Glanbia plc Annual Report 2011
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About us
Glanbia plc is an integrated global nutritionals and large scale global
dairy business. Our operations are based in Ireland, mainland Europe,
the USA, Africa and Asia. We have market leading positions in
cheese, performance nutrition, dairy ingredients, whey proteins and
micronutrients. Our products are exported to or sold in over 130 countries
worldwide. We are organised into three principal business divisions and
employ over 4,500 people in 14 countries. Our shares are listed on the
Irish and London Stock Exchanges (Symbol: GLB).
Total Group Revenue
€3.2 billion
Total Group EBITA
€204.7 million
Employees
4,500+
Operations
14 countries
Exports
130+ countries
About this report
Throughout this report we have
included portraits of people who
represent key aspects of our business.
These include our farmer suppliers,
processing plant personnel, scientists
from our research and development
teams, customers who buy and
consume our products and other
Glanbia employees; all of whom
contribute to the success of the Group.
We have also included a more
detailed view of our business model
to demonstrate the integrated nature
of Glanbia. Our strategy is built on a
global dairy base combined with a
specialist global nutritional business.
This means we play to our core
strengths as a business with deep
roots and understanding of the
dairy sector.
Caption here
Overview
2
2011 performance
4 Divisional performance
Group performance
6 Group Chairman’s statement
8
Group Managing Director’s review
14 Understanding our business
16 Group Finance Director’s review
22 Risk management
27 Our responsibilities
Divisional performance
34 Our global footprint
36 Dairy Ireland
38 US Cheese & Global Nutritionals
40 Joint Ventures & Associates
Governance
42
Group Chairman’s introduction to
corporate governance
43
Governance and risk framework
44
Board of Directors and
senior management
49 Committee reports
> Audit Committee report
> Nomination Committee report
> Remuneration Committee report
66 Applying the principles of the UK
Corporate Governance Code
73 Other statutory information
77 Statement of Directors'
responsibilities
Understanding our business
Glanbia has leading domestic,
international and global market
positions. In total the Group
processes almost six billion
litres of milk into cheese and a
range of dairy-based ingredients.
Exports from Ireland are to more
than 50 countries, US Cheese is
growing its export markets and
Performance Nutrition products
are now sold in over 100
countries world-wide.
Dairy Ireland
> 1.6 billion litres of milk
> 38,000 tonnes of cheese
> 177,000 tonnes of dairy based ingredients
US Cheese & Global Nutritionals
> 1.8 billion litres of milk
> 190,000 tonnes of cheese
> 60,000 tonnes of dairy based ingredients
Joint Ventures & Associates
> 2.4 billion litres of milk
> 257,000 tonnes of cheese
> 26,000 tonnes of dairy based
ingredients
Leading
US producer of American-style
cheddar cheese
No.1
European producer of
mozzarella cheese
No. 3
Consumer packaged
dairy powders
in Nigeria
No.1
Irish dairy
consumer brand
Irish supplier of
farm inputs
Leading
Irish dairy processor
No.1
European manufacturer of
enriched milk powders
Leading
Global brand family in
performance nutrition
Global marketer of
whey protein isolate
Global supplier of
micronutrient premixes
Whey
protein
Customised
Premix
Solutions
Performance
Nutrition
Ingredient
Technologies
Global Nutritionals
Dairy
protein
Whey
Whey
Milk
Cheese
Yoghurt
Soup
(cid:18)(cid:9)(cid:14)(cid:19)(cid:20)(cid:17)(cid:7)(cid:7)(cid:4)
Cheese
Cheese
Agribusiness
Consumer Products
Dairy Ingredients
US Cheese
Southwest Cheese, USA
Dairy Ireland
8
US Cheese &
Global Nutritionals
12
Joint Ventures &
Associates
4
Nutricima,
Nigeria
Cheese
Glanbia
Cheese, UK
Financial statements
80
Independent auditors’ report
82 Group income statement
83 Group statement of
comprehensive income
Milk
Milk
Milk
Milk
Milk
Milk
Milk
Milk
Milk
14
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Understanding our business
www.glanbia.com
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Understanding our business
www.glanbia.com
15
84 Group statement of changes
in equity
P14
Understanding our business
85 Group statement of financial position
86 Group statement of cash flows
87 Company statement of
financial position
88 Company statement of changes
Nigeria
in equity
89
Company statement of
comprehensive income and
statement of cash flows
5.8 billion
litres of milk
485,000
tonnes of cheese
263,000
tonnes of dairy-based ingredients
Dairy Ireland
US Cheese & Global Nutritionals
Joint Ventures & Associates
90 Notes to the financial statements
Our global footprint
We have a strong global
presence in key food
markets and sectors
around the world. The
Group has manufacturing
operations in seven
countries, sales and
technical support locations
in 14 countries and our
products are sold to over
130 countries worldwide.
Manufacturing & processing
and sales/technical locations
Dairy Ireland
US Cheese & Global Nutritionals
Joint Ventures & Associates
Glanbia plc head office
Glanbia Innovation Centre
Sales and technical support locations
Export and product distribution locations
Ireland
> Glanbia plc head office
North America
> 10 manufacturing/processing
Asia Pacific
> 1 manufacturing/processing
> 8 manufacturing/processing
facilities
facility
facilities
> 6 sales and technical support
> 5 sales and technical support
> 4 sales and technical support
locations
locations
locations
> 1 innovation and customer
> 9 export/distribution markets
> 52 Agribusiness branches
> 1 innovation centre
collaboration centre
> 55 employees
> 120+ export/distribution markets
> 50+ export/distribution markets
> 1,812 employees
> 1,835 employees
Europe
> 4 manufacturing/processing
South America
> 1 sales and technical support
Africa
> 1 manufacturing/processing
facilities
location
facility
> 5 sales and technical support
locations
> 30+ export/distribution markets
> 511 employees
> 1 sales and technical support
location
> 1 export/distribution market
> 359 employees
34
Glanbia plc Annual Report 2011
Directors' Report: Divisional performance
Our global footprint
www.glanbia.com
Glanbia plc Annual Report 2011
Directors' Report: Divisional performance
Our global footprint
www.glanbia.com
35
P34
Our global footprint
Other information
148 Five year financial summary
149 Shareholders’ information
152 Contacts
153 Index
www.glanbia.com
Pages two to 77 make up the
Directors’ Report in accordance with
the Companies Acts, 1963 to 2009.
2011 performance
The increase in total Group revenue and EBITA in 2011 is attributable to strong
underlying organic volume growth, the impact of 2011 acquisitions, primarily
Bio-Engineered Supplements and Nutrition (BSN®) and higher global dairy prices.
These results underpinned excellent growth in adjusted earnings per share and a
10% dividend increase for the full year.
2
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4.8%
4.3%
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0707
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€ billion
€ million
%
Total Group(1) revenue
2011: €3.2 billion; up 23.7%
Total Group EBITA(2)
pre exceptional
2011: €204.7 million; up 18.2%
Total Group EBITA margin
pre exceptional
2011: 6.4%; down 30 bps
Total Group revenue, including share
of Joint Ventures & Associates,
grew by 23.7% to €3.2 billion (2010:
€2.6 billion).
Total Group EBITA, including share of
Joint Ventures & Associates, increased
by 18.2% to €204.7 million (2010:
€173.2 million).
Revenue in US Cheese & Global
Nutritionals was up by 28.9% to
€1.32 billion (2010: €1.02 billion).
Revenue in Dairy Ireland grew by
18.9% to €1.35 billion (2010:
€1.14 billion).
Our share of revenue in Joint Ventures
& Associates grew by 25.8% to
€524.2 million (2010: €416.6 million).
Other Business is a very small
segment representing less than 0.3%
of total Group.
US Cheese & Global Nutritionals
delivered year-on-year EBITA growth of
16.9% to €122.2 million (2010: €104.5
million) driven by the performance of
Global Nutritionals.
Dairy Ireland EBITA grew by 20.9% to
€57.9 million (2010: €47.9 million),
as a difficult trading environment for
Consumer Products was offset by the
positive impact of higher global dairy
markets in Dairy Ingredients.
Joint Ventures & Associates EBITA
grew by 16.7% to €25.2 million
(2010: €21.6 million), driven by the
performance of Glanbia Cheese, UK.
Total Group EBITA margin fell by 30
basis points to 6.4% (2010: 6.7%).
This margin decline arose within US
Cheese & Global Nutritionals where
EBITA margins decreased from 10.2%
to 9.3% in 2011. This was mainly
as a result of input cost pressures in
Performance Nutrition.
Dairy Ireland EBITA margin at 4.3%,
increased by 10 basis points (2010:
4.2%), reflecting the net effect of
positive global dairy markets in the year
and ongoing cost reduction initiatives.
The EBITA margin of Joint Ventures &
Associates declined by 40 basis points
to 4.8% (2010: 5.2%), primarily due to
lower margins in Southwest Cheese as
a consequence of higher milk cost.
16.5% compound average
growth in total Group
EBITA pre exceptional
over five years.
190 bps
increase in total
Group EBITA margin
over a five year
period
2
Glanbia plc Annual Report 2011
Directors' Report: Overview
2011 performance
www.glanbia.com
Dairy Ireland
US Cheese & Global Nutritionals
Joint Ventures & Associates
Other Business
Total Group
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2.7
2.6
2.1
2.1
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1.5
07
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08
09 10 11
Cents per share
%
Times
Adjusted earnings per share
Return on capital employed
Net debt: adjusted EBITDA(3)
2011: 46.32 cent; up 21.7%
2011: 13.3%; up 50 bps
2011: 2.1 times; no change
Adjusted earnings per share (EPS)
increased 21.7% to 46.32 cents per
share (2010: 38.07 cents per share)
driven mainly by improved Group
operating profit and share of profit after
interest and tax from Joint Ventures &
Associates. Adjusted EPS is calculated
as the profit for the year attributable to
the equity holders of the Parent before
exceptional items and amortisation of
intangible assets (net of tax).
The overall return on capital employed
has improved by 50 basis points
to 13.3% (2010: 12.8%). The
improvement was driven by the strong
growth in operating performance of
the Group allied with the prudent
deployment and good utilisation of
capital across the Group. The return
is defined as a post tax measure
of the return earned by the Group
on capital invested, including
Joint Ventures & Associates.
Group net debt increased by €72.2
million in the year to €480.3 million
(2010: €408.1 million). Strong EBITDA
performance of €212.2 million was
reinvested to deliver the Group’s
growth strategy. The Group remained
focused on cash management in 2011
and delivered a robust year-end net
debt: adjusted EBITDA financing ratio
of 2.1 times (2010: 2.1 times), well
within the Group’s banking covenant of
3.3 times.
(1) Total Group includes share of Joint
Ventures & Associates
(2) EBITA is earnings before interest,
taxation and amortisation
(3) EBITDA is earnings before interest,
taxation, depreciation and amortisation
10%
increase
in dividend
per share
in 2011
Glanbia plc Annual Report 2011
Directors' Report: Overview
2011 performance
www.glanbia.com
3
Divisional performance
The strongest performing division in 2011 was US Cheese & Global
Nutritionals which contributed 41% of total Group revenue and 60%
of total Group EBITA for the year.
Total Group revenue
including Joint Ventures
& Associates
Total Group EBITA
including Joint Ventures &
Associates
Innovation
Performance Nutrition’s three year
innovation pipeline accounts for more
than 20% of its 2011 revenue.
42%
Dairy Ireland(cid:2)
41%
28%
Dairy Ireland
60%
US Cheese & Global Nutritionals
US Cheese & Global Nutritionals
17%
12%
Joint Ventures & Associates
Joint Ventures & Associates
Total €3.2 billion
Total €204.7 million
In 2011, Dairy Ireland represented
42% of total Group revenue. In five
years, revenue in US Cheese & Global
Nutritionals has grown from 24%
to its current contribution of 41% of
total Group revenue. Joint Ventures
& Associates delivered 17% of total
Group revenue, mainly from Glanbia’s
three strategic international joint
ventures.
In 2011, US Cheese & Global
Nutritionals generated 60% of total
Group EBITA. Global Nutritionals is now
the largest business in Glanbia by both
revenue and EBITA which is a significant
strategic transformation since 2005.
Dairy Ireland delivered 28% of total
Group EBITA and Joint Ventures &
Associates contributed 12%.
Anytime aminos with energy
Pre-training performance and energy
All-in-one formula for
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4
Glanbia plc Annual Report 2011
Directors' Report: Overview
Divisional performance
www.glanbia.com
Dairy Ireland
US Cheese &
Global Nutritionals
Joint Ventures &
Associates
2011 EBITA
€57.9m
2011 EBITA
€122.2m
2011 EBITA
€25.2m
Dairy Ireland comprises three business
units. Agribusiness produces and
supplies inputs to farmers who produce
the key raw material, milk, for both Dairy
Ingredients and Consumer Products.
Dairy Ireland has well invested facilities
serving local and global markets.
US Cheese is one of the leading
producers of American-style cheddar
cheese in the USA, from its large-scale
manufacturing facilities in Idaho. Global
Nutritionals operates from facilities in
the USA, Canada, Europe and Asia
and incorporates the Group’s three
nutritional businesses – Ingredient
Technologies, Customised Premix
Solutions and Performance Nutrition.
Glanbia has three principal international
joint ventures – Southwest Cheese in
the USA, Glanbia Cheese in the UK
and Nutricima in Nigeria – as well as
a number of smaller Irish-based joint
ventures and associates.
€1.35 billion revenue
4.3% EBITA margin
1,702 employees
8 manufacturing/processing facilities
€1.32 billion revenue
9.3% EBITA margin
1,858 employees
12 manufacturing/processing facilities
€524.2 million revenue
4.8% EBITA margin
1,012 employees
4 manufacturing/processing facilities
More information
www.glanbia.com
www.glanbiaagribusiness.ie
www.countrylife.ie
More information
www.glanbiafoods.com
www.glanbianutritionals.com
www.bsnonline.net
www.optimumnutrition.com
More information
www.glanbiacheese.co.uk
www.southwestcheese.com
P14
Understanding our business
P15
Understanding our business
P15
Understanding our business
P36
2011 performance
and 2012 outlook
P38
2011 performance
and 2012 outlook
P40
2011 performance
and 2012 outlook
Glanbia plc Annual Report 2011
Directors' Report: Overview
Divisional performance
www.glanbia.com
5
Group Chairman’s statement
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Adjusted
earnings
per share
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Total
dividend
per share
Dear Shareholder,
The Group had a very strong year
in 2011. Reported revenue, which
excludes Joint Ventures & Associates,
increased by 23.3% to €2.7 billion
(2010: €2.2 billion).
Reported EBITA grew 18.4% to €179.5
million (2010: €151.6 million). Reported
EBITA margin declined 30 basis points
to 6.7% (2010: 7.0%). This resulted from
margin pressures in our Performance
Nutrition business, because of
significantly higher whey input prices.
Reported adjusted earnings per share
increased 21.7% to 46.32 cents per
share (2010: 38.07 cents per share).
This performance was driven by higher
global dairy markets and strong organic
revenue growth particularly in the
Global Nutritionals business.
Glanbia has an 11 year record of steady
dividend increases and the Group
continues its progressive dividend
policy in 2011 with a 10% increase in
total dividend for the year (2010: 10%).
The Board is recommending a final
dividend of 4.94 cents per share (2010
final dividend 4.49 cents per share).
This brings the total dividend for the
year to 8.27 cents per share (2010:
7.52 cents per share). Subject to
approval at the Annual General Meeting
(AGM) dividends will be paid on 11 May
2012 to shareholders on the register
of members as at 30 March 2012. Irish
withholding tax will be deducted at the
standard rate where appropriate.
The Group will hold its AGM on
Wednesday, 9 May 2012 in the
Newpark Hotel, Kilkenny. Glanbia
will issue an Interim Management
Statement in accordance with the
reporting requirements of the EU
Transparency Directive, in conjunction
with the AGM. I look forward to
welcoming shareholders on the day.
The performance of Glanbia during
2011, particularly in relation to
developing new markets, cost
management, product innovation
and strategic customer relationships,
demonstrated once again a very strong
level of operational excellence.
