 12 Service Concession Arrangements (effective for annual periods beginning on or after 1 January 2008)
Service concessions are arrangements whereby a government or other public sector entity grants contracts for the supply
of public services – such as roads, airports, prisons and energy and water supply and distribution facilities – to private
sector operators. As the Group is not a service concession operator IFRIC 12 is not relevant to the Group’s activities.
64
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
(bb) Prior year adjustments
(i) Foreign currency
The Group has adopted the amendment to IAS 21, ‘Net Investment in a Foreign Operation’, in the Group’s fi nancial
statements from 1 January 2006. The adoption of this amendment has resulted in a change in accounting policy.
The adoption of this amendment requires that all foreign exchange gains and losses on inter-company loans that
form part of the net investment in a foreign operation, including loans between fellow subsidiaries, are recognised
directly in equity on consolidation. Prior period comparative fi gures have been restated to refl ect the impact of this
change. In the prior year, such loans between fellow subsidiaries did not qualify as part of the net investment and
therefore the exchange gains and losses on these loans were recognised directly in the income statement.
This change results in the recognition of a gain of €3.9 million, previously included within administration expenses in
the income statement in the prior year, directly in equity in the currency reserve. There is no net impact on equity as
a result of this change. The overall impact represents an increase in currency reserve amounting to €3.9 million and a
decrease in retained earnings amounting to €3.9 million.
The change in accounting policy has resulted in a decrease in basic and diluted EPS for the year ended 31 December
2005 of 1.35 cent and 1.30 cent respectively.
(ii) Leases
The Group has adopted IFRIC 4, Determining whether an Arrangement contains a Lease, in the Group’s fi nancial
statements from 1 January 2006. The Group reviews arrangements that do not take the legal form of a lease and
a determination is also made as to whether the substance of an arrangement could equate to a fi nance lease,
considering whether fulfi lment of the arrangement is dependant upon the use of a specifi c asset and the arrangement
contains the right to use an asset. If the specifi ed criteria are met, the arrangement is classifi ed as a fi nance lease. In
prior years the annual cost of this arrangement was recognised as an expense as incurred. The effect of this change
in accounting policy has resulted in an increase in property, plant and equipment and lease liabilities amounting to
€8.5 million and €8.5 million respectively at 31 December 2005. This has also resulted in a decrease in administration
expenses of €0.93 million, an increase in depreciation of €0.57 million and an increase in interest expense of €0.36
million in the year ended 31 December 2005.
The change in accounting policy has resulted in no impact to basic or diluted EPS for the year ended 31 December 2005.
3 Financial risk management
The conduct of its ordinary business operations necessitates the holding and issuing of fi nancial instruments and derivative
fi nancial instruments by the Group. The main risks arising from issuing, holding and managing these fi nancial instruments
typically include liquidity risk, interest rate risk and currency risk. The Group approach is to centrally manage these risks
against comprehensive policy guidelines, which are summarised below.
The Group does not engage in holding or issuing speculative fi nancial instruments or derivatives thereof. The Group
fi nances its operations by a mixture of retained profi ts, preference shares, medium and short-term committed bank
borrowings and uncommitted bank borrowings. The Group borrows in the major global debt markets in a range of
currencies at both fi xed and fl oating rates of interest, using derivatives where appropriate to generate the desired
effective currency profi le and interest rate basis.
Currency risk
Although the Group is based in Ireland, it has signifi cant investment in overseas operations primarily in the USA. As a result
movements in US dollar/euro exchange rates can signifi cantly affect the Group’s euro balance sheet and income statement.
The Group seeks to match, to a reasonable extent, the currency of its borrowings with that of its assets. The Group also has
transactional currency exposures that arise from sales or purchases by an operating unit in currencies other than the unit’s
operating functional currency. The Group requires all its operating units to mitigate such currency exposures, by means of
forward foreign currency contracts.
Liquidity and cash fl ow risk
The Group’s objective is to maintain a balance between the continuity of funding and fl exibility through the use of
borrowings with a range of maturities. In order to preserve continuity of funding, the Group’s policy is that, at a minimum,
committed facilities should be available at all times to meet the full extent of its anticipated fi nance requirements, arising in
the ordinary course of business, during the succeeding 12 month period. This means that at any time the lenders providing
facilities in respect of this fi nance requirement are required to give at least 12 months notice of their intention to seek
repayment of such facilities. At the year end, the Group had multi-currency committed term facilities of €622.1 million of
which €138.3 million was undrawn. The weighted average period to maturity of these facilities was 4.3 years.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
65
Finance and interest rate risk
The Group’s objective in relation to interest rate management is to minimise the impact of interest rate volatility on interest
costs in order to protect reported profi tability. This is achieved by determining a long-term strategy against a number
of policy guidelines, which focus on (a) the amount of fl oating rate indebtedness anticipated over such a period and (b)
the consequent sensitivity of interest costs to interest rate movements on this indebtedness and the resultant impact on
reported profi tability. The Group borrows at both fi xed and fl oating rates of interest and uses interest rate swaps to manage
the Group’s exposure to interest rate fl uctuations.
Price risk
The Group is exposed to equity securities price risk because of investments held by the Group and classifi ed on the
consolidated balance sheet as available for sale.
Credit risk
The Group has no signifi cant concentrations of credit risk. It has policies in place to ensure that credit sales of products are
made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high-
credit–quality fi nancial institutions.
4 Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will,
by defi nition, seldom equal the related actual results. The estimates and assumptions that could have a signifi cant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year
are discussed below.
(a) Impairment reviews of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated
in note 2(f). The recoverable amounts of cash generating units have been determined based on value in use calculations.
These calculations require the use of estimates.
The assets of Seltzer Companies, Inc., including goodwill arising on acquisition of €62.1 million, were tested for impairment
using projected cash fl ows over a 10 year period. A reduction in projected EBITDA of 10% or an increase in the discount
factor used from 9% to 10% would not result in an impairment of the assets. A rate of 0% has been used to estimate cash
fl ow growth between 5 and 10 years.
(b) Income taxes
The Group is subject to income tax in numerous jurisdictions. Signifi cant judgement is required in determining
the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is different
from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in
the period in which such determination is made. Notwithstanding the above, the Group believes that it has adequate tax
provisions to cover all risks across all jurisdictions.
Deferred tax assets are recognised to the extent that it is probable that future taxable profi t will be available against which
the unused tax losses and unused tax credits can be utilised. The Group estimates the most probable amount of future
taxable profi ts, using assumptions consistent with those employed in impairment calculations, and taking into consideration
applicable tax legislation in the relevant jurisdiction. These calculations require the use of estimates.
(c) Post-employment benefi ts
The Group operates a number of post employment defi ned benefi t plans. The rates of contributions payable, the pension
cost and the Group’s total obligation in respect of defi ned benefi t plans is calculated and determined by independent
qualifi ed actuaries and updated at least annually. The Group also has plan assets totalling €376.6 million giving a net
pension liability of €124.9 million for the Group. The size of the obligation and cost of the benefi ts are sensitive to actuarial
assumptions. These include demographic assumptions covering mortality and longevity, and economic assumptions covering
price infl ation, benefi t and salary increases together with the discount rate used. The size of the plan assets is also sensitive to
asset return levels and the level of contributions from the Group.
66
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
(d) Establishing lives for depreciation of property, plant and equipment and intangible assets
Long-lived assets comprising primarily of property, plant and equipment and intangible assets, represent a signifi cant
portion of total assets. The annual depreciation and amortisation charge depends primarily on the estimated lives of each
type of asset and, in certain circumstances, estimates of fair values and residual values. The Directors regularly review these
useful lives and change them as necessary to refl ect current thinking on remaining lives in light of technological change,
pattern of consumption, the physical condition and expected economic utilisation of the asset. Changes in the useful
lives can have a signifi cant impact on the depreciation and amortisation charge for the period. Details of the useful lives
are included in the accounting policy 2(e) and 2(f). The impact of any change could vary signifi cantly depending on the
individual changes in assets and the classes of assets impacted.
(e) Providing for doubtful debts
The Group trades with a large and varied number of customers on credit terms. Some debts due will not be paid as a result of
the default of a small number of customers. The Group uses estimates based on historical experience and current information
in determining the level of debts for which a provision for impairment is required. Factors that the Group will consider
include fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation and
default or delinquency in payments. Any signifi cant impact on the level of customers that default on payment would have a
consequential impact on operating result. The level of provision required is reviewed on an ongoing basis.
5 Segment information
Primary reporting format – business segments
At 30 December 2006 the Group is organised into three main business segments:
-
-
-
Consumer Foods
Food Ingredients and Nutritionals
Agribusiness and Property
The segment results for the year ended 31 December 2005 are as follows:
Food
2005
Total gross segment revenue
Inter-segment revenue
Ingredients Agribusiness
and
Consumer
and
Foods Nutritionals
(as restated)
€’000
€’000
Property Unallocated
(as restated)
€’000
€’000
Group
(as restated)
€’000
493,667
(85)
1,215,559
(108,271)
239,826
(10,684)
-
-
1,949,052
(119,040)
Revenue
493,582 1,107,288
229,142
- 1,830,012
Operating profi t pre-exceptional items
Exceptional items
27,139
(11,860)
43,109
(2,649)
10,684
(1,160)
-
10,628
80,932
(5,041)
15,279
40,460
9,524
10,628
75,891
Finance income and costs
Share of results of joint ventures and associates
Profi t before tax
Tax
Profi t for the year
(18,453)
932
58,370
(657)
57,713
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
67
The segment results for the year ended 30 December 2006 are as follows:
Food
2006
Total gross segment revenue
Inter-segment revenue
Ingredients Agribusiness
and
Consumer
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
511,077
(55)
1,186,890
(108,977)
264,492
-
-
-
1,962,459
(109,032)
Revenue
511,022 1,077,913
264,492
- 1,853,427
Operating profi t pre-exceptional items
Exceptional items
24,525
(3,277)
44,166
-
16,876
-
-
(9,178)
85,567
(12,455)
21,248
44,166
16,876
(9,178)
73,112
Finance income and costs
Share of results of joint ventures and associates
Profi t before tax
Tax
Profi t for the year
(14,035)
2,842
61,919
4,351
66,270
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also
be available to unrelated third parties.