The quality of our people is a core
strength for Glanbia and we invested
further this year in US Cheese & Global
Nutritionals. US Cheese has built up
commercial and sales resources to
continue developing export markets
for American-style cheddar cheese.
Global Nutritionals continued to
recruit key sales and business
development people and strengthened
its management teams across the
business to ensure delivery of its
organic growth strategy.
Asia Pacific is also a region that has
seen significant development, driven by
increasing demand for nutritional and
dairy products.
I would like to thank our Group
Managing Director John Moloney and
all our people for their contribution and
commitment to the continued success
of the Group.
Part of the Board’s remit is to approve
and oversee major investments by
the Group. In January 2011, Glanbia
acquired Bio-Engineered Supplements
and Nutrition (BSN®) for $144 million.
6
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Chairman's statement
www.glanbia.com
Liam Herlihy / Group Chairman
“ The Group delivered a very strong performance in 2011 and this
is reflected in record financial results for the year. This builds on
an excellent performance by Glanbia in 2010 and positions the
Group very well for the future.”
US Cheese awards
US Cheese and Southwest Cheese
continued their great tradition
of winning at the World Cheese
Championship Contest this year,
which had a record 2,313 entries
in 2012.
US Cheese and Southwest
Cheese won a total of nine awards,
including a clean sweep in pepper
flavoured cheese. This was the
third consecutive year of winning
gold for peppered flavoured
cheese and the seventh year out
of the past nine years. This is an
excellent achievement and a clear
demonstration of product quality and
consistency.
Operations in Twin Falls were also
awarded gold in the medium cheddar
category, bronze in mild cheddar,
bandaged sharp cheddar and
Monterey Jack. A silver medal was
awarded for their entry in the dessert
cheese category, which was Monterey
Jack with walnuts. Southwest Cheese
won a bronze medal for Colby Jack
cheese, cut from a 640lb block.
One of the Board’s objectives for
the year was to satisfy itself on the
successful integration of this business
into our Performance Nutrition portfolio.
Good progress was made during the
year and BSN® is performing well and in
line with expectations.
There were a number of Board changes
during the year. Victor Quinlan retired
as a Non-Executive Director and
Vice-Chairman of the Board. Henry
Corbally was elected Vice-Chairman of
the Board. Edward Fitzpatrick, James
Gilsenan and Anthony O'Connor also
retired this year as Non-Executive
Directors and William Carroll, David
Farrell, Patrick Murphy and Eamon
Power were appointed to the Board.
All appointments and retirements to the
Board were made on 26 May 2011.
I would like to welcome our new Board
members and offer retiring members
best wishes for the future and to thank
them for their contribution.
During the year the Board approved a
revised executive remuneration policy
for the period 2012 to 2014, details of
which are set out in the Remuneration
Committee report starting on page 53.
The Directors attach great importance
to Glanbia’s reputation and the need for
clear and transparent communication
with our shareholders and wider
stakeholder groups.
During the year Glanbia executives
and senior management held investor
meetings in eight cities in Europe
and North America. The Group also
participated in five investor and industry
conferences. In addition, Glanbia
conducted an investor perception
survey and this has given us good insight
into how we can enhance our investor
communications further. In 2012,
Glanbia has a full programme of investor
relations activity planned including the
re-launch of the corporate website
this year.
Glanbia has had two very strong
years in terms of both financial and
operational performance. While the
outlook for global dairy markets is
positive overall, there is significant
macroeconomic and fiscal uncertainty.
As a result, we are somewhat cautious
in our outlook for growth in 2012
However, Glanbia is very well
positioned overall and we look
forward with confidence.
Liam Herlihy
Group Chairman
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> Positive global dairy markets
> First time contribution of
BSN®
> Strong organic volume
growth in Global Nutritionals
> Increasing raw material input costs in
Performance Nutrition
> Higher milk input costs and price
competition in Consumer Products
> Increased investment in markets and
people capabilities to underpin growth
Total Group EBITA analysis
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Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Chairman's statement
www.glanbia.com
7
Group Managing Director’s review
Glanbia achieved excellent
results in 2011 delivering
26.7% growth in adjusted
earnings per share, on a
constant currency basis
(21.7% on a reported basis).
The acquisition and
successful integration of
BSN® into Performance
Nutrition complemented
strong organic revenue
growth in our three
nutritionals businesses.
These businesses continue
to outpace market growth
rates, driven by strong
market positions and
science based, customer
focused innovation.
US Cheese's performance
benefited from strong
operational execution.
Positive global dairy
markets underpinned a
solid performance by Dairy
Ireland particularly given
the significant challenges
in the Consumer Products
business, as a result of a very
difficult Irish food retailing
environment. The Group’s
key strategic joint ventures
also delivered a good result.
2011 performance highlights
> Total Group revenue, including
Joint Ventures & Associates,
exceeded €3 billion for the first
time rising 23.7% to €3.2 billion;
> Total Group earnings before
interest, tax and amortisation
(EBITA) grew 18.2% to €204.7
million;
> Total Group EBITA margin declined
30 basis points to 6.4%, which
was a solid outcome given the
scale and pace of input cost
pressures in Performance Nutrition
throughout most of 2011;
> Strong organic growth across
the business was complemented
by the acquisition of BSN®,
acquired in January 2011 for $144
million. This has expanded our
presence and product range in
key nutritional market segments
in Performance Nutrition;
> During the year, we developed
our internal risk management
framework further to create clear
risk priorities and mitigation
plans for each business unit. This
positions real ownership of the
risk management processes with
frontline management in each
business unit;
>
Food safety is a key priority for
the Group and this is monitored
through a cross-business unit
audit approach based on Hazard
Analysis and Critical Control Point
(HACCP) principles;
8
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Managing Director’s review
www.glanbia.com
John Moloney / Group Managing Director
“ The Group’s focus on driving growth in nutritionals combined
with deep dairy market expertise and strong execution capability,
positions us well for the future.”
> Operational excellence is an intrinsic
feature of how we run our business
and we advanced this further in
2011 with the ‘Glanbia Performance
System’, which seeks to optimise
the effectiveness and efficiency of all
our operations. These processes,
developed centrally, were initially
implemented in the US Cheese
business and are already delivering
real financial benefits and facilitating
problem solving; and
> Working with a number of parties
we are building a new sustainability
model for our Irish dairy operations.
This has the potential to deliver
competitive advantage and to
align the business as a key supply
partner for leading customers.
Glanbia is also a member of the
US Dairy Sustainability Committee
and our US Cheese and Ingredient
Technologies businesses will issue
their first Sustainability Report
this year.
Group strategy
Glanbia has invested significant
resources to develop and enhance
its US Cheese & Global Nutritionals
division. Our key strategic investments
and acquisitions in these areas have
performed very well and underpin
our strategic objective of delivering
sustainable, profitable earnings
growth. Disciplined strategic execution
has developed market positions in
important markets such as:
> Leading US American-style
cheddar cheese producer;
> Global marketer of whey protein
isolate;
> Leading brand family in
Performance Nutrition; and
> Global supplier of micronutrient
premixes.
Our strategy is consistent and clear.
It is set out on page 13 of this review
which includes the key focus areas for
the business in 2012. Our business
models are outlined on pages 14 and
15 and show the integrated nature of
the Group, with firm foundations and a
long history in the dairy industry.
The quality of our people is a core
strength. We have further enhanced
our capabilities again this year in key
markets, including in Asia Pacific and
Latin America where a billion new
consumers are emerging in these
developing economies.
Our strategic objectives are to deliver
attractive and growing returns to
shareholders, excellent solutions and
service to our customers, value adding
routes to market for our milk suppliers
and rewarding careers to our employees.
Total Shareholder Return (TSR)
In 2011, Glanbia delivered TSR of
27.8% and outperformed the ISEQ,
the FTSE 300 Index and the FTSE 300
Food Producers Index. In a period of
five years the Group has delivered TSR
of 72%.
Global dairy markets
2011 was a positive year for global dairy
markets. Despite a significant increase
in global milk production, overall
demand proved to be resilient, resulting
in a modest market correction in the
second half. Many of the 2011 demand
characteristics, including demand from
developing economies, are expected to
prevail in 2012.
There is strong growth currently in global
milk production. The risk to forecast
2012 market dynamics is the significant
concern around a global economic
downturn and the impact this could have
at the consumer level.
An integrated business
Global
Nutritionals
business
Large scale
dairy business
2011 marked a decade of
transformation for Glanbia. This
journey has been mapped out with
a strategic focus on nutritionals and
cheese, as well as an unrelenting
focus on growth customers in
growth markets.
Our strategy is built on a global
dairy base and a specialist nutrition
business, using advanced dairy
and other ingredients. This means
we play to our core strengths as an
organisation with deep roots in the
dairy sector.
Our nutritional focus spans sports,
fitness and healthy aging. Glanbia’s
product innovation targets health
& wellness, convenience for busy
lifestyles and healthy snacking. These
‘lifestyle products’ have a strong
emotional bond for consumers and
demand is resilient as a result.
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Managing Director's review
www.glanbia.com
9
Global Nutritionals' brand and product portfolio
Performance Nutrition includes
three main brands. Optimum Nutrition
are specialists in protein powders;
ABB are high performance sports
beverage experts; and BSN® are
leaders in pre-workout energy
products and have a strong position in
blended protein products.
> Bar Solutions are derived from
whey proteins, modified whey
protein isolates, milk proteins
and whey/soya protein blends.
They are designed to fortify
nutritional content while improving
functionality in nutrition bars and
high-protein bars.
Customised Premix Solutions
specialise in creating micronutrient
premixes utilising a wide range of
specialty ingredients for applications
which are tailor-made to customer
specifications.
Ingredient Technologies provides
customers with:
> Functional Ingredients designed
to improve customers’ product
formulations, including clean
labels, lower costs, better texture,
longer shelf life and enhanced
processing capability.
> Whey Proteins, a superior, natural
way to build muscle through
efficient delivery of essential and
branch chain amino acids. Easily
added to food products and easily
absorbed, whey proteins promote
overall health & wellness while
being essential building blocks for
muscle development.
> Amino Acids, Vitamins & Specialty
Ingredients is an extensive range
of individual ingredients that can
be utilised in sports performance
solutions.
> Milk Proteins are derived from the
freshest, ultra-filtered skimmed
milk and provide the same ratio of
micellar casein and whey protein
found naturally in milk, but in a
process-stable, superior-flavoured,
easy-to-use powder format.
> Flax Seeds have powerful
antioxidant benefits and an
abundance of essential Omega-3
fatty acids. MeadowPure® is a
patented seed selection and
cleaning process exclusive to
Glanbia. The result is a superior
flaxseed that delivers the full
nutritional value of flaxseed where
it’s intended - in the food products
that reach consumers.
The current view on global dairy market
performance is that prices will soften
further in the first half of 2012, relative
to the second half of 2011, with
increased milk and dairy product
availability. The second half of 2012 is
forecast to be moderately weaker again.
Critical markets such as China, Russia
and South East Asia are expected to
remain solid throughout 2012, limiting
market volatility.
US Cheese markets
In 2011, US cheese prices were
strong for most of the year, due to a
combination of market factors. US milk
production increased 1.8% for the year
and 3.7% in Idaho. However, higher
prices from competing dairy products
reduced milk volumes processed into
cheese, thereby increasing prices.
Retail cheese sales were down
overall, mainly as a result of consumer
resistance to retail price increases.
This was more than offset by relatively
strong demand from the foodservice
sector and very strong export sales of
American-style cheddar cheese, which
increased over 30% in 2011.
In 2012, US cheese prices have
reduced year to date with the market
currently driven by supply factors as
milk production exceeds expectations.
(cid:18)(cid:9)(cid:14)(cid:19)
(cid:18)(cid:9)(cid:14)(cid:19)
(cid:28)(cid:4)(cid:29)(cid:30)(cid:31)(cid:3)(cid:29)(cid:20)(cid:20)
(cid:9)(cid:14)(cid:19)(cid:20)(cid:17)(cid:7)(cid:7)(cid:4)
Our cheese business gives
us access to a large, high
quality whey pool, which is
a cornerstone of our Global
Nutritionals' business.
(cid:18)(cid:9)(cid:14)(cid:19)
(cid:18)(cid:9)(cid:14)(cid:19)
10
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Managing Director's review
www.glanbia.com
While retail demand is sluggish,
demand from foodservice, industrial
and exports continues to be robust.
Global Nutritionals’ markets
2011 was a significant year for whey
proteins as strong demand and tight
supply led to unprecedentedly high
whey pricing. Demand was fuelled
by strong growth in key nutritional
markets, which continued to accelerate
throughout the year. Market growth
estimates for 2011 key global nutritional
segments which are key to Glanbia
included; 15% growth in the nutritional
bar market, 7% growth in sports
nutrition and 18% growth in nutritional
beverages. Sports nutrition is the
largest market segment and the latest
research into this market confirms that
growth is driven by an awareness of
the benefits of these products by a
growing population of nutrition-aware
consumers with a desire to live healthy
lifestyles. In 2011, the market for
customised premix solutions continued
to be strong driven by double digit
growth in demand from the energy
drinks sector and product fortification
requirements in infant formula,
breakfast cereals, supplements and
nutritional bars. Favourable market
demand conditions in key nutritional
segments are expected to continue in
2012. However with tight supply in key
raw materials, effective management
of the buy/sell equation, particularly in
Performance Nutrition, will be important
in the face of further potential price
inflation in raw material inputs.
Dairy Ireland markets
The performance of global dairy
markets, outlined on page 9, is the
key market dynamic that impacts
Dairy Ingredients, as substantially all
of its output is exported. The trading
environment for Dairy Ingredients was
therefore positive in 2011 with some
weakness anticipated for 2012. The
trading environment for the Consumer
Products business is dictated by both
the domestic Irish economy and the
indirect impact of global dairy markets
on input costs. 2011 was another
difficult year for the food retail market
in Ireland as consumer sentiment was
weak and fell sharply towards year-end.
Higher global dairy markets during the
year resulted in increased milk costs
for Consumer Products and while
some modest price increases were
implemented, margins were still lower
year-on-year. The Irish economic and
fiscal backdrop offers little respite at
present to consumers. As a result these
market conditions are expected to
persist in 2012.
Customer
collaboration
One of our strategic priorities
is to build a science-based
innovation portfolio. Our research
& development (R&D) activities
focus on:
>
leveraging the latest academic
research;
> pre-commercialisation of new
products or processes;
>
re-engineering of current
processes for greater efficiency
or effectiveness; and
> commercialisation of new
ingredients and products.
Consumer and customer insights
remain fundamental to the growth
and development of our business.
These are supplemented by key
innovation centres in Ireland and
the USA, as well as in-market
resources across Europe, the USA,
Latin America, Asia Pacific and the
Middle East. We collaborate directly
with customers in the development
process, helping us to build a robust
pipeline of product development
options that are aligned with
market-driven needs.
"(cid:20)(cid:19)(cid:14)(cid:29)(cid:11)(cid:15)
We have successfully
developed our Global
Nutritionals business in the
last five years through organic
growth and acquisition.
(cid:24)!(cid:23)
of total Group
revenue is
represented by
Global
Nutritionals
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Managing Director's review
www.glanbia.com
11
2012 outlook
We expect the operating environment
in 2012 to be more challenging
than in recent years. Current global
economic uncertainty has the potential
to impact global dairy markets and
fragile consumer confidence. The
Group’s focus on driving growth in
nutritionals, combined with deep dairy
market expertise and strong execution
capability, position us well for the future.
Our guidance for 2012 is for 5 to 7%
growth in adjusted earnings per share,
on a constant currency basis.
John Moloney
Group Managing Director
2015 abolition of EU milk quotas
Glanbia is Ireland’s largest dairy
company. We collect approximately
1.6 billion litres of milk from over 4,800
farmer suppliers. This represents 30%
of Ireland’s milk pool, which we process
into a wide range of dairy ingredients.
Most of this product is destined for sale
internationally and we export to more
than 50 countries globally.
We are in the process of reviewing the
implications of the potential expansion
of our supply base post the abolition of
EU milk quotas in 2015.
Glanbia plc, in common with its largest
shareholder, Glanbia Co-operative
Society Limited, recognises that
Ireland has a range of competitive
characteristics that facilitates growth in
milk supply post 2015.
The longer-term outlook for global dairy
markets is also positive, driven by rising
income levels in developing economies.
Both parties and their advisors are
working to evaluate possible options for
expansion of dairy processing in Ireland.
A conclusion on the best way forward
for all stakeholders is expected to be
reached in the second quarter of 2012.
Any investment opportunities arising
would be considered by Glanbia plc in
a portfolio context to ensure that Group
resources are directed to business
segments so as to maximise overall
Group performance.
Organic expansion plans
We have a number of projects underway
across the Group to either expand or
enhance our operations:
> Expansion of higher whey protein
product output in Dairy Ingredients
in 2012;
> New plant for Customised Premix
Solutions in Germany, which will be
commissioned in 2012; and
> New US Cheese innovation and
customer collaboration centre in
Idaho, which is due to open in
early 2013.
2012 principal risks
Our performance is influenced by global
economic growth, global dairy and
US cheese markets and consumer
confidence in the markets in which
we operate. Economic uncertainty or
excessive volatility in global dairy pricing
would represent a material change to
the Group’s trading environment.
In 2012, the principal risks affecting the
Group’s performance are:
> An uncertain global economic
outlook;
> Sustainability of the demand/supply
balance in global dairy markets;
> Buy/sell balance in US Cheese and
Performance Nutrition; and
> Consumer confidence in Ireland.
Ingredient Technologies
The innovation pipeline within Ingredient Technologies has been particularly strong during 2011.
Ingredient Technologies commercialised a range of functional solutions for the yoghurt market, including OptiSol™ 1010
for yoghurt and OptiSol™ 1020 for Greek-style yoghurt. The two OptiSol products offer yoghurt manufacturers a superior
stabilisation protein system which improves texture and consistency and provides a protein boost. These functional
solutions help producers satisfy the growing consumer demand for natural and clean labels in fresh dairy products.
The Greek-style yoghurt market grew 130% in North America in 2011.
Ingredient Technologies continue to develop new solutions for the growing nutritional bar markets with unique protein
systems that offer different functional and nutritional benefits. This market is estimated to be growing at 15% per annum.
New OptiSol™ 2000, featuring SugarTrim technology, allows bar and cereal manufacturers to reduce sugar levels by up to
50% while increasing protein levels and offering the consumer a more nutritious product.
12
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Managing Director's review
www.glanbia.com
Our strategy
Our strategic goals are to diversify earnings, improve operating margin and
deliver earnings growth. On this journey we built strong organisational capability
in world-class manufacturing, science-based innovation in product and solutions
development and acquisitions delivery. We also established new scale businesses
with leading market positions in high growth sectors.
#(cid:3)(cid:15)(cid:3)(cid:7)(cid:30)
To be the leading
global nutritional
solutions and
cheese
group
2012
Business
focus
Our strategy
> Drive Global Nutritionals
forward
> Focus on both organic and
acquisition growth
> Allocate resources to the areas
of greatest growth potential
> Leverage the Group's two
business models and strategic
joint ventures
Our strategic
priorities
1. Align to key growth customers
and markets
2. Focus on science-based
innovation
3. Balance risk and capital
management
4. Deliver operational excellence
Dairy Ireland
> Clarity on the strategic approach to
the potential opportunity post the
abolition in 2015 of the current
EU milk quota regime
> Achieve further strategic cost
reductions in Consumer Products
> Deliver whey expansion in
Dairy Ingredients
US Cheese & Global Nutritionals
> Deliver nutritionals acquisition
> Successfully complete planned
facilities expansion in
Customised Premix Solutions
> Review milk procurement strategy
in US Cheese
> Achieve organic growth targets for
Global Nutritionals
> Manage buy/sell balance and whey
supply in Performance Nutrition
Group
> Review bank debt facilities
Key performance
indicators (KPIs)
> Revenue
> EBITA
> EBITA margin
> Adjusted earnings per share
> Net debt: adjusted EBITDA
> Return on capital employed
(cid:2)(cid:3)(cid:4)(cid:5)
(cid:13)(cid:9)(cid:14)(cid:14)(cid:15)(cid:14)
(cid:16)(cid:7)(cid:10)(cid:17)
(cid:18)(cid:9)(cid:14)(cid:19)
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Managing Director's review
www.glanbia.com
13
Understanding our business
Glanbia has leading domestic,
international and global market
positions. In total the Group
processes almost six billion
litres of milk into cheese and a
range of dairy-based ingredients.
Exports from Ireland are to more
than 50 countries, US Cheese is
growing its export markets and
Performance Nutrition products
are now sold in over 100
countries world-wide.
Dairy Ireland
> 1.6 billion litres of milk
> 38,000 tonnes of cheese
> 177,000 tonnes of dairy based ingredients
US Cheese & Global Nutritionals
> 1.8 billion litres of milk
> 190,000 tonnes of cheese
> 60,000 tonnes of dairy based ingredients
Joint Ventures & Associates
> 2.4 billion litres of milk
> 257,000 tonnes of cheese
> 26,000 tonnes of dairy based
ingredients
No.1
Irish dairy
consumer brand
Irish supplier of
farm inputs
Leading
Irish dairy processor
No.1
European manufacturer of
enriched milk powders
Dairy
protein
Milk
Cheese
Yoghurt
Soup
Agribusiness
Consumer Products
Dairy Ingredients
Dairy Ireland
8
Milk
Milk
Milk
14
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Understanding our business
www.glanbia.com
Leading
Global brand family in
performance nutrition
Global marketer of
whey protein isolate
Global supplier of
micronutrient premixes
Whey
protein
Customised
Premix
Solutions
Performance
Nutrition
Ingredient
Technologies
Global Nutritionals
Leading
US producer of American-style
cheddar cheese
No.1
European producer of
mozzarella cheese
No. 3
Consumer packaged
dairy powders
in Nigeria
Whey
Whey
Nutricima,
Nigeria
Cheese
Glanbia
Cheese, UK
(cid:18)(cid:9)(cid:14)(cid:19)(cid:20)(cid:17)(cid:7)(cid:7)(cid:4)
Cheese
Cheese
US Cheese
Southwest Cheese, USA
US Cheese &
Global Nutritionals
12
Joint Ventures &
Associates
4
Milk
Milk
Milk
Milk
Milk
Milk
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Understanding our business
www.glanbia.com
15
Group Finance Director’s review
Glanbia delivered a
very good performance
with respect to its key
performance indicators
in 2011. This follows a
strong performance in
2010. All KPIs delivered
good momentum with
the exception of margins,
where a 30 basis points
reduction in reported
EBITA margin resulted
from a time lag between
rising input costs and price
increases implemented
in Performance Nutrition
within the US Cheese &
Global Nutritionals division.
The Group’s financial
flexibility was enhanced
by a 33.6% increase in free
cash flow to €87.5 million
(2010: €65.5 million). 2011
year-end net debt: adjusted
EBITDA, which is monitored
for financing covenants, was
2.1 times (2010: 2.1 times).
This was ahead of target and
was achieved after adverse
currency movements and
significant development
capital and acquisition spend
of €133.8 million in the year.
Return on capital employed
grew 50 basis points to
13.3% (2010: 12.8%).
Revenue
Reported Group revenue grew by
23.3% to €2.7 billion (2010: €2.2
billion) reflecting continued strong
organic growth primarily in Global
Nutritionals and the impact of
higher global dairy and US Cheese
market prices. Total Group revenue,
including our share of Joint Ventures
& Associates, grew by 23.7% to €3.2
billion (2010: €2.6 billion).
EBITA & EBITA margin
Reported Group EBITA grew strongly
by 18.4% to €179.5 million (2010:
€151.6 million). The result includes
the first time contribution of BSN®,
acquired in January 2011, which is
performing in line with expectations.
While Group EBITA margin declined by
30 basis points in the year, this was a
very solid performance given the scale
of the input cost pressures within the
Performance Nutrition business.
Joint Ventures and Associates
The Group’s share of results of
Joint Ventures & Associates was up
41.6% (€4.2 million) to €14.3 million
(2010: €10.1 million). The improved
result reflected strong profitable
growth across our key strategic joint
ventures.
Net financing costs
Net financing costs increased by
€5.8 million to €27.9 million (2010:
€22.1 million) mainly due to the
drawdown of a $325 million private
debt placement of 10 year senior loan
notes during the year. These notes
are unsecured, ranking pari passu
with existing senior debt and have a
fixed coupon rate of 5.4%.
16
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Finance Director’s review
www.glanbia.com
Siobhán Talbot / Group Finance Director
“ Glanbia delivered another year of strong profitable growth
within a robust financial and risk framework.”
2011 results
As reported – pre exceptional
Revenue(1)
EBITA
EBITA margin
Operating profit
Operating margin
Net finance cost
Share of results of Joint Ventures & Associates(1)
Income taxes
Profit for the year
Adjusted earnings per share(2)
Exceptional items - pre tax
Dividend per share in respect of the full year
On a constant currency basis – pre exceptional
Revenue(1)
EBITA
2011
2010
€2,671.2m
€179.5m
€2,166.7m
€151.6m
6.7%
€161.0m
6.0%
(€27.9m)
€14.3m
(€27.0m)
€120.4m
46.32c
(€8.7m)
8.27c
2011
€2,734.7m
€186.1m
7.0%
€136.5m
6.3%
(€22.1m)
€10.1m
(€25.5m)
€99.0m
38.07c
€10.2m
7.52c
2010
€2,166.7m
€151.6m
Adjusted earnings per share(2)
48.22c
38.07c
Change
+ 23.3%
+ 18.4%
- 30 bps
+ 17.9%
- 30bps
- €5.8m
+ 41.6%
- €1.5m
+ 21.6%
+ 21.7%
- €18.9m
+ 10%
Change
+ 26.2%
+ 22.8%
+ 26.7%
(1) Total Group revenue, including Glanbia’s share of the revenue of Joint Ventures & Associates, was €3.2 billion for the year, €3.3 billion on a
constant currency basis for the year (2010: €2.6 billion). Share of results of Joint Ventures & Associates is an after interest and tax amount.
(2) Adjusted earnings per share is calculated as the profit for the year attributable to the owners of the Group before exceptional items and
amortisation of intangible assets (net of tax).
The Group’s average interest rate for
the full year 2011 was 5.0% (2010:
4.2%). Glanbia operates a policy
of fixing a significant amount of its
interest exposure with approximately
75% of projected 2012 debt currently
contracted at fixed rates for 2012.
Taxation
The 2011 tax charge pre exceptional
increased by 5.9%, €1.5 million, to
€27.0 million (2010: €25.5 million)
which represents an effective rate,
excluding Joint Ventures & Associates,
of 20.3% (2010: 22.3%). The decrease
in the effective rate is driven by the
change in mix and geographic locations
in which profits are earned.
Exceptional items
Rationalisation costs of €8.7m
include redundancies related to the
integration of the liquid milk business
acquired from Kerry Group plc and
were incurred in the first half by the
Consumer Products business within
Dairy Ireland.
Basic earnings per share
Basic earnings per share (EPS)
increased by 3.7% to 38.22 cents
per share (2010: 36.86 cents per
share), as a net negative movement
in exceptional items year-on-year was
offset by an increase in pre exceptional
Group profit after tax.
Adjusted earnings per share
Adjusted earnings per share is
calculated as the profit for the year
attributable to the equity holders of
the Parent before exceptional items
and amortisation of intangible assets
(net of tax). Adjusted EPS increased
21.7% to 46.32 cents per share (2010:
38.07 cents per share) driven mainly
by improved operating profit and share
of profit after tax from Joint Ventures &
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Finance Director’s review
www.glanbia.com
17
2011 Segmental analysis
As reported – pre exceptional
US Cheese & Global Nutritionals
Dairy Ireland
Other Business
Group as reported(2)
JVs & Associates
Total Group including JVs & Associates
2011
2010
Revenue
€m
EBITA(1)
€m
EBITA
margin
Revenue
€m
EBITA(1)
€m
EBITA
margin
1,316.9
1,353.3
1.0
2,671.2
524.2
3,195.4
122.2
57.9
(0.6)
179.5
25.2
204.7
9.3%
4.3%
(60.0%)
6.7%
4.8%
6.4%
1,021.9
104.5
10.2%
1,138.6
47.9
4.2%
6.2
(0.8)
(12.9%)
2,166.7
151.6
416.6
21.6
2,583.3
173.2
7.0%
5.2%
6.7%
On a constant currency basis – pre exceptional
2011
US Cheese & Global Nutritionals
Dairy Ireland
Other Business
Group as reported(2)
JVs & Associates
Total Group including JVs & Associates
Revenue
€m
EBITA(1)
€m
EBITA
margin
1,380.4
1,353.3
128.8
57.9
9.3%
4.3%
1.0
(0.6)
(60.0%)
2,734.7
541.0
3,275.7
186.1
26.0
212.1
6.8%
4.8%
6.5%
(1) Given the nature of Group acquisitions in recent years, EBITA is an accurate reflection of underlying cash generative operating performance.
(2) Reported results exclude Joint Ventures & Associates. Share of results of Joint Ventures & Associates in the income statement is an after
interest and tax amount.
Associates, offset by an increased net
finance charge. A detailed calculation
of adjusted EPS is shown in note 12 of
the financial statements on page 114.
Dividend per share
The Board is recommending a final
dividend of 4.94 cents per share (2010:
final dividend 4.49 cents per share). This
represents an increase of 10% in the
year and brings the total dividend for
the year to 8.27 cents per share (2010:
7.52 cents per share).
Constant Currency
Glanbia’s financial results are exposed
to movements in the euro/US dollar
currency exchange rate and the impact
this has on the translation into euro of
the significant portion of the Group’s
profits that are US dollar denominated.
To reflect the underlying performance
of the business Glanbia uses constant
currency as a basis for discussing
financial results and providing
earnings guidance. In 2011 US dollar
denominated profits represented
approximately 65% of the Group’s
earnings before interest, taxation and
amortisation (EBITA).
Segmental analysis
Total Group revenue, including share of
Joint Ventures & Associates, on a
constant currency basis, grew by
26.8% to €3.3 billion (2010: €2.6
billion). The growth in total revenue
is attributable to strong underlying
organic volume growth of 8%, the
impact of acquisitions, primarily
Bio-Engineered Supplements and
Nutrition (BSN®) of 5% and higher
pricing and an enhanced product
mix of 14%.
Total Group revenue growth at constant currency
$(cid:24)%(cid:25)(cid:27)(cid:23)
€2.6bn
8%
Volume
5%
€3.3bn
Acquisition
14%
Price
2010
2011
Dairy Ireland
Joint Ventures & Associates
US Cheese & Global Nutritionals
18
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Finance Director’s review
www.glanbia.com
Key financial covenants
Net debt(1): adjusted EBITDA(2) (times)
Adjusted EBIT(3): net finance costs (times)
3.3
3.5
2.1
6.3
2.1
6.7
2.6
5.4
Covenant 2011
2010
2009
(1) Including €63.5 million cumulative redeemable preference shares.
(2) Adjusted EBITDA reflects Group EBITDA plus dividends from Joint Ventures & Associates.
(3) Adjusted EBIT reflects Group EBIT plus dividends from Joint Ventures & Associates.
Financing KPIs
EBITDA
Free cash flow
Net debt
Net debt: adjusted EBITDA(1)
Return on capital employed(2)
2011
€212.2m
€87.5m
€480.3m
2.1 times
13.3%
2010
€182.8m
€65.5m
€408.1m
2.1 times
12.8%
(1) Adjusted EBITDA reflects Group EBITDA plus dividends from Joint Ventures &
Associates.
(2) Return on capital employed is calculated as Group EBITA, plus the Group's share of
results of Joint Ventures & Associates after interest and tax, over capital employed.
Capital employed is calculated as the Group's non-current assets plus working capital.
Revenue in US Cheese & Global
Nutritionals increased to €1.38 billion
(2010: €1.02 billion). Revenue in Dairy
Ireland grew 18.9% to €1.35 billion
(2010: €1.14 billion). Revenue in Joint
Ventures & Associates grew to €541.0
million (2010: €416.6 million).