Other segment items included in the income statement for the year ended 31 December 2005 are as follows:
Food
2005
Ingredients Agribusiness
and
Consumer
and
Foods Nutritionals
(as restated)
€’000
€’000
Property Unallocated
€’000
€’000
Group
(as restated)
€’000
Depreciation restated
Amortisation of intangibles
Capital grants released to income statement
Restructuring costs
6,870
2,380
(1,411)
11,860
14,356
821
(7)
2,649
2,859
112
(6)
1,160
-
-
-
-
24,085
3,313
(1,424)
15,669
Other segment items included in the income statement for the year ended 30 December 2006 are as follows:
Food
2006
Ingredients Agribusiness
and
Consumer
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
Depreciation
Amortisation of intangibles
Capital grants released to income statement
Restructuring costs - exceptional item
7,989
2,567
(4,269)
3,277
15,000
1,607
(12)
-
2,426
278
(41)
-
-
-
-
-
25,415
4,452
(4,322)
3,277
68
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
The segment assets and liabilities at 31 December 2005 and capital expenditure for the year then ended are as follows:
Food
2005
Assets
Associates and joint ventures
Total assets
Liabilities
Ingredients Agribusiness
and
Consumer
and
Foods Nutritionals
(as restated)
€’000
€’000
Property Unallocated
€’000
€’000
Group
(as restated)
€’000
175,389
-
477,963
-
122,309
-
120,274
70,922
895,935
70,922
175,389
477,963
122,309
191,196
966,857
(131,503)
(280,359)
(72,144)
(359,133)
(843,139)
Group capital expenditure and acquistions
12,096
30,006
8,439
495
51,036
The segment assets and liabilities at 30 December 2006 and capital expenditure for the year then ended are as follows:
Food
2006
Assets
Associates and joint ventures
Total assets
Liabilities
Ingredients Agribusiness
and
Consumer
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
149,129
-
488,926
-
140,632
-
314,519
69,601
1,093,206
69,601
149,129
488,926
140,632
384,120 1,162,807
(77,232)
(161,113)
(35,000)
(688,943)
(962,288)
Group capital expenditure and acquisitions
6,275
102,817
11,252
(71)
120,273
Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, derivatives designated as
hedges of future transactions and receivables. They exclude deferred taxation, investments and derivatives held for trading
or designated as hedges of borrowings.
Segment liabilities comprise operating liabilities. They exclude items such as taxation, corporate borrowings and related
hedging derivatives.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
69
Secondary reporting format - geographical segments
The Group’s three main business segments operate in three main geographical areas, even though they are managed on a
worldwide basis.
Revenue
Ireland
Rest of Europe
USA/other
Revenue is allocated based on the country in which the customer is located.
Total assets
Ireland
Rest of Europe
USA/other
Associates and joint ventures
Unallocated assets
Total assets
Total assets are allocated based on where the assets are located.
Capital expenditure
Ireland
Rest of Europe
USA/other
2006
€’000
2005
€’000
781,940
214,942
856,545
735,034
226,545
868,433
1,853,427
1,830,012
2006
€’000
2005
(as restated)
€’000
471,259
30,382
277,046
545,667
11,673
218,321
778,687
775,661
69,601
314,519
70,922
120,274
1,162,807
966,857
2006
€’000
2005
€’000
31,720
799
87,754
35,922
685
14,429
120,273
51,036
Capital expenditure, including acquisitions is allocated based on where the assets are located.
70
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
6 Operating profi t
The following items have been included in arriving at operating profi t:
Depreciation of property, plant and equipment (note 14)
- Owned assets
- Leased assets under fi nance leases
Profi t on disposal of property, plant and equipment
2006
€’000
2005
(as restated)
€’000
23,730
1,685
21,878
2,207
(7,531)
(2,509)
Repairs and maintenance expenditure on property, plant and equipment
25,264
25,891
Amortisation of intangible assets (note 15)
- Software costs
- Other intangible assets
Increase in inventories
3,370
1,082
2,784
529
908
10,831
Raw materials and consumables used
1,355,388
1,356,020
Trade receivables - impairment charge for bad and doubtful debts
Amortisation of government grants received (note 34)
Operating lease rentals payable
- Plant and machinery
- Other
Employee benefi t expense
Auditors’ remuneration
Research and development costs
Net foreign exchange (gains)/losses
Gain on interest rate swaps not qualifying as hedges
Other
Total operating expenses - pre-exceptional
Exceptional items (note 7)
Total operating expenses
696
(270)
(1,180)
(1,424)
3,317
4,715
2,798
5,767
178,671
177,104
599
561
6,275
5,991
(2,008)
196
-
(2,098)
172,879
142,824
1,767,860
1,749,080
12,455
5,041
1,780,315
1,754,121
7 Exceptional items
Restructuring cost
The Cheese Company Holdings Limited
(Loss) on sale or termination of operations
Profi t on sale of quoted investments
Exceptional tax credit (note 11)
Exceptional fi nance cost (note 10)
Net exceptional items
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
71
Notes
(a)
(b)
2006
€’000
2005
(as restated)
€’000
(3,277)
(9,178)
-
-
(15,669)
-
(331)
10,959
(12,455)
(5,041)
12,321
6,935
-
(5,304)
(134)
(3,410)
(a)
Restructuring costs relate to the closure of the Pigmeat cannery operation. Costs include redundancy and the release
of unamortised capital grants.
(b)
On 29 December 2006, the Group disposed of its 25% interest and related 2008-2018 loan note in The Cheese
Company Holdings Limited to the majority shareholder, Milk Link Limited.
8 Employee benefi t expense
Wages and salaries
Termination costs (including exceptional items - note 7)
Social security costs
Share option and Sharesave Scheme costs
Pension costs - defi ned contribution plans (note 32)
Pension costs - defi ned benefi t plans (note 32)
2006
€’000
2005
€’000
152,358
7,232
17,093
290
1,026
6,435
143,623
12,331
14,364
259
738
5,789
184,434
177,104
The average number of employees in 2006 was 3,926 (2005: 3,837) and is analysed into the following categories:
Consumer Foods
Food Ingredients and Nutritionals
Agribusiness and Property
2006
2005
1,894
1,349
683
1,879
1,299
659
3,926
3,837
72
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
9 Directors’ remuneration
The salary, fees and other benefi ts for each of the Directors during the year were:
Executive
JJ Moloney
GJ Meagher
KE Toland
WG Murphy (note (a))
2006
2005
Non-executive
MJ Walsh (note (b))
L Herlihy
JV Quinlan (note (c))
JE Callaghan
HV Corbally
J Fitzgerald
EP Fitzpatrick
JA Gilsenan
P Gleeson (note (d))
P Haran (note (e))
CL Hill
ML Keane (note (e))
MN Keane (note (d))
JV Liston
M Merrick (note (e))
JJ Miller (note (f))
WG Murphy (note (a))
M Parsons
EM Power
GE Stanley (note (f))
TP Corcoran (note (g))
TP Heffernan (note (h))
2006
2005
Total 2006
Total 2005
Salary
€’000
Fees
€’000
438
263
287
-
988
1,053
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
988
1,053
-
-
-
-
-
-
80
38
38
57
17
17
17
17
11
57
17
17
11
57
17
7
57
17
17
7
-
-
573
475
573
475
Performance
Pension
bonus contribution
€’000
€’000
329
206
226
-
761
313
126
79
85
-
290
290
2006
Total
€’000
927
569
605
-
2,101
Other
benefi ts
€’000
34
21
7
-
62
50
2005
Total
€’000
642
420
462
182
1,706
57
36
29
52
16
16
16
16
-
31
16
10
-
52
10
16
14
16
16
16
32
8
80
38
38
57
17
17
17
17
11
57
17
17
11
57
17
7
57
17
17
7
-
-
573
2,674
475
2,181
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
761
313
290
290
62
50
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
73
(a)
Mr WG Murphy retired as an executive Director on 9 September 2005 and remains on the Board as a
non-executive Director.
(b) Mr MJ Walsh was appointed Chairman on 9 June 2005.
(c) Mr JV Quinlan was appointed Vice Chairman on 9 June 2005.
(d) Messrs P Gleeson and MN Keane were appointed as Directors on 24 May 2006.
(e) Messrs P Haran, ML Keane and M Merrick were appointed as Directors on 9 June 2005.
(f) Messrs JJ Miller and GE Stanley resigned as Directors on 24 May 2006.
(g) Mr TP Corcoran resigned both as Chairman and Director on 9 June 2005.
(h) Mr TP Heffernan resigned as a Director on 9 June 2005.
Details of Directors’ share options are set out in note 42 to the fi nancial statements.
The Remuneration Committee of the Board, which comprises solely of non-executive Directors, determines
the Company’s policy on executive Director remuneration and sets the remuneration package of each of the
executive Directors. There are no contracts of service for executive Directors which are required to be made
available for inspection.
Transfer value
of increase in
accrued pension
€’ 000
Annual pension
accrued in 2006
in excess of infl ation
€’ 000
Total annual
accrued pension at
30 December 2006
€’ 000
361
128
135
624
648
20
6
14
40
35
259
192
62
513
649
JJ Moloney
GJ Meagher
KE Toland
2006
2005
10 Finance income and costs
(a) Finance income
Interest income (i)
(b) Finance costs - pre-exceptional
Interest expense
- Bank borrowings repayable within fi ve years
- Finance lease
Finance cost of preferred securities and preference shares
Total fi nance costs - pre-exceptional
Finance costs - exceptional
Cancellation of preferred securities (ii)
Total fi nance costs
2006
€’000
4,883
2005
€’000
4,209
2006
€’000
2005
(as restated)
€’000
(15,096)
(380)
(10,291)
(472)
(15,476)
(10,763)
(3,442)
(6,595)
(18,918)
(17,358)
-
(5,304)
(18,918)
(22,662)
(i)
Interest income consists mainly of interest on a Stg£35 million subordinated secured loan note granted by The Cheese
Company Holdings Limited in 2004, representing part proceeds on the sale by the Group of a 75% interest in its UK hard
cheese business. On 29 December 2006, the Group disposed of its remaining 25% interest in The Cheese Company
Holdings Limited and related 2008-2018 loan note, to the majority shareholder, Milk Link Limited.
(ii)
On 15 June 2005 the Group prepaid the US$100 million 7.99% cumulative guaranteed preferred securities, giving rise
to a cost of €5.3 million, which was disclosed as an exceptional item.
74
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
11 Income taxes
Irish corporation tax
Adjustments in respect of prior years
Current tax on income for the year
Foreign tax
Adjustments in respect of prior years
Current tax on income for the year
Total current tax
Deferred tax (note 31)
Pre-exceptional tax charge
Exceptional tax credit
2006
€’000
3,080
238
3,318
1,035
(46)
989
2005
€’000
2,460
(1,285)
1,175
594
(1,056)
(462)
4,307
713
3,663
7,970
(12,321)
6,879
7,592
(6,935)
(4,351)
657
A deferred tax asset of €12.1 million arising from the expected use in future years of UK tax losses, which previously had not
been recognised due to uncertainty as to recoverability, has been recognised in the 2006 fi nancial statements. Also, in 2006,
the restructuring provision in the Pigmeat Division resulted in a corporation tax credit of €699,000 and a deferred tax charge
of €489,000.
In 2005, a taxation benefi t arising from the disposal of certain US operations in prior years, which previously had not been
recognised in the fi nancial statements was fi nalised and gave rise to a gain of €6.9 million.
The tax credits in 2006 and 2005, by virtue of their size and nature, have been separately disclosed as exceptional credits in
the fi nancial statements.
The tax on the Group’s profi t before tax differs from the theoretical amount that would arise using the corporation tax rate
in Ireland, as follows:
Profi t before tax (pre-exceptional items)
Tax calculated at Irish rate of 12.5% (2005: 12.5%)
Earnings at reduced and higher Irish rates
Difference due to overseas tax rates
Utilisation of previously unrecognised tax losses
Adjustment to tax charge in respect of previous periods
Tax on profi ts of joint ventures and associates shown in profi t before tax
Expenses not deductible for tax purposes and other differences
Pre-exceptional tax charge
Exceptional tax credit
2006
€’000
2005
€’000
74,374
68,715
9,297
(622)
2,489
(544)
(58)
(355)
(2,237)
8,589
(759)
3,072
(3,781)
(59)
(116)
646
7,970
7,592
(12,321)
(6,935)
Details of deferred tax charged or credited directly to equity during the year are outlined in note 31.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
75
12 Earnings per share
Basic
Basic earnings per share is calculated by dividing the net profi t attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group
and held as own shares (note 26).
2006
€’000
2005
(as restated)
€’000
Profi t attributable to equity holders of the Company
65,934
57,396
Weighted average number of ordinary shares in issue
292,958,667
291,469,902
Basic earnings per share (cent per share)
22.51
19.69
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares. Share options are dilutive potential ordinary shares. In respect
of share options, a calculation is done to determine the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the Company’s shares) based on the monetary value of the
subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the
number of shares that would have been issued assuming the exercise of the share options.
2006
€’000
2005
€’000
Weighted average number of ordinary shares in issue
Adjustments for share options
292,958,667
480,072
291,469,902
1,134,139
Adjusted weighted average number of ordinary shares
293,438,739
292,604,041
Diluted earnings per share (cent per share)
22.47
19.62
At year end options over 1,405,000 ordinary shares could potentially dilute basic earnings per share in the future but are
anti-dilutive during the year ended 30 December 2006.
Adjusted
Profi t attributable to equity holders of the Company
Exceptional items
Adjusted earnings per share (cent per share)
Diluted adjusted earnings per share (cent per share)
2006
€’000
65,934
134
66,068
22.55
22.52
2005
€’000
57,396
3,410
60,806
20.86
20.78
13 Dividends
The dividends paid in 2006 and 2005 were €16.5 million (5.62 cent per share) and €15.6 million (5.36 cent per share)
respectively. On 4 October an interim dividend of 2.38 cent per share on the ordinary shares amounting to €6.98 million
was paid to shareholders on the register of members as at 15 September 2006. The Directors have recommended the
payment of a fi nal dividend of 3.41 cent per share on the ordinary shares which amounts to €10.0 million. Subject to
shareholders approval this dividend will be paid on Tuesday, 22 May 2007 to shareholders on the register of members as
at Friday, 27 April 2007, the record date. These fi nancial statements do not refl ect this fi nal dividend payable.
76
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
14 Property, plant and equipment – Group
Previously stated at 1 January 2005
Cost
Accumulated depreciation
Previously stated net book amount
Implementation of IFRIC 4
Land and
buildings
(as restated)
€’000
Plant and
equipment
Motor
vehicles
€’000
€’000
Total
(as restated)
€’000
184,019
(59,692)
495,186
(317,951)
17,359
(16,864)
696,564
(394,507)
124,327
9,067
177,235
-
495
-
302,057
9,067
Restated net book amount
133,394
177,235
495
311,124
Year ended 31 December 2005
Opening net book amount
Exchange differences
Acquisition of subsidiaries
Additions
Disposals
Reclassifi cation
Depreciation charge
133,394
3,644
1,637
11,573
(3,210)
(1,054)
(4,350)
177,235
9,247
1,146
31,334
(3,035)
1,054
(19,192)
495
16
32
1,159
(79)
-
(543)
311,124
12,907
2,815
44,066
(6,324)
-
(24,085)
Closing net book amount
141,634
197,789
1,080
340,503
At 31 December 2005
Cost
Accumulated depreciation
Net book amount
Year ended 30 December 2006
Opening net book amount
Exchange differences
Acquisition of subsidiaries (note 40)
Additions
Disposals
Reclassifi cation
Depreciation charge
Closing net book amount
At 30 December 2006
Cost
Accumulated depreciation
Net book amount
203,833
(62,199)
527,039
(329,250)
18,204
(17,124)
749,076
(408,573)
141,634
197,789
1,080
340,503
141,634
(3,102)
419
6,337
(1,543)
-
(4,745)
197,789
(7,489)
859
24,544
(225)
(29)
(20,074)
1,080
(11)
-
376
(101)
29
(596)
340,503
(10,602)
1,278
31,257
(1,869)
-
(25,415)
139,000
195,375
777
335,152
202,932
(63,932)
537,849
(342,474)
18,123
(17,346)
758,904
(423,752)
139,000
195,375
777
335,152
Depreciation expense of €25,415,366 (2005: €24,084,506) has been charged to cost of sales €22,647,360 (2005:
€21,797,308), €2,053,075 (2005: €1,915,298) in distribution costs and €714,931 (2005: €371,900) in administration expenses.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
77
Leased assets, comprising plant and equipment, included in the table on page 76, where the Group is a lessee under a
fi nance lease, comprise as follows:
Cost - capitalised fi nance leases
Accumulated depreciation
Net book amount
2006
€’000
2005
(as restated)
€’000
43,976
(24,998)
43,965
(22,747)
18,978
21,218
Operating lease rentals amounting to €8,031,578 (2005: €8,564,871) are included in the income statement.
Included in the cost of plant and equipment is an amount of €4,652,730 (2005: €14,881,934) incurred in respect of assets
under construction.
Borrowing costs incurred on signifi cant capital projects are capitalised. The amount capitalised, using the Group’s
incremental cost of borrowing, amounted to €517,000 in 2006 (2005: €623,000).
Capitalised borrowing costs will be amortised to the income statement and will be deducted in determining taxable profi t
over the life of the underlying asset.
78
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
15 Intangible assets
At 1 January 2005
Cost
Accumulated amortisation
Goodwill
€’000
Other
intangibles
€’000
Software
€’000
Development
costs
€’000
Total
€’000
12,563
-
4,362
(35)
30,547
(10,739)
-
-
-
47,472
(10,774)
36,698
Net book amount
12,563
4,327
19,808
Year ended 31 December 2005
Opening net book amount
Exchange differences
Additions
Disposals
Acquisition of subsidiaries
Reclassifi cation
Amortisation
12,563
33
493
-
8,968
1,035
-
4,327
-
-
-
8,905
(1,035)
(529)
19,808
210
4,652
(508)
-
-
(2,784)
-
-
1,825
-
-
-
-
36,698
243
6,970
(508)
17,873
-
(3,313)
Previously stated closing net book amount
Adjustment to provisional fair values
23,092
1,500
11,668
(1,500)
21,378
-
1,825
-
57,963
-
Restated closing net book amount
24,592
10,168
21,378
1,825
57,963
At 31 December 2005
Cost
Accumulated amortisation
24,592
-
10,732
(564)
34,995
(13,617)
1,825
-
72,144
(14,181)
Net book amount
24,592
10,168
21,378
1,825
57,963
Year ended 30 December 2006
Opening net book amount
Exchange differences
Additions
Acquisition of subsidiaries (note 40)
Amortisation
24,592
(1,780)
172
62,148
-
10,168
(254)
300
16,589
(868)
21,378
(355)
6,459
-
(3,370)
1,825
(135)
2,069
-
(214)
57,963
(2,524)
9,000
78,737
(4,452)
Closing net book amount
85,132
25,935
24,112
3,545
138,724
At 30 December 2006
Cost
Accumulated amortisation
85,132
-
27,367
(1,432)
41,099
(16,987)
3,759
(214)
157,357
(18,633)
Net book amount
85,132
25,935
24,112
3,545
138,724
Other intangibles include intellectual property (primarily unpatented know-how), customer relationships and brands
recognised at the time of acquisition of subsidiary undertakings. Formal valuations have been completed on these assets
associated with the acquisition of Pro-Fibe and CMP, with the resulting adjustment to provisional values applied at the time
of acquisition being treated as a restatement (€1.5 million). As outlined in note 40 fair values assigned to the identifi able
assets and liabilities associated with the acquisition of Seltzer have been determined provisionally.
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash generating units (CGUs) identifi ed according to country of operation and
business segment.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
79
A segment level summary of the goodwill allocation is presented below:
Food
Consumer
and
Foods Nutritionals
Ingredients Agribusiness
and
Property
(as restated)
€’000
€’000
€’000
Total
(as restated)
€’000
At 31 December 2005
Ireland
Rest of Europe
USA/other
At 30 December 2006
Ireland
Rest of Europe
USA/other
5,635
-
-
540
16,580
1,146
691
-
-
6,866
16,580
1,146
5,635
18,266
691
24,592
5,650
-
-
540
16,852
61,399
691
-
-
6,881
16,852
61,399
5,650
78,791
691
85,132
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash fl ow
projections based on fi nancial budgets approved by management covering a three year period. Cash fl ows beyond the
three year period are extrapolated using estimated growth rates consistent with forecasts included in industry reports. Key
assumptions include management’s estimates of future profi tability, capital expenditure requirements and working capital
investment. Discount rates used refl ect specifi c risks relating to the relevant segments.
The value in use calculations are prepared using pre tax discount rates, which range from 7.5% to 10%, and incorporate
terminal values.
16 Investments in associates
At the beginning of the year
Share of profi t after tax
Exchange differences
Additions
Disposals
Deferred tax liability
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
2005
Group
€’000
1,395
-
-
-
-
-
11,090
66
(142)
367
(448)
-
1,395
-
-
-
-
-
10,918
341
182
-
(190)
(161)
At the end of the year
1,395
10,933
1,395
11,090
80
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
The Group’s share of the results of principal associates, all of which are unlisted, and its share of the assets (including
goodwill) and liabilities are as follows:
2005
Co-operative Animal Health Limited
South Eastern Cattle Breeding Society Limited
Malting Company of Ireland Limited
South East Port Services Limited
Westgate Biological Limited
Other
2006
Co-operative Animal Health Limited
South Eastern Cattle Breeding Society Limited
Malting Company of Ireland Limited
South East Port Services Limited
Westgate Biological Limited
Other
Assets
€’000
Liabilities
€’000
Revenues
€’000
Profi t/
(loss)
€’000
Interest
held
%
8,578
1,839
4,939
4,004
80
475
5,718
449
2,562
1,989
38
288
14,664
1,642
3,458
1,223
-
1,210
155
(15)
143
179
(156)
35
50
57
33.33
49
28
19,915
11,044
22,197
341
Assets
€’000
Liabilities
€’000
Revenues
€’000
Profi t/
(loss)
€’000
Interest
held
%
8,064
1,842
4,966
3,930
209
27
6,047
460
2,583
1,867
76
288
14,718
1,647
3,391
1,388
-
-
155
(8)
6
82
(169)
-
50
57
33.33
49
41.8
19,038
11,321
21,144
66
Further details in relation to principal associates are outlined in note 43.