Total Group EBITA, including share
of Joint Ventures & Associates, on a
constant currency basis, increased
22.5% to €212.1 million (2010:
€173.2 million). This improvement in
performance reflects strong organic
volume growth across all global
nutritional sectors and the first time
contribution of BSN®.
US Cheese & Global Nutritionals
delivered strong year-on-year EBITA
growth of 23.3% to €128.8 million
(2010: €104.5 million) driven by the
performance of Global Nutritionals.
Dairy Ireland EBITA also grew by
20.9% to €57.9 million (2010: €47.9
million), as difficult markets and input
cost conditions for the Consumer
Products business were countered by
the positive impact of higher global
dairy markets in the Dairy Ingredients
business.
As anticipated, total Group EBITA
margin fell 20 basis points to 6.5%
(2010: 6.7%), on a constant currency
basis. This reduction in margin arose
within US Cheese & Global Nutritionals
where EBITA margins declined from
10.2% to 9.3% in 2011. This margin
decline was primarily in the Performance
Nutrition business in Global Nutritionals.
Dairy Ireland EBITA margin at 4.3%
increased 10 basis points (2010:
4.2%), reflecting the positive net effect
of volume growth and relatively strong
global dairy markets in the year.
The EBITA margin of Joint Ventures &
Associates declined by 40 basis points
to 4.8%, primarily due to a decline in
margins in Southwest Cheese as a
consequence of the impact of relative
market pricing of certain dairy products
on milk cost during the year.
Financing KPIs
Group net debt increased by €72.2
million in the year to €480.3 million
(2010: €408.1 million). Strong EBITDA
performance of €212.2 million was
reinvested to deliver the Group’s
growth strategy. The principal cash
outflows for the Group included
€133.8m on acquisitions and
strategic capital expenditure, business
sustaining capital expenditure of
€27.3m, interest and taxes of €39.3m
and equity dividends of €22.9m.
The Group remained focused on cash
management in 2011 and delivered
a robust year end net debt: adjusted
EBITDA financing ratio of 2.1 times
(2010: 2.1 times). This is well within the
Group’s banking covenant of 3.3 times.
In 2011, adjusted EBIT to net financing
cost cover weakened somewhat to 6.3
times (2010: 6.7 times), reflecting the
increased cost of the private debt senior
loan notes in the year.
Group financing facilities
The Group currently has three
sources of debt finance; 10 year
senior loan notes issued as a private
debt placement in 2011, senior bank
debt with nine banks under bilateral
arrangements with common terms and
conditions and cumulative redeemable
preference shares. Committed
debt facilities total €987.7 million
encompassing the $325 million private
debt placement (€251.2 million),
€673.0 million from nine banks and
€63.5 million cumulative redeemable
preference shares. The tenure of these
facilities ranges from €163.0 million
renewable in July 2012, €510.0 million
renewable in July 2013, €63.5 million
maturing in July 2014 and €251.2
million maturing in June 2021. The
Group will be reviewing the overall
group financing in 2012 as part of the
normal bank debt renewal process.
Return on capital employed
The return on capital employed has
improved by 50 basis point to 13.3%
(2010: 12.8%); defined as a post
tax measure of the return earned
on capital invested including Joint
Ventures & Associates. The 2011
improvement was driven by the strong
growth in operating performance of
the Group allied with the prudent
deployment and strong utilisation of
capital in the business.
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Finance Director’s review
www.glanbia.com
19
Financial risk management
The conduct of Glanbia’s ordinary
business operations necessitates
the holding and issuing of financial
instruments and derivative financial
instruments by the Group. The main
risks, arising from issuing, holding and
managing these financial instruments,
typically include liquidity risk, interest
rate risk and currency risk. The Group
does not trade in financial instruments.
The Group’s treasury policies and
guidelines are designed to mitigate the
impact of fluctuations in interest rates
and exchange rates and to manage the
Group’s financial risks. These policies
were reviewed in 2011 by the Group
Audit Committee and the Board.
Summary cash flow
EBITDA pre exceptional
Working capital movement
Net interest and tax paid
Business sustaining capital expenditure
Other outflows
Free cash flow
Dividends from joint ventures
Loans repaid by joint ventures
2011
€m
2010
€m
Change
€m
212.2
(39.0)
(39.3)
(27.3)
(19.1)
87.5
14.8
-
182.8
(53.6)
(34.5)
(17.3)
(11.9)
65.5
11.2
23.3
29.4
14.6
(4.8)
(10.0)
(7.2)
22.0
3.6
(23.3)
Strategic acquisition/capital expenditure
(133.8)
(16.2)
(117.6)
Restructuring costs
Equity dividends
Cash flow pre currency exchange/
fair value adjustments
(10.0)
(22.9)
(9.8)
(20.5)
(0.2)
(2.4)
(64.4)
53.5
(117.9)
Currency exchange/fair value adjustments
(7.8)
(19.0)
11.2
Net (increase)/decrease in debt
during the year
(72.2)
34.5
(106.7)
Net debt at the beginning of the year
(408.1)
(442.6)
34.5
Net debt at the end of the year
(480.3)
(408.1)
(72.2)
Movement in the liability for retirement benefit obligations
At the beginning of the year
Exchange differences
Total expense
Curtailment gains and negative past service costs
Actuarial (loss)/gain
Employer contributions
At the end of the year
2011
€m
2010
€m
(48.6)
(85.8)
(0.5)
(3.2)
-
(17.0)
20.9
(48.4)
(1.0)
(7.1)
10.2
13.4
21.7
(48.6)
Summary cash flow
The Group generated strong free cash
flow during the year of €87.5 million
(2010: €65.5 million) an increase of
€22.0 million year-on-year. Free cash
flow is stated after charging working
capital movements and business
sustaining capital expenditure, but
before dividends received from joint
ventures, loans repaid by or advanced
to joint ventures, strategic capital
expenditure, restructuring costs,
and equity dividends.
Higher EBITDA in 2011 of €212.2
million (2010: €182.8 million) was offset
by year-on-year investment in working
capital, increased business sustaining
capital expenditure and interest
outflows. The working capital outflow in
the year primarily reflects the reduction
of a debt purchase agreement which
was in place with a financial institution
since 2005.
Dividends received from joint ventures
during 2011 were €14.8 million, an
increase from the prior year of €3.6
million (2010: €11.2 million) and reflects
a cash return to the Group from both
Southwest Cheese and Glanbia Cheese.
Pension
At 31 December 2011 the Group’s
net pension liability under IAS 19
‘Employee Benefits’, before deferred
tax, decreased by €0.2 million to
€48.4 million (2010: €48.6 million).
The marginal reduction in the Group’s
deficit reflected the negative movement
in actuarial assumptions (€17.0 million),
caused primarily by a lower than
expected return on invested assets and
increased mortality assumptions used,
offset by the employer contributions of
€17.7 million (net of service cost).
The fair value of the assets of the
pension schemes at 31 December
2011 was €400.0 million (2010: €389.3
million) and the value of the scheme
liabilities was €448.4 million (2010:
€437.9 million).
€526
million
2007 to 2011
acquisition/strategic
investment
20
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Finance Director’s review
www.glanbia.com
Investor Relations
In 2011, senior management of
the Group participated in a series
of investor meetings in Ireland, the
UK, Europe, North America and
Canada and attended capital market
conferences.
During the year the Group
commissioned an investor perception
study to appraise the Group's
performance, across a range of
parameters. The results and findings
from this study are currently being
reviewed and will form part of the
Group's investor relations programme
for 2012 and beyond.
Glanbia’s largest shareholder, Glanbia
Co-operative Society Limited, which
owns 54.4% of the Group, forms a
significant part of the Group’s investor
relations programme with a series
of meetings carried out with the
Council of the Society by Group senior
management during 2011.
In 2011, the share price increased
26% from the start of 2011 (€3.68), to
the finish (€4.63), with a share price
high of €5.02 during June 2011. Total
Shareholder Return (TSR) for the year
was 27.8%. The share price
outperformed the Irish Stock Exchange
index by 24.9%, the FTSE E300 Index
by 40.7%, the S&P 500 Index by 21.6%
and the FTSE E300 Food Producers
Index by 20.3%.
Financial Strategy
The Group has significantly restructured
and re-orientated its business strategy
in recent years. As the Group has been
in strategy delivery mode, the financial
goals have remained consistent,
that is; to diversify earnings, improve
operating margin and deliver sustained
earnings growth through rigorous cost
management and prudent deployment
of capital to the highest returning
investment opportunities. The Group
operates to an internal hurdle rate for
return on investment decisions of 12%
post tax, by year three and monitors
investment spend against this metric.
2012 Outlook
The Group anticipates that global
economic growth for 2012 will
remain challenged, with some
softening anticipated in global dairy
markets. While the business overall
is well positioned to continue its
growth momentum, such economic
uncertainty means that we are cautious
on 2012 trading performance. We
currently anticipate 5-7% growth in
adjusted earnings per share for 2012,
on a constant currency basis.
Siobhán Talbot
Group Finance Director
Shareholder analysis
Shareholder analysis
December 2011
December 2011
Glanbia Co-operative Society 54.4%
Retail 21.6%
UK* 12.7%
Ireland* 2.8%
Europe* 4.3%
North America* 4.2%
*Institutional/other
The Board agrees and regularly
reviews the Group's treasury policies
and guidelines. More detailed
information on financial risk is
contained in note 3.1 ‘Financial
risk factors’ in the notes to the
financial statements and in the risk
management section of this report.
P98
Financial statements note 3.1
P22
Risk management
Further information on
divisional performance
P36
Dairy Ireland
P38
P40
US Cheese &
Global Nutritionals
Joint Ventures & Associates
The focus on nutrition, together
with a more informed and
interested consumer in aspects
of health, wellness and diet,
is a key global trend.
2.1
times net debt:
adjusted EBITDA
in 2011
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Group Finance Director’s review
www.glanbia.com
21
Risk management
Our approach to risk
management
The Board determines the nature and
extent of the risks the Group is willing to
take in achieving its strategic objectives.
In Glanbia, there is an ongoing process
in place for identifying, assessing,
managing, monitoring and reporting
on risk. This process has been in place
for the year under review and up to and
including the date of approval of the
2011 Annual Report.
Risks can materialise and impact
the delivery of Group objectives,
the achievement of sustainable
shareholder value and compliance with
the requirements of good corporate
governance. The Group’s approach
to risk management is aimed at the
early identification of key risks and a
detailed consideration of the existing
level of mitigation and required
management actions.
While the Board has overall responsibility
for ensuring that risk is effectively
managed across the Group, it has
delegated the responsibility for reviewing
the design and implementation of the
Group’s system of internal control and
risk management procedures to the
Audit Committee.
Risk identification and assessment
The Board has adopted a quarterly
risk identification and assessment
programme. This approach was first
introduced in 2010 and has been further
developed and refined in 2011 through
the work of the Audit Committee.
Summary presentations to both the
Board and the Audit Committee
include an analysis of the key financial,
operational and regulatory risks faced by
the Group in terms of impact (assessed
over the following 12 months within
defined monetary terms) and likelihood of
occurrence (assessed over a three-year
period in line with the Group strategic
plan and based on defined probabilities
of occurrence).
Risk identification and assessment
includes the development of risk graphs
to provide representation of individual
risks with reference to their size or impact
to the Group and their likelihood of
occurrence.
Risk management responsibilities
Board -
Risk governance
Responsible for strategic
decision-making and risk
oversight. Sets risk
appetite and tolerance.
BU Management -
Risk ownership
How
Glanbia
Manages
Risk
Responsible for risk
identification, measurement,
monitoring and reporting.
Audit Committee -
Risk infrastructure
Responsible for
reviewing the design and
implementation of risk
management systems.
Group Operating Executive -
Risk management
Responsible for maintaining
effective risk management
policies and programmes.
Organisational and business risks are
also identified and assessed; however
the likelihood and impact of occurrence
are often harder to define as many of
these risks are deemed to be outside
the direct control but not the influence of
management and the Board. Examples
of such risks include an animal disease
outbreak such as foot-and-mouth
impacting milk supply or a significant
adjustment to the current climate change
agenda impacting our large-scale
processing operations.
Separate risk graphs are prepared to
reflect the inherent position (before
taking account of any related internal
controls) and the residual position (post
internal controls). The focus of the
Board is on ensuring that the residual
risk position is within their risk appetite,
while management and the Audit
Committee are entrusted with ensuring
that appropriate measures are in place to
validate the strength of internal controls.
Risk monitoring and reporting
within the Group
Following detailed risk review exercises,
each business unit management team
and functional head completes the
Group risk register template. This is a
standard format, where identified risks
are documented showing the nature of
the risk identified, the risk classification,
the inherent risk impact and likelihood,
the mitigation measures (if applicable),
the residual risk and the related
management action plans. Each risk is
allocated an owner who has authority
and responsibility for assessing and
managing it.
An overall Group-level risk register is
prepared and presented to the Board
on a quarterly basis together with a
summary of the key movements in the
trend of risks identified and the related
mitigation and management action
plans. The Group Operating Executive,
the Audit Committee and the Board, in
that order, all review the Group risk profile
and the key changes on a quarterly
basis. During 2011, the Audit Committee
reviewed the effectiveness of the
Group’s risk identification, assessment,
management, monitoring and reporting
processes and is satisfied that they are
appropriate for the Group’s requirements.
Commencing in 2011, business unit
presentations to the Board included
a detailed review of the key risks
facing each business and the related
mitigation measures, in line with the
Group assessment criteria. The Audit
Committee continued its programme
of evaluating key areas of Group risk
through a further series of presentations
on matters such as food safety and
quality, information technology and
financial control. Both approaches will
be continued and further enhanced in
2012 to ensure that risk management
in Glanbia continues to evolve to take
account of the changing environment
and continues to support the delivery
of the Group’s objectives and the
achievement of sustainable growth. The
enhancements will include adjusting the
current process to assess the speed at
which risk materialises and how easily
the organisation can recover from a
significant risk crystallising.
22
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Risk management
www.glanbia.com
Principal risks and uncertainties
The performance of the Group is influenced by global economic growth, global dairy and US cheese markets, and consumer
confidence in the markets in which it operates. Risk identification processes take into account the Group’s strategic priorities
and 2012 business focus areas outlined on page 13 together with a number of broader business environment risks.
A summary of the key risks identified, potential impacts and mitigating actions are set out below.
Strategic priorities
1. Align to key growth customers and markets
Risk description
Potential impact
Mitigation
Certain key customers
represent a significant
portion of Group revenue
and operating profits.
The loss of all or part of
one or more of these
customers represents a
concentration risk to the
business.
Reduced profitability
and cash flow.
The Group believes that it currently enjoys good relationships with major
customers and continues to manage and develop these relationships
by focusing on superior customer service, product innovation, quality
assurance and cost competitiveness.
In order to better serve its key customers and to provide a platform for future
growth the Group has continued to expand its global footprint through the
acquisition of BSN® in January 2011 and the development of a number
of key capital projects including an expansion of the whey facility at Dairy
Ingredients Ireland and an expansion of the Customised Premix Solutions
facility in Germany.
2. Focus on science-based innovation
Risk description
Potential impact
Mitigation
Increasing competition,
product innovations,
technical advances
and changing market
trends provide a
constant challenge to
the future success of the
Group and its ability to
successfully adapt.
Potential adverse
effects on the
Group’s financial
performance.
Glanbia’s main innovation centre is located in Ireland with a further
innovation and customer collaboration centre in the USA. Research and
development expenditure is focused on value added and customer-specific
solutions in sectors where Glanbia has significant technical and market
knowledge.
To enhance its existing skills, a new innovation centre focused on the
development of cheese applications/functionality is planned for Twin Falls,
Idaho in 2012/2013.
3. Balance risk and capital management
Risk description
Potential impact
Mitigation
A failure by the Board
to manage risk or make
correct capital allocation
decisions may impact
the Group’s objective of
maximising shareholder
return.
Lost opportunities to
maximise shareholder
value.
The 2012-2014 strategy plan was approved by the Board and an
ongoing process is in place for the Group Operating Executive and the
Board to review strategic opportunities.
The Group has a comprehensive programme for the identification
and management of risk.