17 Investments in joint ventures
At the beginning of the year
Implementation of IAS 32 and IAS 39
Share of profi t after tax
Other reserve movements
Exchange differences
Additions
At the end of the year
2006
€’000
2005
€’000
59,832
-
2,776
568
(4,514)
6
48,281
(72)
591
-
6,573
4,459
58,668
59,832
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
81
The following amounts represent the Group’s share of the assets and liabilities, revenue and results in joint ventures:
Assets
Non-current assets
Current assets
Liabilities
Long-term liabilities
Current liabilities
Net assets
Revenue
Expenses
Profi t after income tax
Proportionate interest in joint venture’s commitments
A listing and description of interests in signifi cant joint ventures is outlined in note 43.
18 Investments
2006
€’000
2005
€’000
113,644
50,965
118,802
33,355
164,609
152,157
61,848
44,093
61,948
30,377
105,941
92,325
58,668
59,832
241,727
(238,951)
109,247
(108,656)
2,776
14,600
591
510
At the beginning of the year
Implementation of IAS 32 and IAS 39
Exchange differences
Acquisition of subsidiaries
Disposals/redemption
Fair value adjustment
Additions
Investments
in subsidiaries
Available
for sale
Investments
investments in subsidiaries
Available
for sale
investments
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
2005
Group
€’000
510,469
-
-
-
(57)
-
-
29,511
-
376
-
(17,811)
102
349
512,174
-
-
-
(1,705)
-
-
28,672
1,165
460
14
(3,977)
-
3,177
At the end of the year
510,412
12,527
510,469
29,511
82
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
Investments include the following:
Listed securities
- Equity securities – eurozone countries
Unlisted securities
- The Cheese Company Holdings Limited
- Irish Dairy Board
- Glanbia Enterprise Fund Limited
- Moorepark Technology
- Other Group companies
Loan to joint venture
Other
Investments
in subsidiaries
Available
for sale
Investments
investments in subsidiaries
Available
for sale
investments
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
2005
Group
€’000
1
864
1
762
-
-
1,290
-
509,121
-
-
-
9,558
1,290
202
-
-
613
-
-
1,290
-
509,178
-
-
14,481
9,215
1,290
245
-
2,905
613
510,412
12,527
510,469
29,511
The Group sold its 25% interest in The Cheese Company Holdings Limited on 29 December 2006 to the majority
shareholder, Milk Link Limited.
Available for sale investments are fair valued annually at year end. For investments traded in active markets, fair value is
determined by reference to Stock Exchange quoted bid prices. For other investments, fair value is estimated by reference
to the current market value of similar instruments or by reference to cash fl ows discounted using a rate based on the market
interest rate and the risk premium specifi c to the unlisted securities.
Available for sale investments are classifi ed as non-current assets, unless they are expected to be realised within 12 months
of the balance sheet date or unless they will need to be sold to raise operating capital.
19 Trade and other receivables
Trade receivables
Less provision for impairment of receivables
Trade receivables - net
Prepayments
Receivable from associates and joint ventures
Loans to related parties (note 41)
Valued added tax
Other receivables
Less non-current portion: loans to related parties
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
2005
Group
€’000
-
-
142,336
(10,439)
-
-
120,560
(11,716)
-
1,881
-
-
-
-
131,897
16,025
3,301
4,929
4,725
8,663
1,881
-
169,540
-
-
934
-
-
-
-
934
-
108,844
15,378
1,529
56,874
5,670
12,189
200,484
(56,874)
1,881
169,540
934
143,610
In 2004 a Stg£35 million subordinated secured loan note was granted by The Cheese Company Holdings Limited,
representing part proceeds arising on the sale by the Group of its 75% interest in its UK hard cheese business.
The loan note yielded interest at 1.75% above LIBOR with the principle amount and compounded interest repayable
over 40 quarterly instalments from 1 April 2008 to 1 January 2018. On 29 December 2006, the Group sold its remaining
25% interest, in The Cheese Company Holdings Limited, and Stg£35 million loan note to the majority shareholder,
Milk Link Limited.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
83
In 2006, under a Debt Purchase Agreement with a fi nancial institution, the Group has transferred credit risk and retained
late payment risk on certain trade receivables, amounting to €24.5 million. The Group has continued to recognise an asset
of €557,000, representing the extent of its continuing involvement, and an associated liability of a similar amount.
The fair values of receivables are not materially different to the book values. The net movement in the provision for
impairment of receivables has been included in distribution expenses in the income statement.
There is no concentration of credit risk with respect to trade receivables, as the Group has a large number of customers,
internationally dispersed.
20 Inventories
Raw materials
Finished goods
Expense
2006
€’000
2005
€’000
18,852
111,045
15,261
21,404
107,512
15,334
145,158
144,250
Included in the above are inventories carried at fair value less costs to sell amounting to €32.7 million (2005: €34.2 million).
21 Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
2005
Group
€’000
4,376
-
63,596
195,715
16,281
-
59,536
44,869
4,376
259,311
16,281
104,405
The fair value of cash and cash equivalents are not materially different to the book values.
84
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
22 Reconciliation of changes in equity
Notes
Share
capital
€’000
(note 23)
Other
reserves
€’000
(note 24)
Retained
earnings
€’000
(note 25)
Minority
interest
€’000
(note 29)
Total
€’000
Balance at 1 January 2005
95,208
116,414
(97,797)
6,085
119,910
Adoption of IAS 32 and IAS 39
Amendment to IAS 21 (note 2)
-
-
3,017
(798)
(5,609)
798
-
-
(2,592)
-
Restated balance at 2 January 2005
95,208
118,633
(102,608)
6,085
117,318
Actuarial loss - defi ned benefi t schemes
Deferred tax on pension loss
Currency translation differences
Fair value adjustments
Net expense recognised directly in equity
Profi t for the year
Total recognised income for 2005
Change in minority interest in subsidiaries
Shares issued
Premium on shares issued
Cost of share options
Sharesave Scheme - discount cost
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Dividends paid in 2005
32
31
23
23
27
27
23
27
-
-
-
-
-
-
-
-
28
703
-
-
1,645
380
-
2,756
-
-
2,553
(873)
1,680
-
(42,303)
4,054
(1,664)
-
(39,913)
57,396
-
-
-
-
(42,303)
4,054
889
(873)
-
317
(38,233)
57,713
1,680
17,483
317
19,480
-
-
-
161
98
-
(380)
-
(121)
-
-
-
-
-
-
-
(15,612)
(15,612)
(103)
-
-
-
-
-
-
-
(103)
(103)
28
703
161
98
1,645
-
(15,612)
(13,080)
Restated balance at 31 December 2005
97,964
120,192
(100,737)
6,299
123,718
Actuarial gain - defi ned benefi t schemes
Deferred tax on pension gain
Share of actuarial gain - joint ventures
Currency translation differences
Fair value adjustments
Net expense recognised directly in equity
Profi t for the year
Total recognised income for 2006
Shares issued
Premium on shares issued
Cost of share options
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Dividends paid in 2006
32
31
24
23
23
27
23
27
-
-
-
-
-
-
-
-
7
183
-
122
28
-
340
-
-
-
(9,401)
2,734
(6,667)
-
36,852
(3,923)
230
-
-
33,159
65,934
-
-
-
-
-
36,852
(3,923)
230
(9,401)
2,734
-
336
26,492
66,270
(6,667)
99,093
336
92,762
-
-
199
-
(28)
-
171
-
-
-
-
-
(16,472)
(16,472)
-
-
-
-
-
-
-
7
183
199
122
-
(16,472)
(15,961)
Balance at 30 December 2006
98,304
113,696
(18,116)
6,635
200,519
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
85
23 Share capital
Company
At 1 January 2005
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Issue of shares - option scheme
At 31 December 2005
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Issue of shares - option scheme
Number of
shares
(thousands)
Ordinary
shares
€’000
292,644
-
-
472
293,116
-
-
123
17,559
-
-
28
17,587
-
-
7
Share
premium
Company
€’000
435,480
-
-
703
436,183
-
-
183
Own
shares
€’000
Total
Company
€’000
(2,563)
1,645
380
-
450,476
1,645
380
731
(538)
122
28
-
453,232
122
28
190
At 30 December 2006
293,239
17,594
436,366
(388)
453,572
Group
At 1 January 2005
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Issue of shares - option scheme
At 31 December 2005
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Issue of shares - option scheme
Number of
shares
(thousands)
Ordinary
shares
€’000
292,644
-
-
472
293,116
-
-
123
17,559
-
-
28
17,587
-
-
7
Share
premium
Group
€’000
80,212
-
-
703
80,915
-
-
183
Own
shares
€’000
(2,563)
1,645
380
-
(538)
122
28
-
Total
Group
€’000
95,208
1,645
380
731
97,964
122
28
190
At 30 December 2006
293,239
17,594
81,098
(388)
98,304
The total authorised number of ordinary shares is 306 million shares (2005: 306 million shares) with a par value of €0.06
per share (2005: €0.06 per share). All issued shares are fully paid.
86
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
Share options
Share options are granted to Directors and to employees. Movements in the number of share options outstanding are
as follows:
At the beginning of the year
Granted
Exercised
Lapsed
At the end of the year
Sharesave Scheme (note 26)
Total at the end of the year
Expiry date in
2006
2008
2008
2012
2013
2014
2014
2016
2006
Average
exercise
2006
2005
Average
exercise
2005
price in € Number of
options
per share
price in € Number of
options
per share
2.41 3,007,000
50,000
2.87
(123,000)
1.55
(200,000)
3.23
2.34 3,608,500
-
(471,500)
(130,000)
-
1.55
3.78
2.39 2,734,000
2.41 3,007,000
-
-
1.20
109,913
2,734,000
3,116,913
Exercise
price
2006
Number
2005
Number
-
1.20
10,000
Stg£2.90
4.25
315,000
1.55 1,069,000
1.90
160,000
2.73 1,030,000
100,000
2.47
50,000
2.87
109,913
10,000
390,000
1,192,000
160,000
1,105,000
150,000
-
2,734,000
3,116,913
Total options over 2,409,000 ordinary shares were outstanding at 30 December 2006 under the 2002 Long Term Incentive
Plan (“LTIP”), at prices ranging between €1.55 and €2.87. Furthermore, in accordance with the terms of the LTIP, certain
executives to whom options were granted in 2002 and 2004 are eligible to receive share awards related to the number of
ordinary shares which they hold on the second anniversary of the exercise of the option, to a maximum of 146,900 (2005:
191,300) ordinary shares.