The Group manages capital by operating within defined return-on-
investment metrics and debt ratios as outlined in the Group Finance
Director’s Review. All significant investment and divestment decisions
are approved by the Board consistent with the Group’s capital strategy
which is based on achieving a range of financial criteria including return
on capital invested. The Board will continue to focus on investments
that are in line with the Group strategy and capable of maximising overall
Group performance.
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Risk management
www.glanbia.com
23
4. Deliver operational excellence
Risk description
Potential impact
Mitigation
A breach of existing
environmental laws
and regulations or the
introduction of new, more
onerous, legislation.
Reputational damage
and regulatory penalties
including restrictions
on operations, damages
or fines.
Increased cost of
compliance with modified
or new legislation.
The Group is committed to compliance with regulations.
We continue to invest in energy efficiency advancements,
carbon reduction and emission programmes and recycling.
This commitment is demonstrated through successes such as
Glanbia Dairy Ingredients, Virginia, becoming the first Irish dairy
business to receive the prestigious ‘Carbon Trust Standard’ award,
a globally recognised certification for organisations that have
measured, managed and reduced their carbon footprint,
and demonstrated commitment to making further reductions
year-on-year.
Product recall costs, lost
revenues and reduced
growth prospects.
The Group conforms to international and local food safety, quality
and environmental regulations and employs best practice across
all its production facilities to maintain the highest standards.
The Group maintains product liability insurance.
Reputational damage
and regulatory penalties
including restrictions on
operations, damages
or fines.
Additional labelling
requirements.
Reputational damage and
possible regulatory
penalties.
All business operations have business continuity plans in
place including identification of alternative production locations
where relevant.
Inability to service
customer requirements.
Reduced profitability and
cash flow.
The Group monitors overall safety and loss prevention
performance through the Glanbia Risk Management System
(GRMS) to assist operational management responsible for site
risk. An independent risk manager conducts the GRMS reviews,
the results of which are presented to and considered by the Audit
Committee on an annual basis.
A comprehensive insurance programme is in place for all significant
insurable risks and major catastrophes. The Irish business units
completed detailed simulation testing in relation to business
continuity planning during 2011 and plans are in place to roll out
this testing to the remainder of the Group during 2012.
Adverse impact on cash
flow and earnings.
Energy efficiency programmes are operated across all sites.
When required the Group will enter into fixed-price arrangements
to cover certain future energy requirements.
Contamination of
products and/or
raw materials
or
A breach of food
safety legislation or the
introduction of more
stringent regulations.
Loss of capacity at a
major site or a breach
of health and safety
regulations.
A significant increase in
energy costs impacting
the Group’s large-scale
processing operations.
Find out more
P13
Our strategy
P14
P42
Understanding our business
Group Chairman’s introduction to
corporate governance
P98
Financial risk management
Go online
www.glanbia.com/corp-gov
24
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Risk management
www.glanbia.com
2012 Business focus
1. Clarity on strategic approach to potential opportunity post the abolition in 2015 of the current EU milk quota regime
Risk description
Potential impact
Mitigation
A failure by the Board
to select the optimal
investment option to
maximise shareholder
return.
Lost opportunities to
maximise shareholder
value.
Glanbia is in the process of reviewing the implications of the
potential expansion of its supply base post the abolition of EU
milk quotas in 2015. As part of this process the Group is working
to evaluate potential options for expansion of dairy processing in
Ireland. Any investment opportunities arising would be considered
by Glanbia plc in a portfolio context to ensure that Group resources
are directed to business segments so as to maximise overall Group
performance.
2. Achieve further strategic cost reductions in Consumer Products
Risk description
Potential impact
Mitigation
Cost reductions not
delivered in line with
expectations.
Adverse impact on
earnings.
Monthly reviews take place with the Consumer Products business
unit to track actual performance against planned assumptions and
strategic objectives, during which any required corrective actions
are identified.
3. Successfully complete planned facilities expansion in Customised Premix Solutions and deliver whey expansion in
Dairy Ingredients
Risk description
Potential impact
Mitigation
Risk of sub-optimal
production capacity
utilisation.
Inability to service new
and existing customer
requirements.
Operational efficiencies
impacted.
All key development projects are well planned in advance of
execution by dedicated and experienced teams with regular Group
reporting requirements to ensure projects are delivered on time and
on budget.
All business units have business continuity plans in place in the
event of unexpected issues arising.
4. Deliver nutritionals acquisition
Risk description
Potential impact
Mitigation
Risk of being unable
to realise the Group’s
growth potential.
Intended business benefits
not realised impacting
profitability and growth.
The Group implements regular reporting against targets outlined
in the acquisition business case with a determination made on the
corrective actions as required.
Integration efforts may
result in an excessive
management time
requirement.
The Group management team has significant post-acquisition
integration experience. Acquired entity management teams
are typically strengthened by the transfer of experienced
Glanbia managers.
5. Review milk procurement strategy in US Cheese
Risk description
Potential impact
Mitigation
Risk of not achieving
an appropriate balance
between sustainable
milk supply and cost.
Inability to deliver earnings. Management are currently reviewing the milk procurement strategy
for the business to ensure it remains competitive for the future in the
interests of our milk suppliers and Glanbia alike.
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Risk management
www.glanbia.com
25
6. Achieve organic growth targets for Global Nutritionals
Risk description
Potential impact
Mitigation
A deterioration in market
conditions or business
unit performance
impacting results.
Recruitment and
retention - the Group
is dependent upon
the quality, ability and
commitment of key
personnel in order to
sustain, develop and
grow the business.
Reduced profitability and
cash flow.
Monthly reviews with all business units tracking actual performance
against budget and forecast and determining corrective actions
as required.
Growth targets may be put
at risk by failing to attract
and retain high quality
management and staff.
Business unit senior management teams and the Board regularly
assess key market trends and implications for Group performance
and business unit strategic objectives on an ongoing basis.
The Group mitigates risk exposure through sustained succession
management, strong recruitment processes, long-term incentives
and retention initiatives. As outlined in their report, during 2011
the Remuneration Committee implemented a number of specific
changes to the remuneration plan to reduce key management
retention risk.
The Group also operates management development programmes
to ensure there is a continuous pipeline of talent to support the
ongoing growth and development of the business.
7. Manage buy/sell balance and whey supply in Performance Nutrition
Risk description
Potential impact
Mitigation
The failure to fully
recover higher whey
input costs in the
market place or one of
our major ingredient
suppliers being unable
to fulfil product demand
requirements.
Adverse impact on
earnings.
Inability to service new
and existing customer
requirements.
Operational efficiencies
impacted.
Raw material pricing pressures and the Group’s ability to recover
increased costs in the market place are regularly assessed by
management.
A broad supplier base is maintained, management continuously
seeks out and assesses additional sources of supply for key raw
materials. Regular quality control assessments, including supplier
site audits, are conducted to ensure raw material of the required
standard is consistently procured.
8. Review bank debt facilities
Risk description
Potential impact
Mitigation
Refinancing of Group
debt facilities is key
to underpinning the
liquidity requirements of
the Group.
Lack of liquidity to sustain
and grow the Group.
The Group has strong ongoing relationships with debt providers.
New financing arrangements are typically negotiated at least twelve
months prior to expiration.
The Group, as part of its overall financing review in 2011, extended
the sources of debt facilities at its disposal by completing a $325
million private debt placement of 10-year senior loan notes.
Tight management of debt and interest rate exposures with
significant headroom maintained against current covenants.
Business Environment Risks
1. Economic uncertainity or excessive volatility in global dairy pricing
Risk description
Potential impact
Mitigation
A deterioration in global
economic or market
conditions resulting in
a decline in consumer
confidence.
Volatile global dairy
commodity markets.
Negative impact on
profitability and cash
flow.
The Group maintains a balanced spread of businesses and
continues to diversify its earnings base in order to reduce volatility in
financial performance.
Inability to deliver
higher quality and
less volatile earnings.
Globally the Group has employed a number of risk management tools to
limit volatility but its ability to pass pricing volatility in dairy commodities
back to its Irish milk suppliers can be constrained by competitive
conditions and the pricing methods employed.
As the Group maintains a portfolio of businesses there are some natural
hedges to global dairy markets within that portfolio.
26
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Risk management
www.glanbia.com
Our responsibilities
Glanbia's corporate social
responsibility includes
appropriate business
conduct and accountability,
fairness and respect for
employees and business
partners, achieving a strong
environmental, health and
safety performance and local
community involvement. Our
goal is to build a sustainable
business that contributes
to the communities where
we operate.
This responsibility is
reflected in the standards
and attitudes that have been
embedded in the way we
conduct our business and
customer relationships.
During 2011 our corporate
responsibility programme
continued to focus on
managing the environmental,
people and community
issues which are most
material to our business,
and most important to our
stakeholders, in a way which
is aligned to and supports our
overall business strategy.
Significant progress was
made in terms of further
reducing waste and energy
consumption, developing
the skills of our staff and in
continuing to promote our
brands through charitable
partnerships.
Muireann Kelliher /
Group Strategy Development
Director / Glanbia plc /
County Kilkenny, Ireland
" I joined Glanbia six years ago from
McKinsey & Company to further
develop the Group’s strategic
planning processes. I travel
extensively with my job to support
each business unit in developing
their strategic plans which form
the base for the Group’s overall
three year strategic plan."
Find out more
P13
Our strategy
P14
Understanding our business
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Our responsibilities
www.glanbia.com
27
In 2011, 25 high potential
managers from across
Glanbia’s global community
attended the Glanbia
Management Development
Programme. This programme
is designed to develop
leadership and strategic
capability in high potential
managers. Participants are
also challenged with business
critical projects providing the
opportunity to put their newly
learned skills to the test in
cross functional teams.
Our People Strategy
The Group actively fosters a dynamic
and results oriented corporate culture
by continuing to make Succession
Management the way of working
throughout the organisation. We
encourage our people at all levels of
the organisation to “make a difference”
through clear accountability and the
delivery of performance and innovation
with high energy and personal integrity.
Our Succession Management process
ensures that those employees who
perform well will be rewarded and
provided with exciting opportunities
for career development in Glanbia’s
expanding global business.
The clear identification of employee
performance and of potential future
leaders through the succession
management process is a Key
Performance Indicator (KPI) for
Human Resources (HR). The Group
is committed to providing continued
development to these future leaders
through defined development initiatives.
Graduate programme
Glanbia continues to attract and
recruit talent to sustain the future
development of the organisation. Our
Graduate programme has been a key
element for many years in recruiting
top talent to support the operations,
commercial and innovation functions
throughout the Group. Many of
these graduates are now developing
successful careers across the global
organisation.
Employee communication
A key HR imperative is to have strong
clear communication throughout
the organisation. Regular team
briefs continued in 2011 to provide
all employees with relevant Group
messages and updates on local
business specific issues.
Additionally, a two day management
conference was held in 2011 for the
senior management teams of all global
business units and Group functions. This
was an excellent opportunity to outline
the Group strategy, clarify the roles and
responsibilities of each business unit in
that context and to fully integrate this key
senior management group.
Management
Conference Excellence
Awards
Achievement Awards were presented
during the 2011 Glanbia Management
Conference to celebrate success
within the Group.
Presentations were made to:
> Global Nutritionals and Group
Business Services - for a
complex, collaborative IT project
between the Glanbia Nutritionals
team at Customised Premix
Solutions, California and Group
Business Services.
> Consumer Products - for supply
chain management under
extreme, adverse weather
conditions during the winter of
2010/2011.
> Southwest Cheese - for the
capacity expansion project,
an example of “on time and on
budget delivery.”
4,572
The average number
of people employed
with Glanbia
in 2011
28
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Our responsibilities
www.glanbia.com
The Consumer Products
team responsible
for achieving GRMS
accreditation for supply
chain function in 2011.
GRMS is the ‘Glanbia Risk
Management System’
which governs the health
and safety standards and
procedures required to
operate safely.
Global HR system
We continue to develop our Global HR
system to underpin our performance
and reward policies and to deliver a
highly professional performance and
succession management process.
In 2012 we move to a new development
phase of key metrics measurement to
further empower managers with the
information required for efficient people
management.
Operational HR
Glanbia employed an average of
4,572 people in 2011, including
Joint Ventures & Associates.
Employee numbers in US Cheese
and Global Nutritionals increased by
289 in 2011. This was largely due to
the acquisition of BSN®. In addition,
Global Nutritionals continued to
recruit key sales and business
development people across its global
business to strengthen and reorganise
management teams to enable the
future delivery of our growth strategy.
Dairy Ireland employee numbers
were largely unchanged reflecting
the completion of the 2009-2011
rationalisation programme when 358
employees left the business.
We continue to examine our Dairy
Ireland cost base to ensure we optimise
our competitiveness in a challenging
Irish economic environment, while also
being adequately resourced to take
advantage of the business opportunities
arising from the current positive global
dairy outlook.
Pension scheme
During 2011, the strategic review of
the Group’s defined benefit pension
scheme arrangements in Ireland was
finalised. Changes were necessary as
a consequence of significant funding
deficits experienced by these schemes.
As a result, funding proposals were
agreed with the Pensions Board for the
Group’s main pension schemes. This
resulted in members’ benefits being
reduced in conjunction with significantly
increased Group contributions to the
schemes and it is anticipated that the
changes will place the defined benefit
pension schemes on a firmer platform for
the future.
Irish pay agreement
In 2012, Glanbia enters the final year
of a 51 month pay agreement with our
Irish based employees. The Group will
review, with employee representatives,
future compensation policy in the light
of the evolving Irish economic and
commercial climate and our competitive
cost position.
Health and safety
Glanbia continues to extend and
deepen the investment in health and
safety (H&S) in all our operational sites.
We measure our effectiveness through
independent third party H&S audits as
part of the Glanbia Risk Management
System (GRMS). H&S and legislative
compliance is a cornerstone of the
GRMS and are embodied in 11 sections
of the audit programme including risk
assessment, planned inspections,
occupational health, training, personal
protective equipment, communications
and recruitment.
Among many initiatives in 2011, one
novel innovation was the roll out of
‘Behavioural Based Safety’ at our
cheese production facilities in Idaho.
This is a process whereby an employee
conducts a workplace safety review on
an aspect of a colleague’s role resulting
in improved safety recommendations,
where required.
Another key initiative was in the
Consumer Products business where
supply chain has been incorporated into
the GRMS audit framework.
In 2011, 25 high potential managers
from across Glanbia’s global community
embarked on the first stage of the
custom designed programme, ‘Glanbia
Management Development Programme.’
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Our responsibilities
www.glanbia.com
29
The presentation of the
Carbon Trust Standard
Award to Dairy Ingredients'
Virginia facility.
Environmental highlights
With a global presence in key food
markets and manufacturing
operations in seven countries,
Glanbia is committed to improving
the environmental performance
across the Group each year.
Dairy Ireland
Glanbia continues to maintain a
successful environmental and energy
management system with all major
processing sites accredited to ISO
14001 and EN 16001 standards.
Both management systems are driving
significant reductions in CO2 (carbon
dioxide) emissions and simultaneously
decreasing fossil fuel consumption and
associated business costs.
Dairy Ingredients
During 2011 Dairy Ingredients
continued its strong track record
in environmental management at
its two key processing facilities in
Ballyragget, County Kilkenny and
Virginia, County Cavan.
by 7% per tonne of product produced
in comparison to 2008. 42% of site
waste was eliminated in 2011 versus
2008, with a further 12% diverted
from landfill. Chemical use in water
treatment reduced by 36% per litre of
milk processed in comparison to 2008.
During the year Dairy Ingredients also
launched a new programme to further
enhance on farm sustainability. Read
the case study on page 37.
Consumer Products
In 2011, Consumer Products made
further progress in its environmental
programme with energy and carbon
reductions, as well as a number of new
packaging and supply chain initiatives.
From 2005 to 2011 Consumer
Products reduced consumption
of thermal energy by almost 40%
and electrical energy by 16%. C02
emissions were reduced by 20%
as a direct consequence of energy
management systems employed
during the same period.