In May 2002, the Company established an Employee Share Trust to operate in connection with the Company’s Sharesave
Scheme. As detailed in note 26 to the fi nancial statements, the Employee Share Trust held 262,503 ordinary shares at 30
December 2006. The dividend rights in respect of these shares have been waived.
Options over 325,000 ordinary shares, which were granted in 1998, under the Avonmore Foods plc 1988 Share Option
Scheme remain outstanding at a price of €4.25 or Stg£2.90.
Under the LTIP and the 1988 Share Option Scheme, options cannot be exercised before the expiration of three years from
the date of grant and can only be exercised if a predetermined performance criterion for the Group has been achieved.
The performance criterion is that there has been an increase in the adjusted earnings per share of the Group of at least the
Consumer Price Index plus 5% over a three year period.
The fair value of share options had been calculated using the Trinomial Model. Options over 1,394,000 (2005: 1,701,913)
ordinary shares were exercisable at 30 December 2006 at a weighted average price of €2.18 (2005: €2.16).
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
87
24 Other reserves
Capital and
mergers
reserves
€’000
Notes
Currency
reserve
€’000
Fair value
reserves
€’000
Total
€’000
Balance at 1 January 2005
116,371
43
-
116,414
Adoption of IAS 32 and IAS 39
Amendment to IAS 21
-
-
-
(798)
3,017
-
3,017
(798)
Restated balance at 2 January 2005
116,371
(755)
3,017
118,633
Translation differences on foreign currency net investments
Gains on interest rate swaps
Foreign exchange contracts - loss in year
Transfers to income statement
- Foreign exchange contracts
- Available for sale investments
Revaluation of forward commodity contracts
Deferred tax on fair value adjustments
Cost of share options
Discount on own shares vested
Sharesave Scheme - discount cost
27
27
27
-
-
-
-
-
-
-
161
(380)
98
2,553
-
-
-
-
-
-
-
-
-
-
2,467
(1,466)
(1,631)
(410)
(253)
420
-
-
-
2,553
2,467
(1,466)
(1,631)
(410)
(253)
420
161
(380)
98
Restated balance at 31 December 2005
116,250
1,798
2,144
120,192
Translation differences on foreign currency net investments
Revaluation of interest rate swaps - gain in year
Foreign exchange contracts - gain in year
Transfers to income statement
- Foreign exchange contracts - gain in year
- Forward commodity contracts - loss in year
- Interest rate swaps - gain in year
Revaluation of forward commodity contracts - gain in year
Revaluation of investments - gain in year
Deferred tax on fair value adjustments
Cost of share options
Discount on own shares vested
27
27
-
-
-
-
-
-
-
-
-
199
(28)
(9,401)
-
-
-
-
-
-
-
-
-
-
-
2,378
1,840
(540)
227
(1,169)
591
102
(695)
-
-
(9,401)
2,378
1,840
(540)
227
(1,169)
591
102
(695)
199
(28)
Balance at 30 December 2006
116,421
(7,603)
4,878
113,696
Capital and merger reserves
Capital and merger reserves refl ect (i) Sharesave Scheme through which charges relating to granting of both shares and
options are recorded (ii) the net share premium, that is the excess of fair value over nominal value of ordinary shares issued,
in connection with the merger of Avonmore Foods plc and Waterford Foods plc.
Currency reserve
Currency reserve refl ects the foreign exchange gains and losses that form part of the net investment in foreign operations.
Where Group companies have a functional currency different from the presentation currency, their assets and liabilities are
translated at closing rate at the balance sheet date, income and expenses in the income statement are translated at the
average rate for the year, resulting exchange differences are taken to the currency reserve within equity.
Fair value reserve
Fair value reserve refl ects the effective portion of changes in the fair value of derivatives that are designated and qualify as
cash fl ow hedges. Amounts accumulated in the fair value reserve are recycled to the income statement in the periods when
the hedged item affects profi t or loss. Unrealised gains and losses arising from changes in the fair value of available for
sale investments are recognised in the fair value reserve. When such investments are sold or impaired, the accumulated fair
value adjustments are recycled to the income statement.
88
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
25 Retained earnings
Company
retained
earnings
€’000
Group
retained
earnings
€’000
Group
goodwill
write-off
€’000
Group
Total
€’000
Balance at 1 January 2005
39,085
(4,836)
(92,961)
(97,797)
Adoption of IAS 32 and IAS 39
Amendment to IAS 21
-
-
(5,609)
798
-
-
(5,609)
798
Restated balance at 2 January 2005
39,085
(9,647)
(92,961)
(102,608)
Actuarial loss - defi ned benefi t schemes
Deferred tax on pension loss
Currency translation differences
Net expense recognised directly in equity
Profi t for the year
Recognised income for 2005
Dividends paid in 2005
-
-
-
(42,303)
4,054
(1,664)
-
23,964
(39,913)
57,396
23,964
17,483
(15,612)
(15,612)
-
-
-
-
-
-
-
(42,303)
4,054
(1,664)
(39,913)
57,396
17,483
(15,612)
Restated balance at 31 December 2005
47,437
(7,776)
(92,961)
(100,737)
Actuarial gain - defi ned benefi t schemes
Deferred tax on pension gain
Share of actuarial gain - joint venture
Net income recognised directly in equity
Profi t for the year
Total recognised income for 2006
Dividends paid in 2006
-
-
-
36,852
(3,923)
230
-
16,959
33,159
65,934
16,959
99,093
(16,472)
(16,472)
-
-
-
-
-
-
-
36,852
(3,923)
230
33,159
65,934
99,093
(16,472)
Balance at 30 December 2006
47,924
74,845
(92,961)
(18,116)
26 Own shares (Company and Group)
At the beginning of the year
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
At the end of the year
2006
€’000
2005
€’000
(538)
122
28
(2,563)
1,645
380
(388)
(538)
The amount included above as own shares relates to 262,503 (2005: 364,485) ordinary shares in Glanbia plc held by an
Employee Share Trust which was established in May 2002 to operate in connection with the Company’s Saving Related
Share Option Scheme (‘Sharesave Scheme’). The trustee of the Employee Share Trust is Mourant & Co.; a Jersey based
trustee services company.
The shares purchased by the Employee Trust cost €387,717 and had a market value of €777,009 at 30 December 2006.
The transfer from capital reserve represents the excess of the purchase price over the option price in respect of 101,982
ordinary shares (2005: 1,370,464 ordinary shares) on which options vested during the year.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
89
The purpose of the Sharesave Scheme, which was open to Irish and UK employees, was to provide a tax effi cient method
for employees to save money for the purpose of acquiring shares in the Company. To participate in the Sharesave Scheme
in 2002, employees agreed to save a fi xed amount between €12 and €320 (GBP£10 and GBP£250 in the UK) each month
for a three year period in a Revenue approved Save as You Earn (“SAYE”) contract.
27 Capital reserves
At the beginning of the year
Sharesave Scheme - discount on options
Sharesave Scheme - discount cost
Cost of share options
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
4,503
(28)
-
199
3,102
(28)
-
199
4,624
(380)
98
161
2005
Group
€’000
3,223
(380)
98
161
At the end of the year
4,674
3,273
4,503
3,102
28 Merger reserve – Group
Share premium – representing excess of fair value over nominal value of ordinary shares
issued in connection with the merger of Avonmore Foods plc and Waterford Foods plc
Merger adjustment
Share premium and other reserves relating to nominal value of shares in Waterford Foods plc
2006
€’000
2005
€’000
355,271
(327,085)
84,962
355,271
(327,085)
84,962
113,148
113,148
The merger adjustment represents the difference between the nominal value of the issued share capital of Waterford Foods
plc, and the fair value of the shares issued by Avonmore Foods plc in 1997 (now named Glanbia plc).
29 Minority interests
At the beginning of the year
Share of profi t for the year
Reduction in minority interest in subsidiaries
Increase in minority interest in subsidiaries
At the end of the year
2006
€’000
2005
€’000
6,299
336
(1)
1
6,085
317
(104)
1
6,635
6,299
90
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
30 Borrowings
Current
Cumulative redeemable preference shares
Finance lease liabilities
Non-current
Bank borrowings
Cumulative redeemable preference shares
Finance lease liabilities
Total borrowings
2006
2006
2005
Company
€’000
Group
€’000
Company
€’000
2005
(as restated)
Group
€’000
-
-
-
-
-
-
-
-
38,184
1,051
39,235
-
-
-
-
1,133
1,133
437,708
-
6,862
3,397
-
-
281,581
37,986
7,857
444,570
3,397
327,424
483,805
3,397
328,557
Bank borrowings are secured by cross-guarantees from Group companies. Lease liabilities are effectively secured as the
rights to the leased asset revert to the lessor in the event of default.
The Group has restated prior year borrowings to refl ect the adoption of IFRIC 4, “Determining Whether an Arrangement
contains a Lease”. The impact of this restatement has been an increase in fi nance lease liabilities of €8.5 million at