A specific programme has been
running since 2008 which delivered
benefits including energy efficiency
per tonne of product, which has
improved by 8% in comparison to
2008. Carbon emissions were down
Consumer Products introduced regular
resource surveys and continuous
packaging evaluation to improve the
impact on the environment. As a result
packaging weight reductions of 7%
were achieved in 2011.
Carbon Trust
Standard Award
In December 2011, Dairy
Ingredient’s Virginia facility became
the first Irish dairy business to be
awarded the Carbon Trust Standard
Award – a globally recognised
certification for organisations that
have measured, managed and
reduced their carbon footprint,
and committed to making further
reductions year-on-year. It follows
a concerted effort by management
and staff in the Virginia facility that
resulted in an 8.5% reduction in
carbon emissions relative to plant
output over the last three years.
Michael Gifford, Head of Operations
at Carbon Trust Certification
congratulated Glanbia and said
“The Carbon Trust Standard
enables Glanbia to demonstrate its
commitment to reducing its impact
on the environment, lowering its
costs and meeting supplier demand
for lower carbon products.”
30
Glanbia plc Annual Report 2011
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Our responsibilities
www.glanbia.com
With the support of packaging
suppliers, we became the first dairy
business in Europe to use milk cartons
produced solely from sustainable
forests, as independently verified by
the Forest Stewardship Council. To
complement this initiative Consumer
Products supports educational
sustainability programmes for school
children that create awareness of
environmental issues.
Consumer Products also reduced
carbon emissions in 2011. The
business invested in a system to
monitor the daily carbon footprint of
lorry drivers and allow each driver to
actively manage their own carbon
emissions. Intelligent fuel management
and route optimisation programmes
were also introduced into the supply
chain, which reduced carbon
emissions by 33,000 kgs and engine
running time by 6,500 hours.
The reduction and elimination of
ozone depleting gases is an ongoing
programme within Consumer
Products. The business recycles
65% of its waste and in conjunction
with suppliers is developing re-use
and recycle loops which will enable
a further 5% improvement in the
recycling rates.
Agribusiness
Agribusiness is the leading supplier of
farm inputs in Ireland. Our mills have a
strong focus on low-energy production
processes and have co-located grain
drying operations on the mill sites to
reduce feed ingredient transport costs.
Gain Dairy Feeds incorporated novel
nutrition technologies to increase
feed efficiency and reduce on-farm
emissions of methane and nitrous
oxide. The Gain Feed Programme is a
comprehensive suite of farm services
including forage evaluation, pasture
management and diet balancing
which is available to agribusiness
customers to support economic and
environmental sustainability of livestock
and grain production. Gain Feeds
also utilised readily available forms of
minerals to reduce mineral excretion
in slurry.
US Cheese
Our US Cheese operations continued
to make successful strides in
environmental performance, both in
effluent quality and non-renewable
energy demands in 2011.
As a result of a focus on more efficient
utilisation, a 4.9% decrease in water
consumption was achieved in 2011.
A decrease of 7% was realised in
natural gas usage in the same period
with a reduction of 5.64% in usage
of electrical energy. The reduction in
energy usage contributed greatly to
a reduction in our greenhouse gas
generation in US Cheese. The amount
of greenhouse gases (carbon dioxide,
nitrous oxide and methane) decreased
by 4.4% during the year.
Also, continued efforts were made to
better utilise renewable sources in 2011.
Biogas, a renewable energy formed
as a consequence of waste water
treatment, continues to supplant natural
gas usage for heating input. In 2011,
a 4.4% increase in biogas usage was
recorded by comparison with 2010.
Southwest Cheese
In 2011, through sustainability
improvement projects Southwest
Cheese decreased water consumption
by 25.5% while also expanding
capacity by 40%. Water is a precious
resource in a desert location and the
Southwest Cheese focus is on making
water usage as efficient as possible.
US Cheese’s greenhouse gases
decreased by 4.4% or 4,441
metric tonnes in 2011.
65%
of Consumer
Products waste recycled
in 2011
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Our responsibilities
www.glanbia.com
31
Barretstown is a charity
which offers life-enhancing
programmes for seriously
ill children and support for
carers and parents.
Intensified monitoring and reporting
in water quality led to a significant
waste water reduction with the plant
decreasing its effluent emissions by
11.6%.
Southwest Cheese decreased energy
usage by 5.8% in 2011. Efforts are
ongoing to fully optimise the plant’s
biogas energy resource.
Local Community Initiatives
With its origins in the Irish co-operative
movement, Glanbia has a proud
history and tradition of supporting
local communities. During 2011,
the Group demonstrated an ongoing
commitment to volunteerism and
corporate giving. Glanbia’s community
initiatives were strongly supported by
employees and customers in 2011
making a tangible difference to local
communities and assisting many
worthy causes.
Ireland
2011 was the third year of Glanbia’s
relationship with Barretstown, a charity
which helps children with serious
illnesses such as cancer, to regain
their confidence and self-esteem
through therapeutic recreation.
Within Glanbia employee 'champions'
volunteer each year to raise internal
awareness and support fundraising.
In 2011, the champions continued to
demonstrate significant commitment
and through two key fundraising
events they engaged the support
of many colleagues and friends
throughout Ireland to raise over
€60,000 for Barretstown. This brought
the total raised by Glanbia in the last
three years to over €1 million.
A sponsored cycle, the ‘Tour de
Kilkenny’ and an organised climb
of Ireland’s highest mountain,
Carrauntoohil, involved over 730
participants in 2011. Numerous other
smaller events were also organised by
the various champions to raise further
donations for the charity.
The Avonmore brand association
continued to generate increased
awareness for Barretstown, in
particular through the brand’s
nationwide TV weather sponsorship.
In recognition of the benefits of this
partnership, Glanbia’s three-year
relationship with Barretstown has been
extended for an extra year.
Sponsorship
Many Glanbia business units
support local communities through
sponsorships. As a dairy based
company, with a wide range of
nutritional products, Glanbia’s
involvement with sports represents
an ideal synergy in the promotion of
a healthy lifestyle. This association
with sports is evident in many of the
Group’s business units such as the
sponsorships by the Avonmore brand
of the Munster school’s rugby, as well
as a number of other performance
nutrition sponsorships.
Glanbia’s corporate sponsorship
of the Kilkenny senior hurling team
has been in place for over a decade
and is reflective of the link between
the Gaelic Athletic Association and
Glanbia through employees, milk
suppliers and customers. 2011 was
our second year of a three-year
agreement with the Kilkenny senior
hurling team who became the All-
Ireland hurling champions for a
record 33rd time in 2011.
€1 million
In the last three years Glanbia
has raised over €1 million for the
Barretstown Charity in Ireland.
32
Glanbia plc Annual Report 2011
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Our responsibilities
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The presentation of the
Idaho Governor's Brightest
Star Award, 'Corporation
Volunteer of the year'
to US Cheese.
Optimum Nutrition is a proud partner
of professional rugby teams Leinster
and Ulster. A host of individual athletes
in diverse sports such as triathlon,
rock climbing and BMX Racing are
also sponsored by the brand. BSN®
is the 'Official Nutritional Supplement
Provider' of the Ultimate Fighting
Championship®, the premier Mixed
Martial Arts organisation in the world.
USA
In November, US Cheese was named
‘Corporation Volunteer of the Year’ by
the Governor of Idaho, C.L. Otter for
"exemplary volunteer service to the
state of Idaho and fostering an ethic of
service in others."
As part of the community engagement
programme in Idaho, US Cheese
receives suggestions from both the
local community and employees for
community sponsorships. In 2011,
US Cheese worked with a number
of local voluntary organisations in the
Gooding, Twin Falls and Richfield areas.
These organisations include a
Gooding community garden project
which produces nutritious food
for those in need within the local
community and offers employment
and education opportunities for a
range of young people, including
those with special needs.
During the year US Cheese raised
$137,000 through the ‘Charity
Challenge Golf Tournament,’ the
largest annual charity event in the
Magic Valley, Idaho.
‘Habitat for Humanity’ an international
voluntary organisation which solves
housing issues through a self-help
model was granted the largest
donation of $105,000, with the
remaining amount spread between
four other organisations. This brings to
over $2 million the amount raised by
US Cheese for local charities over the
last 20 years.
In December, BSN® held the third
annual employee appreciation day
and charity fundraiser in support of St
Jude Children’s Research Hospital in
Florida. BSN® employees and vendors
raised over $156,000 for the children
of St Jude, surpassing the donation of
$131,000 they made in 2010.
Numerous fundraising events have also
taken place amongst our staff across
the US.
Climbing for
Barrettstown
In August 2011, in poor conditions,
a 67-strong team climbed Ireland’s
highest peak to raise funds for
Barretstown. The team responded to
the challenge of driving rain and gale
force winds with the climb and descent
taking six hours to complete.
In September, Glanbia’s collaboration
with Barretstown Camp was
recognised by the Chambers of
Commerce of Ireland when the
Group was presented with the
'Good Neighbour Award for
Large Indigenous Companies' at
the Chambers Corporate Social
Responsibility Awards in Dublin.
Geraldine Somerville, Consumer
Products 'Champion' Citywest,
Brian Phelan, Group HR and Operations
Development Director and Dee Ahearn,
CEO Barretstown, at the presentation
of the 'Good Neighbour' award,
in September 2011.
Glanbia Foods,
Inc, was named
‘Corporation
Volunteer of the Year’
by Idaho Governor
C.L. Otter
Glanbia plc Annual Report 2011
Directors' Report: Group performance
Our responsibilities
www.glanbia.com
33
Our global footprint
We have a strong global
presence in key food
markets and sectors
around the world. The
Group has manufacturing
operations in seven
countries, sales and
technical support locations
in 14 countries and our
products are sold to over
130 countries worldwide.
Manufacturing & processing
and sales/technical locations
Dairy Ireland
US Cheese & Global Nutritionals
Joint Ventures & Associates
Glanbia plc head office
Glanbia Innovation Centre
Sales and technical support locations
Export and product distribution locations
Mexico
e
CanC ada
USA
Uruguay
Ireland
> Glanbia plc head office
North America
> 10 manufacturing/processing
Asia Pacific
> 1 manufacturing/processing
> 8 manufacturing/processing
facilities
facility
facilities
> 6 sales and technical support
> 5 sales and technical support
> 4 sales and technical support
locations
locations
locations
> 1 innovation and customer
> 9 export/distribution markets
> 52 Agribusiness branches
> 1 innovation centre
collaboration centre
> 55 employees
> 120+ export/distribution markets
> 50+ export/distribution markets
> 1,812 employees
> 1,835 employees
Europe
> 4 manufacturing/processing
South America
> 1 sales and technical support
Africa
> 1 manufacturing/processing
facilities
location
facility
> 5 sales and technical support
locations
> 30+ export/distribution markets
> 511 employees
> 1 sales and technical support
location
> 1 export/distribution market
> 359 employees
34
Glanbia plc Annual Report 2011
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Our global footprint
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UKUUUU
Ireland
Belgiummmmmmmmmmm
GGGGGGGGeGGGGeeGGGeG manyy
Germany
er
Nigeria
Du
Dubai
Chinah
Indonesia
Australia
5.8 billion
litres of milk
485,000
tonnes of cheese
263,000
tonnes of dairy-based ingredients
Dairy Ireland
US Cheese & Global Nutritionals
Joint Ventures & Associates
Glanbia plc Annual Report 2011
Directors' Report: Divisional performance
Our global footprint
www.glanbia.com
35
Dairy Ireland
Results Overview
In 2011 Dairy Ireland
revenue grew 18.9% to
€1.35 billion (2010: €1.14
billion). The revenue growth
is attributable to underlying
organic volume growth of
4%, higher pricing and an
enhanced product mix of
13% and an acquisition of
2%. Operating profit pre
exceptional increased
23.2% to €53.6 million
(2010: €43.5 million) and
the operating margin pre
exceptional increased 20
basis points to 4.0% (2010:
3.8%). EBITA pre exceptional
increased 20.9% to €57.9
million (2010: €47.9 million).
Joe Brien / Casein Manager /
Dairy Ingredients / Ballyragget,
County Kilkenny, Ireland
“ Our aim is to meet and exceed
the expectations of our casein
customers. This demands the
highest levels of process efficiency
while maintaining superior quality
standards. I am proud to lead and
empower our team to optimise
performance using the best
technologies, skills and techniques
to drive continuous improvement
for our business.”
Dairy Ingredients: 2011
performance and 2012 outlook
In 2011, global dairy markets remained
largely positive despite significant
geopolitical and macroeconomic
events during the year.
This underpinned solid results from
Dairy Ingredients. Volumes and prices
were higher and the business also
benefited from strong operational and
cost management, combined with
maximising market reach in emerging
markets. Revenue and EBITA grew
and EBITA margins also improved
somewhat, despite significantly
higher milk costs.
During the year, Dairy Ingredients
introduced a number of programmes
to assist farmer suppliers to prepare in
advance for output growth from 2015.
These included a farm sustainability
programme, a herd health programme,
a milk seasonality scheme and farm
finance training programme.
In addition, Dairy Ingredients, working
closely with suppliers and strategic
customers, introduced an innovative
index-linked milk price scheme for 8%
of the milk volumes which assists in the
management of dairy market volatility
by providing market assurance to
both suppliers and customers over
a three year period. It is planned that
the scheme will be further extended
in 2012.
Ongoing capital investment in
automation and the adoption of
lean manufacturing principles
underpinned a rigorous focus on cost
reduction and operational performance
during the year.
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Glanbia plc Annual Report 2011
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Dairy Ireland
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Dairy Ingredients' plant in Virginia,
Cavan became the first Irish dairy
business to receive the prestigious
‘Carbon Trust Award’. This is a
globally recognised certification for
organisations that have managed and
reduced their carbon footprint and
demonstrated a strong commitment to
making further reductions year-on-year.
In 2011, a €21.2 million investment
in the whey processing facilities in
Ballyragget was approved which, when
commissioned in 2012, will increase the
volume of higher protein whey products
produced.
Overall while recognising that some
weakness is anticipated in dairy
markets in 2012, the performance of
Dairy Ingredients is expected to be
broadly in line with 2011.
Consumer Products: 2011
performance and 2012 outlook
Consumer Products had another
difficult year in 2011. Irish
macroeconomic circumstances have
created unprecedented pressure on
suppliers to the Irish food retail and
foodservice sectors.
Within retail, private label grew market
share in all categories as consumers
continued to focus on cost and
managing their food budgets very
tightly. Consumer sentiment is fragile at
best as the outlook remains uncertain
for European fiscal and monetary
developments.
Within the food category price
promotions are now a permanent
market fixture. Higher prices in global
dairy markets impacted raw material
input costs with only modest price
increases passed onto the consumer.
Agribusiness: 2011 performance
and 2012 outlook
Agribusiness had a good year in 2011
overall. Volumes were marginally down
but strong cost focus, favourable
production mix and management
of key buy/sell equations helped to
deliver growth in EBITA. EBITA margins
were broadly similar to 2010. The
performance of global dairy markets in
2012 is expected to underpin farm input
demand at similar levels to 2011 but the
management of milk quota limits the
prospects of volume growth. Overall,
a solid performance is expected from
Agribusiness in 2012.
Volumes were up in fresh dairy products
and natural cheese and on a like for
like sales basis, milk was broadly in line
year-on-year, albeit mix was adverse.
Rationalisation costs of €8.7 million
included redundancies related to the
integration of the liquid milk business
acquired from Kerry Group plc and were
incurred in the first half.
While revenue increased in 2011, largely
driven by a small liquid milk acquisition
during the year, EBITA and EBITA
margins declined.
No significant change in the market
environment is expected in 2012 and
the business is expected to deliver a
broadly similar performance to 2011.
Dairy Ireland results
Revenue
EBITA
EBITA margin
Operating profit
Operating margin
EBITDA
2011
2010
€1,353.3m
€57.9m
€1,138.6m
€47.9m
4.3%
€53.6m
4.0%
€77.4m
4.2%
€43.5m
3.8%
€66.9m
Change
+ 18.9%
+ 20.9%
+ 10 bps
+ 23.2%
+ 20 bps
+ 15.7%
Results are stated pre exceptional items
A new sustainability model for Irish dairy operations
Since 2005, Dairy Ingredients has operated an accredited farm audit process
for milk suppliers. In June 2011, Dairy Ingredients launched a new Sustainability
Programme to further enhance on-farm sustainability. This programme is
operated in association with Bord Bia, the Irish Food Board, and has been jointly
developed with key global Dairy Ingredients' customers. It is designed to create
an infrastructure at farm level which will underpin an internationally recognised
sustainability accreditation and is being rolled out to Dairy Ingredients' 4,800
farmer suppliers in 2012.
Glanbia plc Annual Report 2011
Directors' Report: Divisional performance
Dairy Ireland
www.glanbia.com
37
US Cheese & Global Nutritionals
Results overview*
In 2011, US Cheese &
Global Nutritionals revenue
increased 35.1% to €1.38
billion (2010: €1.02 billion).
The strong growth in revenue
is attributable to strong
underlying organic volume
growth of 10%, higher pricing
and an enhanced product
mix of 14%, and the positive
contribution of BSN® of
11%. Operating profit pre
exceptional increased
21.3% to €113.8 million
(2010: €93.8 million). EBITA
pre exceptional increased
23.3% to €128.8 million
(2010: €104.5 million).
Operating and EBITA margins
pre exceptional decreased
by 100 and 90 basis points
respectively.
Eric Bastian / Vice President /
Glanbia Nutritionals Research /
Twin Falls, Idaho
“ I lead an R&D team that is
commercially focused on new
products for performance nutrition,
high-protein bars and beverages,
fresh-dairy, and processed-food
markets. We pride ourselves on
being aligned with our customers
and in 2011 launched several
commercially-successful products.”
US Cheese: 2011 performance
and 2012 outlook
While the US cheese market was
volatile, average prices were higher
in 2010 and importantly; the business
has increasingly sought to reduce
this market related risk through
the adoption of a range of risk
management tools.
Production volumes were down
marginally in the year as volumes were
aligned with both sales demand and
milk supply. Competition for milk was
a feature of the year and led to some
input cost pressures. These were offset
by strong operational management,
including the implementation of a two
year programme on lean manufacturing
developed centrally, called the Glanbia
Performance System ‘GPS’. US
Cheese implemented this programme,
which will be rolled out across all key
Group manufacturing sites.
Export sales were strong in the year
and significant investment was made
in building internal resources to
maximise this business opportunity
over the longer-term.
US Cheese continues to invest in
enhancing its product capabilities
and an $11m investment in a cheese
innovation centre is planned for 2012.
This is to facilitate closer collaboration
with customers in developing new
products and formats.
*on a constant currency basis
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38
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Glanbia plc Annual Report 2011
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Glanbia plc Annual Report 2011
Directors' Report: Divisional performance
US Cheese & Global Nutritionals
www.glanbia.com
The trading environment for US Cheese
in 2012 has some challenges. Higher
US milk production is expected to result
in a lower average US cheese market
price in 2012. While retail demand
was impacted by high prices in 2011,
overall demand remains resilient in
the foodservice, industrial and export
sectors. In response to the current
competitive environment for both milk
suppliers and US cheese processors,
Glanbia is in the process of reviewing its
milk procurement strategy for its supply
base in Idaho. Overall US Cheese is
forecast to deliver a performance in
2012 broadly in line with 2011.
Global Nutritionals: 2011
performance and 2012 outlook
Global Nutritionals had a strong
year in 2011 and is now the largest
business in the Group both by revenue
and EBITA, which is a significant
strategic transformation for Glanbia
in recent years.
Organic revenue growth was excellent
in all three business units; Performance
Nutrition, Customised Premix Solutions
and Ingredient Technologies, driven
by strong demand and good growth
in prices and EBITA also improved
in the year. However there were
significant raw material price pressures
which impacted EBITA margins
in Performance Nutrition where
significantly higher whey costs were not
fully recovered in the market despite a
series of price increases and margins
declined as a result. This is reflected in
the overall 90 basis points reduction
in US Cheese & Global Nutritionals
divisional EBITA margins for 2011.
On 19 January 2011, Glanbia
announced the acquisition of BSN® for a
total consideration of $144 million. The
business was acquired on a debt free
basis and was funded through Glanbia’s
existing banking facilities. BSN® is
a leading developer, provider and
distributor of nutritional products and
enhances and extends Performance
Nutrition’s product portfolio.
During the year there has been
significant investment in organisation
and product development including
the re-launch of BSN®'s flagship
brand, N.O.-XPLODE 2.0 for pre-
training performance and energy. The
integration of BSN® is progressing well
and the business performed in line with
expectations in 2011.
US Cheese & Global Nutritionals results
Market growth in all Glanbia’s core
nutritional sectors gathered pace in
2011 and the prospects are good for
2012.
These are underpinned by long-term
positive structural market growth drivers
including healthy living and healthy
aging. While raw material availability and
cost is expected to remain challenging
for Performance Nutrition in the short
term, this market dynamic is expected
to ease as new supply sources become
available in the latter part of 2012.
There is a clear focus in Global
Nutritionals on developing new
products, both nutritional and
functional; building a systematic
approach to innovation and enhancing
organisation and operational
capacity. During 2011, all three
nutritional businesses developed
their international presence and each
continues to build scale and global
platforms that are customer centric.
Overall Global Nutritionals is expected
to perform well again in 2012.
Constant Currency
Reported
2011
€1,380.4m
€128.8m
9.3%
€113.8m
8.2%
€142.7m
2010
€1,021.9m
€104.5m
10.2%
€93.8m
9.2%
€116.7m
Change
+ 35.1%
+ 23.3%
- 90 bps
+ 21.3%
- 100 bps
+ 22.3%
2011
€1,316.9m
€122.2m
9.3%
€108.0m
8.2%
€135.4m
Change
+ 28.9%
+ 16.9%
- 90 bps
+ 15.1%
- 100 bps
+ 16.0%
Revenue
EBITA
EBITA margin
Operating profit
Operating margin
EBITDA
Results are stated pre exceptional items
Glanbia plc Annual Report 2011
Directors' Report: Divisional performance
US Cheese & Global Nutritionals
www.glanbia.com
39
Joint Ventures & Associates
Results overview
Glanbia has three principal
international joint ventures.
Southwest Cheese operates
one of the largest natural
American-style cheddar
cheese and high protein
whey processing facilities
in the USA. Production
capacity in this business
expanded by 40% in 2010.
Southwest Cheese is
strategically aligned with the
Group’s wholly-owned US
Cheese business.
Glanbia Cheese in the UK
is a leading supplier of
mozzarella cheese for the
European pizza market.
Nutricima is developing a
portfolio of branded dairy
based products for the
Nigerian market.
Cody Vander Dusen /
Milk Supplier / Rajen Dairies /
Clovis, New Mexico
" Since 2005, Rajen Dairies has been
supplying milk to Southwest Cheese
via Select Milk Producers, Inc.
Currently Rajen Dairies is milking
about 10,000 cows at three different
facilities to ensure a steady supply. The
partnership with Southwest Cheese
has been great and Rajen Dairies is
proud to be part of its success."
Summary overview on a
constant currency basis
Joint Ventures & Associates had a good
year. Revenue and profits improved
as a result of higher volumes and
market price increases in US cheese
and European mozzarella markets.
Nutricima, in Nigeria, also delivered an
improved performance and revenue
grew year-on-year. Glanbia’s share of
revenue grew 29.9% to €541.0 million
(2010: €416.6 million).
Glanbia’s share of operating profit
increased 20.4% to €26.0 million
(2010: €21.6 million), mainly as a result
of the performance of Glanbia Cheese
and an improved performance in
Nutricima.
Operating margins declined 40 basis
points year-on-year to 4.8%, primarily
due to lower margins in Southwest
Cheese as a consequence of higher
milk cost.
Southwest Cheese: 2011
performance and 2012 outlook
Southwest Cheese had a solid year in
2011. Revenue increased, reflecting
the 2010 capacity expansion.
Since commissioning, Southwest
Cheese has focused on perfecting
the 640lb block of cheese, using
a unique process which is valued
by our customers. The business
also delivered a strong operational
performance in whey, with excellent
quality and product portfolio
innovation.
40
40
40
Glanbia plc Annual Report 2011
Glanbia plc Annual Report 2011
Glanbia plc Annual Report 2011
Directors' Report: Divisional performance
Joint Ventures & Associates
www.glanbia.com
www.glanbia.com
www.glanbia.com
Joint Ventures & Associates results
Constant Currency
Reported
2011
2010 Change
€541.0m €416.6m + 29.9%
€26.0m €21.6m + 20.4%
4.8%
5.2% - 40 bps
€26.0m €21.6m + 20.4%
4.8%
5.2% - 40 bps
€33.6m €27.8m + 20.9%
2011
€524.2m
€25.2m
4.8%
€25.2m
4.8%
€32.6m
Change
+ 25.8%
+ 16.7%
- 40 bps
+ 16.7%
- 40 bps
+ 17.3%
Revenue(1)
EBITA
EBITA margin
Operating profit
Operating margin
EBITDA
(1) Not included in Group revenue.
Reconciliation of operating profit to share of results per the
income statement
Operating profit
Finance costs
Income taxes
Share of results of Joint Ventures &
Associates
Reported
2011
€m
25.2
(4.7)
(6.2)
2010
€m
21.6
(4.7)
(6.8)
Change
€m
+ 3.6
-
+ 0.6
14.3
10.1
+ 4.2
Operating profit was broadly in line with
2011 and the operating margin declined
as outlined above. In 2012 Southwest
Cheese’s performance is expected to
be similar to 2011.
Glanbia Cheese: 2011
performance and 2012 outlook
Glanbia Cheese had a good year in
2011. Revenue, operating profit and
operating margin improved year-on-
year. The business benefited from
good mozzarella demand, continued
operational enhancements and strong
customer relationships with leading
foodservice pizza companies and frozen
pizza manufacturers. While volumes are
expected to be strong in 2012, margin
challenges are expected. As a result
this business is expected to deliver a
somewhat lower performance in 2012.
Nutricima: 2011 performance
and 2012 outlook
Nutricima delivered an improved
performance in 2011. Revenue,
operating profit and operating margin
increased. A step change in volume
growth was underpinned by enhanced
sales capability and distribution.
Nutricima is expected to continue
to improve its performance in 2012,
although operating profit and operating
margin growth will be constrained by
planned investment in brand building
and promotion.
Glanbia plc Annual Report 2011
Directors' Report: Divisional performance
Joint Ventures & Associates
www.glanbia.com
41
Group Chairman's introduction to corporate governance
Dear Shareholder,
At Glanbia we are committed
to achieving the highest
standards of corporate
governance and believe
that effective governance
is achieved through a
combination of strong
leadership, collaboration,
openness, transparency
and robust governance
structures which we continue
to enhance in line with the UK
Corporate Governance Code
and the ISE Annex.
It has been another busy and
successful year for the Board.
We continued our programme of
detailed reviews across the Irish
and international businesses which
included on site US visits. The Board
has been significantly engaged at a
strategic level during the year which
included the decision to acquire BSN®
in January 2011 and the ongoing
evaluation of the implications of
the potential for Irish milk output
expansion which can occur when EU
milk quotas are eliminated in 2015.
In 2011, I conducted an evaluation
of the performance of the Board, its
principal Committees and individual
Directors. This evaluation concluded
that the adoption in 2010 of the new
organisational framework set out
opposite had enhanced the Board’s
effectiveness. A key area identified
for action is the further development
of succession planning processes
including the issue of diversity which the
Board has adopted plans to consider
during 2012. In addition, the Board
intends to engage an external party in a
review of its effectiveness during 2012.
Additionally during the year we
completed a thorough analysis of our
remuneration policy. The key changes
are set out in the Remuneration
Committee Report on page 53 and
include proposed amendments to the
2008 Long Term Incentive Plan which
will be put to shareholders at the 2012
Annual General Meeting for approval
together with the 2011 Remuneration
Committee Report for the purposes of
an advisory non-binding vote.
The 2012 Annual General Meeting
will be held on 9 May 2012 and I look
forward to meeting those shareholders
who are able to attend and answering
any questions they may have on these
governance reports and other matters
covered by the resolutions to be put to
the meeting.
Liam Herlihy
Group Chairman
42
Glanbia plc Annual Report 2011
Directors' Report: Governance
Group Chairman's Introduction
www.glanbia.com
Governance and Risk Framework
Board of Directors
Non-
Executive
Chairman
Two Non-
Executive
Vice-Chairmen
Eleven Directors
nominated by
Glanbia Co-operative
Society Limited
Four Non-Executive
Directors including
the Senior Independent
Director
Three Executive
Directors including
the Group Managing
Director
Board
Committees
Senior
Management
Audit Committee
Key activities include
review of financial
statements and
Auditors’ independence,
internal control and risk
management systems,
and the effectiveness of
the Internal Audit function.
Nomination Committee
Key activities include making
recommendations on the appointment
of the Group Chairman, Vice-Chairmen
and Non-Executive Directors,
planning for the orderly succession
of Directors and review of the
independence and time commitment
of Non-Executive Directors.
Remuneration
Committee
Key activities include
review of Executive
Directors and other senior
executives’ salaries and
benefits, approval of annual
incentive targets and long
term incentive plan awards.
Group Operating
Executive
Key activities include
monitoring performance
and making strategic
recommendations to
the Board. This forum
is also the Group Risk
Committee.
Find out more
P8
Group Managing Director’s review
P14
Understanding our business
P16
Group Finance Director’s review
P22
Risk management
P36
Divisional performance
P44
Group Board of Directors
and senior management
P49
Audit Committee report
P51
Nomination Committee report
P53
Remuneration Committee report
Go online
www.glanbia.com/corp-gov
Risk Management
The Board has ultimate responsibility for risk,
which includes the Group’s risk governance
structure and maintaining appropriate internal
controls. The Audit Committee has responsibility
for reviewing the effectiveness of the Group’s
internal control and risk management systems.
Group Management Committee
The Group Management Committee brings together
business unit CEOs and the Group Operating
Executive and has responsibility for delivery of
Glanbia’s annual business plans and strategy.
Group Senior Leadership Team
This team brings together the Group Operating
Executive, Group Management Committee members,
senior business unit teams and Group functional
heads. The focus is to drive shared understanding of
Glanbia’s goals and objectives and the role of each
business unit in delivering the annual business plan
and strategy and to build on Group wide capabilities,
initiatives and collaboration opportunities.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Governance and Risk Framework
www.glanbia.com
43
Group Board of Directors and Senior Management
Group Chairman and Vice-Chairmen
Pictured left to right: Liam Herlihy, Henry Corbally and Martin Keane
Liam Herlihy
Group Chairman
Henry Corbally
Vice-Chairman
Martin Keane
Vice-Chairman
Henry Corbally (aged 57), Vice-Chairman
was appointed to the Board on 9 June
1999 and has served 12 full years
on the Board. He was nominated for
appointment by Glanbia Co-operative
Society Limited. Henry farms at
Kilmainhamwood, Kells, Co. Meath and
holds a certificate of Merit in Corporate
Governance from University College Cork
(‘UCC’). He is a former vice-chairman of
the National Dairy Council.
Martin Keane (aged 56), Vice-Chairman
was appointed to the Board on 24 May
2006 and has served five full years
on the Board. He was nominated for
appointment by Glanbia Co-operative
Society Limited. Martin farms at Errill,
Portlaoise, Co. Laois and has completed
the ICOS Co-operative Leadership
Programme. Martin is a director of Irish
Co-operative Organisation Society
Limited. He is a former director of Co-
operative Animal Health Limited.
Member: Audit Committee/
Remuneration Committee.
Member: Audit Committee/
Remuneration Committee.
Liam Herlihy (aged 60), Group Chairman
was appointed to the Board on 11
September 1997 and has served
14 full years on the Board. He was
nominated for appointment by Glanbia
Co-operative Society Limited. Liam
farms at Headborough, Knockanore,
Tallow, Co. Waterford and has completed
the Institute of Directors Development
Programme (2006) and holds a certificate
of merit in Corporate Governance from
University College Dublin (‘UCD’). He is
a director of the Irish Dairy Board Co-
operative Limited and is a former director
of Irish Co-operative Organisation
Society Limited.