31 December 2005 (note 2 (bb) (ii)).
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
2006
€’000
2005
(as restated)
€’000
1,133
254,507
188,930
38,981
284,293
4,150
444,570
327,424
The exposure of the Group’s total borrowings to interest rate changes having consideration for the contractual repricing
dates at the balance sheet date are as follows:
6 months or less
Between 6 and 12 months
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
2006
€’000
2005
€’000
247,924
38,184
-
-
197,697
281,911
-
38,146
-
8,500
483,805
328,557
The effective interest rates at the balance sheet date, were as follows:
Bank overdrafts
Bank borrowings
4.29%
4.41%
3.06%
5.23%
5.60%
5.89%
5.10%
5.21%
10.25%
5.95%
9.25%
4.69%
EUR
GBP
USD
2006
2005
2006
2005
2006
2005
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
91
The carrying amounts and fair values of non-current borrowings are as follows:
Net carrying
amount
Estimated fair
values
2006
€’000
2005
€’000
2006
€’000
2005
€’000
Non-current borrowings
444,570
327,424
441,310
330,480
The carrying amounts of the Group’s total borrowings are denominated in the following currencies:
Euro
GBP Sterling
US Dollar
The Group has the following undrawn borrowing facilities:
Floating rate:
- Expiring within one year
- Expiring beyond one year
Finance lease liabilities minimum lease payments:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Future fi nance charges on fi nance leases
Present value of fi nance lease liabilities
The present value of fi nance lease liabilities is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
2006
€’000
2005
€’000
271,362
81,614
130,829
104,293
74,074
150,190
483,805
328,557
2006
€’000
2005
€’000
17,501
120,770
17,856
158,327
138,271
176,183
2006
€’000
2005
(as restated)
€’000
1,360
1,143
3,430
3,429
1,486
1,307
3,430
4,573
9,362
(1,449)
10,796
(1,806)
7,913
8,990
2006
€’000
2005
(as restated)
€’000
1,051
869
2,821
3,172
1,133
995
2,712
4,150
7,913
8,990
92
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
31 Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes relate to the same fi scal authority. The following amounts,
determined after appropriate offsetting, are shown in the consolidated balance sheet:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liability
The gross movement on the deferred income tax account is as follows:
At the beginning of the year
Implementation of IAS 32 and IAS 39
Income statement - pre-exceptional charge (note 11)
Income statement - exceptional credit
Transfer to associate
Acquisition of subsidiary and purchase of intellectual property
Deferred tax charged to the fair value reserve (note 24)
Deferred tax charge/(credit) relating to the actuarial gain/(loss) in the year
Exchange differences
At the end of the year
2006
€’000
2005
€’000
(23,923)
(15,869)
38,611
34,471
14,688
18,602
2006
€’000
2005
€’000
18,602
-
3,663
(11,622)
-
1,330
695
3,923
(1,903)
18,076
630
6,879
(6,421)
(161)
1,791
(420)
(4,054)
2,282
14,688
18,602
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of
balances within the same tax jurisdiction, is as follows:
Deferred tax liabilities
Accelerated
tax
depreciation
€’000
Deferred
Fair value development
costs
€’000
gains
€’000
At 1 January 2005
Implementation of IAS 32 and IAS 39
Charged/(credited) to income statement
Credited to equity
Transfer to associate
Acquisition of subsidiaries and intellectual property
Exchange differences
23,438
-
4,144
-
-
104
2,056
-
630
-
(420)
-
-
-
-
-
228
-
-
-
-
Other
€’000
Total
€’000
6,937
-
(4,398)
-
(161)
1,687
226
30,375
630
(26)
(420)
(161)
1,791
2,282
At 31 December 2005
29,742
210
228
4,291
34,471
Charged/(credited) to income statement
Charged against equity (note 24)
Acquisition of subsidiaries and
intellectual property (note 40)
Exchange differences
5,000
-
-
(1,881)
-
695
-
-
176
-
-
(28)
(1,303)
-
1,330
151
3,873
695
1,330
(1,758)
At 30 December 2006
32,861
905
376
4,469
38,611
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
93
Deferred tax assets
At 2 January 2005
Charged to income statement
Credited to equity
At 31 December 2005
Charged/(credited) to income statement
Charged against equity
Exchange differences
Retirement
obligations
€’000
Impairment
of assets
€’000
Tax
losses
€’000
Other
€’000
Total
€’000
(12,299)
484
(4,054)
(15,869)
279
3,923
-
-
-
-
-
-
-
-
-
-
-
-
(12,111)
-
(145)
-
-
-
(12,299)
484
(4,054)
-
(15,869)
-
-
-
(11,832)
3,923
(145)
At 30 December 2006
(11,667)
-
(12,256)
-
(23,923)
The deferred tax charged/(credited) to equity during the year is as follows:
Fair value reserves in shareholders equity
- Available for sale investments
- Hedging reserve
Impact of increase in retirement benefi t obligations
2006
€’000
2005
€’000
20
675
3,923
(82)
(338)
(4,054)
4,618
(4,474)
The decrease in the retirement benefi t obligation has given rise to a reduction in the related deferred tax asset. A deferred
tax asset has been recognised on the basis that the realisation of the related tax benefi t through future taxable profi ts is
probable. Deferred tax assets are recognised for tax losses carry forwards to the extent that realisation of the related tax
benefi t through the future taxable profi ts is probable. The Group has unrecognised tax losses of €25.9 million
(2005: €67.2 million) to carry forward against future taxable income. Deferred tax liabilities have not been recognised for
withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries, associates and
joint ventures.
32 Retirement benefi t obligations
Pension benefi ts
The Group operates a number of defi ned benefi t and defi ned contribution schemes which provide retirement and death
benefi ts for the majority of employees. The schemes are funded through separate trustee controlled funds.
The contributions paid to the defi ned benefi t schemes are in accordance with the advice of professionally qualifi ed
actuaries. The latest actuarial valuation reports for these schemes, which are not available for public inspection, are dated
between 30 June 2003 and 1 January 2006. The contributions paid to the scheme in 2006 are in accordance with the
contribution rates recommended in the actuarial valuation reports.
The amounts recognised in the balance sheet are determined as follows:
Present value of funded obligations
Fair value of plan assets
Liability in the balance sheet
The pension plan assets include 189,610 of the Company’s ordinary shares.
2006
€’000
2005
€’000
(501,473)
376,585
(503,845)
338,829
(124,888)
(165,016)
94
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
The amounts recognised in the income statement are as follows:
Service cost - current
Service cost - past
Interest cost
Expected return on plan assets
Curtailment
Defi ned contribution
The actual movement on plan assets was €37.7 million (2005: €53.5 million).
The movement in the liability recognised in the balance sheet over the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Liability assumed on acquisition of CMP
Total expense – as shown above
Actuarial gains/(losses) – shown in equity
Contributions paid
At the end of the year
The movement in obligations over the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Liability assumed on acquisition of CMP
Current service cost
Past service cost
Interest cost
Actuarial gains/(losses) – shown in equity
- Experience losses
- Change in assumptions
Contributions by plan participants
Curtailments
Benefi ts paid
At the end of the year
2006
€’000
2005
€’000
(10,176)
(375)
(17,266)
20,100
1,282
(7,702)
-
(15,718)
16,908
723
(6,435)
(5,789)
(1,026)
(738)
2006
€’000
2005
€’000
(165,016)
(825)
(614)
-
(6,435)
36,852
11,150
(126,676)
(751)
(607)
(350)
(5,789)
(42,303)
11,460
(124,888)
(165,016)
2006
€’000
2005
€’000
(503,845)
(2,180)
(4,967)
-
(10,176)
(375)
(17,266)
(412,052)
(2,085)
(4,589)
(350)
(7,702)
-
(15,718)
(12,651)
37,928
(4,382)
3,670
12,771
(2,037)
(68,649)
(4,578)
2,929
10,986
(501,473)
(503,845)
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
95
The movement in the fair value of plan assets over the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Expected return on plan assets
Actuarial gains shown in equity - experience gains
Contributions by plan participants
Contributions by employer
Curtailments
Benefi ts paid
At the end of the year
2006
€’000
2005
€’000
338,829
1,355
4,353
20,100
11,575
4,382
11,150
(2,388)
(12,771)
285,376
1,334
3,982
16,908
28,383
4,578
11,460
(2,206)
(10,986)
376,585
338,829
The principal actuarial assumptions used were as follows:
2006
2005
IRL
UK
IRL
UK
Discount rate
Expected return on plan assets
Future salary increases
Future pension increases
4.7%
4.7%-8.5%
3.5%
2.25%-3.5%
5.3%-5.4%
4%-8.0%
3.75%
2.25%-3.25%
4.3%
4.8%-8.5%
3.5%
2.25%-3.5%
4.9%-5.0%
4.1%-8.0%
3.55%
2.0%-3.25%
2006
€’000
2005
€’000
Actuarial (gains)/losses recognised in the statement of recognised income and expense
(36,852)
42,303
Cumulative actuarial losses recognised in the statement of recognised income and expense
51,206
88,058
Plan assets are comprised as follows:
Equity
Bonds
Other
2006
€’000
244,240
92,125
40,220
%
65
24
11
2005
€’000
222,943
89,660
26,226
%
66
26
8
376,585
100
338,829
100
The expected return on plan assets was determined by considering the expected returns available on the assets underlying
the current investment policy. Expected yields on fi xed interest investments are based on gross redemption yields as at
the balance sheet date. Expected returns on equity and property refl ect long-term real rates of return experienced in the
respective markets.
Expected contributions to post-employment benefi t plans for the year ending 29 December 2007 are broadly
in line with 2006 contributions.
Mortality rates
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics
and experience in each territory. The mortality assumptions imply the following life expectancies in years of a pensioner
retiring at age 65:
Male
Female
Irish mortality UK mortality
rates
rates
17.9
20.9
19.8
22.8
96
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
At year end
Present value of defi ned benefi t obligation
Fair value of plan assets
Defi cit
2006
€’000
2005
€’000
2004
€’000
(501,473)
376,585
(503,845)
338,829
(412,052)
285,376
(124,888)
(165,016)
(126,676)
Experience adjustments on plan liabilities
(12,651)
(2,037)
(6,341)
Experience adjustments on plan assets
11,575
28,383
5,911
33 Provisions for other liabilities and charges
At 31 December 2005
Charged to the consolidated income statement
- Additional provisions
Net amounts (credited)/charged to provision
Exchange differences
Restructuring
€’000
UK
pension
€’000
Other
€’000
Total
€’000
8,433
5,535
537
14,505
5,810
(7,133)
-
-
(323)
124
-
223
(64)
5,810
(7,233)
60
At 30 December 2006
7,110
5,336
696
13,142
Non-current
Current
-
7,110
5,336
-
696
-
6,032
7,110
7,110
5,336
696
13,142
(a) Restructuring provision relates to the closure of the Pigmeat cannery operation.
(b)
The UK pension provision relates to administration and certain costs associated with pension schemes relating to
businesses disposed of in prior years.
34 Capital grants
At 31 December 2005
Receivable for year
In acquired subsidiaries
Currency translation adjustment
Released to income statement (note (i))
At 30 December 2006
2006
€’000
2005
€’000
14,855
123
-
4
(4,322)
15,276
772
231
-
(1,424)
10,660
14,855
(i)
Includes amounts released to the income statement as an exceptional credit in respect of capital grants relating to the
Pigmeat operation (note 7).
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
97
35 Trade and other payables
Trade payables
Amounts due to associates and joint ventures
Amounts due to other related parties (note 41)
Amounts due to subsidiary companies
PAYE and PRSI
Accrued expenses
Other payables
Less non-current portion: deferred consideration
The fair value of payables are not materially different to the book values.
36 Derivative fi nancial instruments
Interest rate swaps not qualifying as hedges
Interest rate swaps - cash fl ow hedges
Interest rate swaps - fair value hedges
Forward foreign exchange contracts - cash fl ow hedges
Other cash fl ow hedges
Other fair value hedges
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
20
-
-
10,474
-
1,400
-
96,612
18,669
17
-
3,824
140,375
22,649
20
-
551
18,512
-
1,427
-
2005
Group
€’000
118,874
10,823
6,271
-
3,677
134,526
4,412
11,894
-
282,146
(11,373)
20,510
-
278,583
-
11,894
270,773
20,510
278,583
2006
Assets
€‘000
2006
Liabilities
€‘000
2005
Assets
€‘000
2005
Liabilities
€‘000
-
3,593
-
1,843
636
2,799
-
-
(4,242)
(11)
(42)
(2,799)
-
2,752
-
92
44
62
(630)
-
-
(1,558)
(297)
(62)
Total
8,871
(7,094)
2,950
(2,547)
Less non-current portion
Interest rate swaps - cash fl ow hedges
Interest rate swaps - fair value hedges
2,095
-
-
(3,406)
1,825
-
-
-
Current portion
6,776
(3,688)
1,125
(2,547)
Other cash fl ow hedges and other fair value hedges represent commodity futures.
Forward foreign exchange contracts
The notional principal amounts of the outstanding foreign exchange contracts at 30 December 2006 are €58.0 million
(2005: €75.1 million).
Gains and losses recognised in the fair value reserve in equity on forward foreign exchange contracts as of 30 December 2006
will be released to the income statement at various dates within one year from the balance sheet date.
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as cashfl ow hedges, at 30
December 2006 were €248.7 million (2005: €118.3 million).
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as fair value hedges, at 30
December 2006 were €272.5 million (2005: €nil).
At 30 December 2006, the fi xed interest rates vary from 3.2375% to 4.3300% (2005: 3.2375% to 4.3300%) and the main
fl oating rates are set in advance by reference to inter-bank interest rates (3.8353% EURIBOR, 5.35438% $LIBOR).
Gains and losses recognised in the hedging reserve in equity on interest rate swap contracts as of 30 December 2006 will
be continuously released to the income statement until repayment of the bank borrowings.
98
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
Financial guarantee contracts
In accordance with Group accounting policy, management has reviewed the fair values associated with fi nancial guarantee
contracts, as defi ned within IAS 39 (Financial Instruments: Recognition and Measurement) issued in the name of Glanbia
plc (the Company) and has determined that their value is not signifi cant. No adjustment has been made to the Glanbia plc
company balance sheet to refl ect fair value of the fi nancial guarantee contracts issued in its name.
37 Contingent liabilities
Company
The Company has guaranteed the liabilities of certain subsidiaries in Ireland in respect of any losses or liabilities (as defi ned
in Section 5 (c) of the Companies (Amendment) Act 1986) for the year ended 30 December 2006 and the Directors are of
the opinion that no losses will arise therefrom. These subsidiaries avail of the exemption from the fi ling of audited fi nancial
statements, as permitted by Section 17 of the Companies (Amendment) Act, 1986.
Group
(i)
Bank guarantees, amounting to €13,794,000 (2005: €15,252,000) are outstanding as at 30 December 2006, mainly in
respect of payment of EU subsidies. The Group does not expect any material loss to arise from these guarantees.
(ii)
Under the terms of a Sale and Purchase Agreement concluded with Milk Link Limited dated 21 February 2004, the Group
retained a 25% interest in its UK hard cheese business through The Cheese Company Holdings Limited (“TCCH”).
On 29 December 2006 the Group sold its remaining 25% interest and Stg£35 million loan note in TCCH to the majority
shareholder, Milk Link Limited. A subsidiary of TCCH, The Cheese Company Limited (“TCC”) has become the subject
of an investigation by the Offi ce of Fair Trading (“OFT”) in the UK under Chapter 1 of the Competition Act 1998 into
whether TCC agreed and/or concerted with other undertakings on prices in the supply of cheese and other products
at the wholesale/retail level. We understand TCC continue to assist the OFT in its investigation. A possible contingent
liability remains for the Group under the terms of the Sale and Purchase Agreement dated 21 February, 2004.
38 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not recognised in the fi nancial statements is
as follows:
Property, plant and equipment
Capital commitments not contracted for amounted to €76.6 million (2005: €55.6 million).
2006
€’000
2005
€’000
11,787
23,258
Operating lease commitments - where the Group is the lessee
The Group leases various assets. Generally operating leases are on a short-term basis with no purchase options. The future
aggregate minimum lease payments under non-cancellable operating leases are as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2006
€’000
4,717
11,418
7,401
2005
€’000
6,595
14,204
7,258
23,536
28,057
Other commitments
The Group together with the other shareholders in Southwest Cheese Company LLC (“the Joint Venture”) is a party to a
Sponsor Support Agreement, as part of the fi nancing of the Joint Venture. Under the agreement, each sponsor severally
agrees to provide support to the Joint Venture either by equity contributions or by way of loan:
- to enable the Joint Venture to achieve the project construction completion date; and
- to indemnify the Joint Venture for any amounts necessary to discharge Mechanics Liens.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
99
39 Cash generated from operations
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
2005
Group
(as restated)
€’000
Profi t for the year
16,959
66,270
21,879
57,713
Non-cash restructuring costs
Non-cash loss on repayment of loan note
Share of results of associates and joint ventures
Income taxes
Depreciation
Amortisation
Cost of share options
Gain on disposal of investments
Loss on write-off of investments
Gain on disposal of property, plant and equipment
Interest income
Interest expense
Dividends received
Amortisation of government grants received
Net profi t before changes in working capital
Change in net working capital
- Increase in inventory
- (Increase)/decrease in short-term receivables
- (Decrease)/increase in short-term liabilities
- (Decrease)/increase in provisions
-
-
-
-
-
-
199
-
57
-
(2,125)
-
(10,508)
-
-
9,178
(2,842)
(4,351)
25,415
4,452
199
(1,541)
-
(7,531)
(4,883)
18,918
-
(4,322)
-
-
-
-
-
98
161
(898)
1,687
-
(2,053)
-
(16,214)
-
2,172
-
(932)
657
24,085
3,313
161
(10,959)
-
(2,509)
(4,209)
22,662
-
(1,424)
4,582
98,962
4,660
90,730
-
(947)
(8,616)
-
(2,684)
(25,137)
(11,332)
(1,323)
-
1
3,620
-
(5,501)
35,419
36,045
7,142
Cash generated from operations
(4,981)
58,486
8,281
163,835
40 Business combinations
Seltzer acquisition
On 6 September 2006, the Group acquired the business of Seltzer Chemicals, Inc. Seltzer is a leading US nutritional
solutions business with strong expertise in the development of customised formulations and the distribution of speciality
ingredients for the nutritional supplement, food and pharmaceutical markets for a consideration of US$105 million.
The acquired business contributed operating profi t of €1.7 million to the Group for the period from 6 September 2006 to
30 December 2006.
100
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
Details of net assets acquired and goodwill arising from the above business combinations are as follows:
Purchase consideration:
- Cash paid
- Contingent consideration
- Direct costs relating to the acquisition
Total purchase consideration
Fair value of assets acquired
Goodwill (note 15)
€’000
62,333
19,470
1,314
83,117
20,969
62,148
The goodwill is attributable to the profi tability and workforce of the acquired business and the benefi ts associated
with the extension of Glanbia’s scale and specifi c capabilities to the acquired business, synergies and other benefi ts.
The assets and liabilities arising from the acquisition are as follows:
Cash and cash equivalents
Property, plant and equipment (note 14)
Other intangible assets (note 15)
Inventories
Receivables
Deferred tax (note 31)
Payables
Net assets acquired
Purchase consideration settled in cash
Contingent consideration
Cash outfl ow on acquisition
Fair
value
€’000
779
1,278
16,589
1,857
5,831
(1,330)
(4,035)
Acquiree’s
carrying
amount
€’000
779
1,278
-
1,857
5,831
-
(4,035)
20,969
5,710
83,117
(19,470)
63,647
The contingent consideration is dependant on the achievement of a targeted earnings fi gure.
The fair values assigned to the identifi able assets and liabilities have been determined provisionally. Any adjustments to
these provisional valuations will be recognised within 12 months of the acquisition date.
In the year ended 31 December 2005, the Group acquired the following:
(a) CMP Dairy, an Irish based dairy processing business.
(b) Pro-Fibe Nutrition, a UK company specialising in customised solutions for the sports nutrition market.
(c) A 100% share in Zymalact, a small family owned dairy blending and processed cheese manufacturing company.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
101
41 Related party transactions
The Group is controlled by Glanbia Co-operative Society Limited (“the Society”), which holds 54.66% of the issued share
capital of the Company and is the ultimate parent of the Group.
The following transactions were carried out with related parties:
(a) Sales of goods and services
Sales of goods:
- Associates
- Joint ventures
- Key management
Sales of services:
- The Society
- Joint ventures
- Subsidiaries
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
-
-
-
-
3,644
57,549
574
61,767
-
-
-
-
-
-
6,416
1,325
5,399
-
-
-
7,377
2005
Group
€’000
3,496
21,931
527
25,954
1,849
902
-
6,416
6,724
7,377
2,751
Sales to related parties were carried out on normal commercial terms and conditions.
(b) Purchases of goods and services
Purchases of goods:
- Associates
- Joint ventures
- Key management
Purchases of services:
- The Society
- Joint ventures
- Key management
- Subsidiaries
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
-
-
-
-
10,760
17,326
1,800
29,886
-
-
-
-
-
-
-
1,729
-
404
4
-
254
-
-
1,539
1,729
408
1,793
2005
Group
€’000
10,628
18,313
1,762
30,703
254
-
-
-
254
Purchases from related parties were carried out on normal commercial terms and conditions.
102
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
(c) Key management compensation
Salaries and other short-term employee benefi ts
Post-employment benefi ts
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
-
-
-
3,539
487
4,026
-
-
-
(d) Year-end balances arising from sales/purchases of goods/services
2005
Group
€’000
2,504
413
2,917
2005
Group
€’000
217
1,312
67
1,596
6,271
1,233
9,590
11
-
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
-
-
-
-
237
3,064
14
3,315
-
-
-
-
-
-
-
-
10,474
17
1,068
17,601
-
-
551
-
-
-
18,512
10,474
18,686
19,063
17,105
2006
Company
€’000
2006
Group
€’000
2005
Company
€’000
-
-
-
4,929
-
-
-
-
-
2005
Group
€’000
-
56,874
2,905
Receivables from related parties:
- Associates
- Joint ventures
- Key management
Payables to related parties:
- The Society
- Associates
- Joint ventures
- Key management
- Subsidiaries
(e) Other related party balances
Loan to Southwest Cheese Company
Loan to The Cheese Company Holdings Limited
Loan to Glanbia Cheese Limited
(f)
Glanbia Co-operative Society Limited made a decision in 2006 to support its members during the diffi culties arising
from the Common Agricultural Policy Reform by way of a €16 million bonus payment to milk and grain suppliers.
Glanbia Co-operative Society Limited is the majority shareholder of the Company.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
103
42 Directors’ and Secretary’s interests
The interests of the Directors and Secretary and their spouses and minor children in the share capital of the Company, the
holding Society and subsidiary companies/societies were as follows:
(a) Glanbia plc
Benefi cial
Directors
MJ Walsh
L Herlihy
JV Quinlan
JJ Moloney
JE Callaghan
HV Corbally
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
P Gleeson
P Haran
CL Hill
MN Keane
ML Keane
JV Liston
GJ Meagher
M Merrick
WG Murphy
M Parsons
EM Power
KE Toland
Secretary
M Horan
*
§
§
*
*
* Executive Director.
** Or at date of appointment if later.
§ Appointed on 24 May 2006.
Ordinary shares of €0.06
30/12/2006 01/01/2006
**
23,708
81,804
21,347
94,593
35,000
3,495
24,171
50,501
2,842
21,423
7,462
30,029
20,000
22,104
15,000
212,327
1,600
230,827
26,344
37,893
23,243
23,708
81,804
21,347
84,593
35,000
1,495
24,171
50,501
2,842
2,423
7,462
31,966
-
22,104
5,000
212,327
-
230,827
26,344
37,893
23,243
4,593
4,593
104
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
(b) Glanbia plc
Directors’ and Secretary’s options
Details of movements on outstanding options over the Company’s ordinary share capital are set out below.
Outstanding options are exercisable on dates between 2006 and 2014.
Options - Ordinary shares of €0.06
Movements
01/01/2006 during year 30/12/2006
Benefi cial
Directors
JJ Moloney
1988 Share Option Scheme
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
GJ Meagher
1988 Share Option Scheme
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
150,000
290,000
150,000
75,000
205,000
75,000
-
-
-
-
-
-
150,000
290,000
150,000
75,000
205,000
75,000
Exercise
price
€
4.25
1.55
2.725
4.25
1.55
2.725
WG Murphy
1988 Share Option Scheme
75,000
(75,000)
-
4.25
KE Toland
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
164,000
100,000
-
-
164,000
100,000
1.55
2.725
[a]
[b]
[c]
[a]
[b]
[c]
[a]
[b]
[c]
Options:
[a] Exercisable by Directors at any time up to May 2008.
[b] Exercisable by Directors at any time up to 2012.
[c] Exercisable by Directors between 2007 and 2014.
There were no other changes in the interests of the Directors and Secretary between 30 December 2006 and
23 February 2007.
GJ Meagher, JJ Moloney and KE Toland as participants of the 2002 Long Term Incentive Plan as noted at [b] above,
are eligible for a share award of 10% of the ordinary shares they continue to hold following the second anniversary of
the exercise of the option.
GJ Meagher as a participant of the 2002 Long Term Incentive Plan as noted at [c] above, is eligible for a share award
of 10% of the ordinary shares he continues to hold following the second anniversary of the exercise of the option.
JJ Moloney as participant of the 2002 Long Term Incentive Plan as noted at [c] above, is eligible for a share award of
6.6% of the ordinary shares he continues to hold following the second anniversary of the exercise of the option.
Participants in the Sharesave Scheme are deemed to be interested in 262,503 ordinary shares benefi cially owned
by the Glanbia Employees’ Share Trust as at 30 December 2006 (262,503 ordinary shares as at 23 February 2007).
The market price of the ordinary shares as at 30 December 2006 was €2.96 and the range during the year
was €1.93 to €3.13. The average price for the year was €2.55. The 1988 Share Option Scheme expired on
31 August 1998.
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
105
(c) Glanbia Co-operative Society Limited
‘A’ Ordinary shares
of €1
Convertible
loan stock units
of €0.01269738
‘C’ shares
of €0.01
30/12/2006
01/01/2006 30/12/2006 01/01/2006 30/12/2006 01/01/2006
**
**
**
Benefi cial
Directors
MJ Walsh
L Herlihy
JV Quinlan
JJ Moloney
HV Corbally
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
CL Hill
MN Keane
ML Keane
*
GJ Meagher
*
M Merrick
WG Murphy
M Parsons
EM Power
Secretary
M Horan
14,374
89,398
9,585
-
5,675
25,563
24,034
2,844
20,480
6,117
18,972
-
1,824
-
7,810
26,300
13,774
87,916
9,090
-
4,265
22,457
23,044
2,365
18,396
5,593
18,381
-
1,504
-
6,820
25,082
198,691
1,600,438
-
-
320,305
526,823
340,786
289,947
-
224,023
437,231
-
395,495
-
304,961
340,976
242,589
1,100,000
1,983,609
1,866,068 33,452,288 16,626,637
1,067,686
1,509,000
4,634,869
7,452,304
63,498
168,706
-
-
6,497,492
7,213,532
3,714,146
7,157,402
3,426,974
4,340,461
56,376
84,564
253,948
575,940
8,880,921
8,500,000
200,000
-
2,904,610
3,095,071
1,269,738
1,980,360
4,945,207
6,785,305
-
-
374,467
637,924
416,134
335,196
-
224,023
539,623
-
469,002
-
344,734
416,623
-
-
-
- 1,000,000
-
Executive Director.
*
** Or at date of appointment if later.
There have been no changes in the above interests between 30 December 2006 and 23 February 2007.
106
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes to the fi nancial statements (continued)
for the year ended 30 December 2006
43 Principal subsidiary and associated undertakings
(a) Subsidiaries
Incorporated and operating in
Principal place of business
Principal activities
Group
interest %
Ireland
Glanbia Foods Society Limited
Ballyragget, Co. Kilkenny
and Citywest, Dublin 24
Dairying, liquid milk, consumer food
products and general trading
Glanbia Consumer Foods Limited
Inch, Co. Wexford and
Kilkenny
Fresh dairy products and soups
Glanbia Ingredients
(Ballyragget) Limited
Glanbia Ingredients
(Virginia) Limited
Ballyragget, Co. Kilkenny
Milk products
Virginia, Co. Cavan
Milk products
Glanbia Fresh Pork Limited
Edenderry, Co. Offaly
Pork and bacon products
Glanbia Farms Limited
Glanbia Feeds Limited
Glanbia Estates Limited
Avonmore Proteins Limited
Glanbia Financial Services
Glanbia Investments
(Ireland) Limited
Glassonby
Waterford Foods plc
Cavan and Mayo
Pig rearing
Enniscorthy, Co. Wexford
and Portlaoise, Co. Laois
Manufacture of animal
feed products
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Property and land dealing
Financing
Financing
Holding company
Investment holding
Holding company
D. Walsh & Sons Limited
Palmerstown, Co. Kilkenny
Grain and fertilizers
100
100
100
100
100
100
100
100
100
100
100
100
100
60
Grassland Fertilizers
(Kilkenny) Limited
Britain and Northern Ireland
Palmerstown, Co. Kilkenny
Fertilizers
73.34
Glanbia Feedstuffs Limited
Tamworth, Staffordshire
Supply of animal feeds
Glanbia (UK) Limited
Tamworth, Staffordshire
Holding company
Glanbia Holdings Limited
Tamworth, Staffordshire
Holding company
Glanbia Investments (UK) Limited
Tamworth, Staffordshire
Investment holding
Glanbia Nutritionals (UK) Limited
Middlesborough
Sports nutrition products
Glanbia Foods (NI) Limited
Portadown, Co. Armagh
Consumer food products
United States
Glanbia Foods Inc.
Glanbia Inc.
Twin Falls, Idaho
Milk products
Delaware
Holding company
Seltzer Companies Inc.
San Diego, California
Nutrient delivery systems
Germany
Glanbia Nutritionals
Deutschland GmbH
Netherlands
Glanbia Foods BV
Mexico
Orsingen-Nensingen
Nutrient delivery systems
Moergestel
Holding company
Zymalact Mexico S.A. de C.V.
Lerma
Dairy blending
and processed cheese
100
100
100
100
100
100
100
100
100
100
100
100
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
107
(b) Associates and joint ventures
Incorporated in
Ireland
Co-operative Animal Health
Limited
South Eastern Cattle
Breeders Society Limited
Malting Company of Ireland
Limited
South East Port Services
Limited
Nashs Mineral Waters
(Marketing) Limited
Corman Miloko
Ireland Limited
Britain and Northern
Ireland
Dates to which
results included
Principal place
of business
Principal activities
Group
interest %
31 December 2005
Tullow, Co. Carlow
Agri chemicals
31 December 2005
Thurles, Co. Tipperary
Cattle breeding
50
57
31 October 2006
Togher, Co. Cork
Malting
33.33
30 December 2006
Kilkenny
Port services
30 December 2006
30 December 2006
Newcastle West,
Co. Limerick
Carrick-on-Suir,
Co. Tipperary
Magheralin and
Llangefni
Mineral waters and soft
drinks
Butter products
Cheese products
Evaporated and
powdered milk
Glanbia Cheese Limited
30 December 2006
Milk Ventures (UK) Limited
30 November 2006
Nigeria
United States
Southwest Cheese
Company, LLC
Mexico
Conabia de Mexico
S.A. de C.V.
30 December 2006
Clovis, New Mexico
Milk products
30 December 2006
Mexico City
Dairy ingredients
49
50
45
51
50
50
50
Pursuant to Section 16 of the Companies Act, 1986 a full list of subsidiaries, joint venture and associated undertakings will
be annexed to the Company’s Annual Return to be fi led in the Companies Registration Offi ce in Ireland.
108
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Notes
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 6
Glanbia plc is a leading international dairy foods and nutritional ingredients Group, headquartered
in Ireland. The Group is successfully developing a strategic international presence, which today
represents nearly 40% of revenue. At the same time, the Group continues to consistently improve
the cost base, productivity and long-term sustainability of the Irish operations. Combined these give
Glanbia a strong platform from which to continue to grow and develop.
Contents
Performance Highlights
Our Business
Chairman’s Statement
Group Managing Director’s Review
Our Strategy Explained
Business Review
Consumer Foods
Agribusiness and Property
Food Ingredients and Nutritionals
Nutritionals
Joint Ventures and Associates
Corporate Social Responsibility
Finance Review
Board of Directors
Management
Report of the Directors
Corporate Governance
Financial Statements
1
2
4
6
10
12
12
16
18
21
24
27
30
32
34
35
38
46
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(cid:69)
(cid:1)(cid:152)(cid:152)(cid:213)(cid:62)(cid:143)(cid:202)(cid:44)(cid:105)(cid:171)(cid:156)(cid:192)(cid:204)(cid:202)(cid:211)(cid:228)(cid:228)(cid:200)
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Glanbia plc, Glanbia House, Kilkenny, Ireland.
Tel. +353 56 777 2200 Fax. +353 56 777 2222
www.glanbia.com