Chair: Nomination Committee
Member: Audit Committee/
Remuneration Committee.
Key matters reserved to the Board
> Group strategy and business plans, including responsibility for the overall leadership of the Group.
> Approval of the Group’s strategic plan, oversight of the Group’s operations and review of performance in the light of our
strategy, objectives, business plans and budgets, and ensuring that any necessary corrective action is taken.
> Acquisitions, disposals and other transactions outside delegated limits.
> Financial reporting and controls, including approval of the half-yearly report, interim management statements and
preliminary announcement of the final results, approval of the annual report and financial statements, approval of any
significant changes in accounting policies or practices, and ensuring maintenance of appropriate internal control and risk
management systems.
> Capital expenditure, including the annual approval of the capital expenditure budgets and any material changes to them
in line with the Group wide policy on capital expenditure.
> Dividend policy, including the annual review of our dividend policy and declaration of the interim dividend and
recommendation of the final dividend.
> Shareholder documentation, including approval of resolutions and corresponding documentation to be put to
shareholders and approval of all press releases concerning matters decided by the Board.
> Key business policies, including approval of the remuneration and treasury policies.
44
Glanbia plc Annual Report 2011
Directors' Report: Governance
Board of Directors and Senior Management
www.glanbia.com
Non-Executive Directors
John Callaghan
Senior Independent Director
John Callaghan (aged 69), was
appointed to the Board on 13 January
1998 and has served 14 full years on
the Board. He is a director of a number
of Irish companies including Rabobank
Ireland plc, Topaz Energy Group and
ACC Bank plc. Former positions he
has held include Managing Partner of
KPMG (Ireland) (1983 to 1991), Chief
Executive and director of Fyffes plc
(1991 to 1993), non-executive director
Esat Telecommunications Limited
(1994 to 2000) and non-executive
director/chairman of First Active plc
(1993 to 2004). He is a fellow of the
Institute of Chartered Accountants, a
fellow of the Institute of Bankers, an
associate member of the Institute of
Taxation and a former president of the
Institute of Directors.
Chair: Audit Committee
Member: Nomination Committee/
Remuneration Committee.
Pictured left to right: Paul Haran, William Murphy, Jerry Liston and John Callaghan
Paul Haran
Non-Executive Director
Paul Haran (aged 54), was appointed
to the Board on 9 June 2005 and has
served six full years on the Board.
Paul is a director of a number of Irish
companies including the Mater Private
Hospital, the UCD Michael Smurfit
Graduate School of Business, the
Institute of Public Administration and
the Irish Insurance Federation. He
also chairs Edward Dillon & Co. and
the Qualifications Authority of Ireland.
Paul is a former director of Bank of
Ireland and the Road Safety Authority.
Paul retired at the end of 2004 as
Secretary General of the Department
of Enterprise, Trade and Employment
after a public sector career of almost
30 years. He graduated from Trinity
College Dublin with a B.Sc. in
Computer Science and also has an
M.Sc. in Public Sector Analysis and an
Honorary Doctorate of Law, all from
Trinity College Dublin.
Member: Audit Committee /
Nomination Committee/
Remuneration Committee.
William Murphy
Non-Executive Director
William Murphy (aged 66), was
appointed to the Board on 1 June
1989 and has served 22 full years
on the Board. He served as Deputy
Managing Director from 2001 to 2005
having joined the Group in 1977 and
held a number of senior management
positions. Prior to joining the Group
he worked with the Irish Forestry
Department, Cargill International and
the Irish Farming Association. He is
a director of Aryzta plc and chairman
of the National University of Ireland
Maynooth Outreach Programme. He is
also a director of a number of unlisted
companies. He graduated from UCD
with a B.Comm. in 1972.
Jerry Liston
Non-Executive Director
Jerry Liston (aged 71), was appointed
to the Board on 10 June 2002 and
has served nine full years on the
Board. He is a former Chief Executive
of United Drug plc (1974 to 2000).
He commenced his career with PJ
Carrolls where he was responsible
for brand management, following
which he joined Warner Lambert
Pharmaceuticals and became General
Manager Ireland until his appointment
as Chief Executive of United Drug plc
in 1974. He is also past executive
chairman of the Michael Smurfit
Graduate School of Business (2000 to
2005) and past chairman of the Irish
Management Institute, Balcas Timber
Limited, BWG Group Limited and the
Irish Aviation Authority. He graduated
from UCD with a B.A. (Economics)
in 1961, studied Law at King's Inn in
1962 and was called to the Irish Bar.
Following two years study at UCD,
Jerry was awarded an MBA in 1968.
Chair: Remuneration Committee
Member: Audit Committee/
Nomination Committee.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Board of Directors and Senior Management
www.glanbia.com
45
Directors nominated by Glanbia Co-operative Society Limited
Glanbia plc was formed in 1997 as a result of the merger of Avonmore Foods plc
and Waterford Foods plc. As part of the merger, Glanbia Co-operative Society
Limited retains a majority shareholding in Glanbia plc and nominates from its
Board of Directors, which is elected on a three-year basis, 14 Non-Executive
Directors for appointment to the Board of Glanbia plc. All of the Directors
nominated for appointment by Glanbia Co-operative Society Limited are full time
farmers who have significant expertise of the dairy and agricultural industry.
William Carroll (aged
46), was appointed to
the Board on 26 May
2011 and has served
less than one full year
on the Board.
Brendan Hayes1 (aged
51), was appointed to the
Board on 29 June 2010
and has served one full
year on the Board.
Patrick Murphy (aged
53), was appointed to
the Board on 26 May
2011 and has served
less than one full year
on the Board.
David Farrell (aged 62),
was appointed to the
Board on 26 May 2011
and has served less than
one full year on the Board.
Eamon Power (aged 57),
was re-appointed to the
Board on 26 May 2011
and has served less than
one full year on the Board
in the current term. He
previously served nine
years on the Board.
Michael Keane (aged
59), was re-appointed
to the Board on 29 June
2010 and has served one
full year on the Board
in the current term. He
previously served two full
years on the Board.
James Gannon (aged
61), was appointed to
the Board on 27 May
2009 and has served
two full years on the
Board.
Matthew Merrick2
(aged 60), was appointed
to the Board on 9 June
2005 and has served six
full years on the Board.
He is also a member of
the Audit Committee
since 26 July 2011.
Patrick Gleeson2 (aged 50),
was appointed to the Board
on 24 May 2006 and has
served five full years on the
Board. He is also a member
of the Audit Committee since
26 July 2011.
John Murphy1 (aged
49), was appointed to the
Board on 29 June 2010
and has served one full
year on the Board.
Robert Prendergast1
(aged 50), was appointed
to the Board on 28 May
2008 and has served
three full years on the
Board.
1 Completed the UCC Diploma in
Corporate Direction.
2 Completed the UCD Diploma in
Corporate Governance.
46
Glanbia plc Annual Report 2011
Directors' Report: Governance
Board of Directors and Senior Management
www.glanbia.com
Group Operating Executive
Pictured left to right: Brian Phelan, Siobhán Talbot, Michael Horan, John Moloney and Kevin Toland
Kevin Toland
CEO and President of Glanbia USA
& Global Nutritionals
Kevin Toland (aged 46), was appointed
to the Board on 10 January 2003 and
has served nine full years on the Board.
He is CEO and President of Glanbia USA
& Global Nutritionals, having previously
held the positions of Group Development
Director and Chief Executive of the
Consumer Foods Division. Prior to joining
the Group 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. He is a fellow of the Institute of
Chartered Management Accountants
in Ireland.
Brian Phelan
Group Human Resources/
Operations Development Director
Brian Phelan (aged 45), is Group Human
Resources /Operations Development
Director. Brian was appointed to his
Human Resources role in 2004 and
his role was expanded in May 2007
to include Operations Development
and in July 2009 to include the Group
Purchasing and Group Business Service
areas. Prior to this he was CFO of the
Consumer Foods Division. He has also
worked in Glanbia Ingredients in Ireland
and the USA. Prior to joining the Group
in 1993 he worked with KPMG. He
graduated from UCC with a B.Comm.
in 1989 and he is also a fellow of the
Institute of Chartered Accountants
in Ireland.
Siobhán Talbot
Group Finance Director
Siobhán Talbot (aged 48), was appointed
to the Board on 1 July 2009 and has
served two full years on the Board.
Siobhán was appointed Deputy Group
Finance Director in June 2005 and held
the position of Group Finance Director
Designate from March 2009. She was
formerly Group Secretary and also held
a number of senior finance positions
since she joined the Group in 1992. Prior
to joining the Group, she worked with
PricewaterhouseCoopers in Dublin and
Sydney, Australia. Siobhán graduated
from UCD with a B.Comm. in 1984 and
obtained a postgraduate Diploma in
Professional Accounting in 1985. She is
also a fellow of the Institute of Chartered
Accountants in Ireland.
Michael Horan
Group Secretary
Michael Horan (aged 47), was appointed
Group Secretary on 9 June 2005, having
previously held the position of Group
Financial Controller since June 2002.
He joined the Glanbia Group in 1998 as
Financial Controller of the Fresh Pork
business in Ireland. Michael previously
worked with Almarai Company Limited in
Saudi Arabia and BDO Simpson Xavier.
He graduated from National University of
Ireland, Galway (NUIG) with a B.Comm.
in 1985. He is also a fellow of the Institute
of Chartered Accountants in Ireland.
John Moloney
Group Managing Director
John Moloney (aged 57), is Group
Managing Director since 2001, having
been appointed to the Board on 11
September 1997. He has served 14
full years on the Board. He joined the
Group in 1987 and has held a number of
senior management positions including
Chief Executive of Food Ingredients
and Agribusiness. He was appointed
Deputy Group Managing Director in
2000 and subsequently assumed the
responsibilities of Group Managing
Director in 2001. Prior to joining the
Group, he worked with the Department
of Agriculture, Food and Forestry and
in the meat industry in Ireland. John
is a director of The Irish Dairy Board
Co-operative Limited, DCC plc and a
Council Member of the Irish Business
and Employers Confederation. He
graduated from UCD with a B. Ag.Sc.
in 1978 and was awarded an MBA in
1988 from NUIG. During 2011, he was
awarded an honorary Doctor of Science
degree from UCD.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Board of Directors and Senior Management
www.glanbia.com
47
Business Unit Chief Executives
Jim Bergin
CEO Dairy Ingredients Ireland
Raimund C. Hoenes
CEO Customised Premix Solutions
Jeff Williams
CEO and President US Cheese
Jim Bergin (B. Comm., M.Sc. Mngt.
Practice) (aged 49), is Chief Executive of
Dairy Ingredients Ireland. He joined the
Group in 1984 and has held a number of
senior positions including Chief Financial
Officer Agribusiness and subsequently
Group Business Process Director. He
joined the Dairy Ingredients Ireland
business as Operations Manager in May
2003 and was appointed Chief Executive
in March 2005.
Raimund Hoenes (Ph.D., M.Sc.)
(aged 45), is Chief Executive of
Glanbia Nutritionals Customised
Premix Solutions. He joined the Group
in 2008 and was appointed Chief
Executive of Glanbia Nutritionals
Customised Premix Solutions in 2009.
He previously worked in a variety of
senior roles in the ingredients sector in
several countries.
Jeff Williams (B.A., MBA) (aged 55),
is President and Chief Executive of
US Cheese and has management
responsibilities for the Group's Joint
Venture Southwest Cheese. He joined
the Group in 1989 and has held many
positions in the US Cheese business
including Chief Operations Officer
and Executive Vice President. Jeff
was appointed President and Chief
Executive of US Cheese in 2005. He
previously worked for six years in the
banking industry.
Colm Eustace
CEO Agribusiness
Colm Eustace (B. Ag. Sc., C. Dip. AF.,
MBA ) (aged 50 ), is Chief Executive of
Agribusiness since 2000. He joined the
Group in 1985 and has held a number
of senior positions since 1997 within
Agribusiness. He is a director of
Co-operative Animal Health Limited.
Hugh McGuire
CEO Performance Nutrition
Hugh McGuire (M.Sc., Dip. Finance)
(aged 41), is Chief Executive of Glanbia
Performance Nutrition. He joined the
Group in 2003 and was appointed as
Chief Executive of Performance Nutrition
in 2008. He previously worked for
McKinsey & Company as a consultant
across a range of industry sectors.
Prior to this he worked in the consumer
products industry with Nestlé and Leaf.
Colin Gordon
CEO Consumer Products
Colin Gordon (BBS, MBS, FMII) (aged
50), is Chief Executive of Consumer
Products since his appointment to the
Group in 2006. He previously worked
with C&C Group plc where he held a
number of senior positions, including
Managing Director of C&C (Ireland)
Limited. Colin is currently a member of
the Consumer Foods Board of Bord
Bia and chairman of the Consumer
Foods Council of the Irish Business and
Employers Confederation.
Jerry O’Dea
CEO and President
Ingredient Technologies
Jerry O’Dea (B. Sc. Dy., MBA) (age 52),
is President and Chief Executive
of Glanbia Nutritionals Ingredient
Technologies. He joined the Group in
1981 and has held a number of senior
positions including General Manager of
Glanbia Ingredients USA and President
of Glanbia Nutritionals. He was appointed
Chief Executive of Glanbia Nutritionals
Ingredient Technologies in 2008.
Find out more
P36
Divisional performance:
Dairy Ireland
P38
Divisional performance:
US Cheese &
Global Nutritionals
P40
Divisional performance:
Joint Ventures & Associates
Go online
www.glanbia.com/report
48
Glanbia plc Annual Report 2011
Directors' Report: Governance
Board of Directors and Senior Management
www.glanbia.com
Audit Committee report
John Callaghan
Committee Chairman
and Senior
Independent Director
Dear Shareholder,
I am pleased to present the Audit
Committee report for 2011. The Audit
Committee which met four times during
2011 welcomed two new members,
Patrick Gleeson and Matthew Merrick.
During 2011, the Committee has
deepened its focus on risk management.
The Committee undertook a review
of risk reporting processes across the
Group and is satisfied that reporting
processes are consistently applied and
well embedded in each business unit.
This gives surety on the standard of
information being supplied to the Board
and senior management on the risks that
Glanbia faces and undertakes, and how
these risks are managed and mitigated.
In addition, the Committee continued
with its programme of evaluating key
areas of risk through an ongoing series of
senior management presentations.
The Group’s treasury management
policies were reviewed by the Board
in conjunction with the Committee
in December 2011 to ensure they
appropriately reflect the Group’s financial
risk exposures, in uniquely turbulent
financial market circumstances.
On behalf of the Audit Committee
I can confirm that the information that
the Committee has received has been
balanced, appropriate, timely and has
enabled the Committee to provide
effective oversight of the Group’s key
financial reporting processes and
systems of internal controls and risk
management.
John Callaghan
Audit Committee Chairman
Governance
The Committee was in place
throughout 2011.
John Callaghan is the current
Chairman of the Committee. He is
a fellow of the Institute of Chartered
Accountants in Ireland and is former
Managing Partner of KPMG (Dublin).
The Committee comprises eight
Non-Executive Directors, of which
three members constitute a quorum.
Membership of the Committee
is reviewed by the Chairman of
the Committee and the Group
Chairman and they recommend new
appointments to the Nomination
Committee for onward recommendation
to the Board. The Group Secretary acts
as secretary to the Committee.
The Committee may obtain at the
Company’s expense independent
professional advice on any matters
covered by its terms of reference.
The Auditors and the Group Head of
Internal Audit have direct access to the
Chairman of the Committee and the
Group Chairman.
Relationship with the Auditors
A formal Auditor Relationship and
Independence Policy is maintained
on the provision of non-audit services
which recognises that certain work of a
non-audit nature is best undertaken by
the Auditors. This policy prohibits the
provision (by the Auditors) of services
such as financial information systems
design and implementation, internal
audit services or legal services. The
Auditors may provide audit and certain
audit related services provided that any
individual audit related service to be
undertaken by the Auditors to a value in
excess of €100,000 does not impair
Members
• John Callaghan (FCA, FIB)
(Committee Chairman)
• Liam Herlihy (Group Chairman)
• Martin Keane (Vice-Chairman)
• Henry Corbally (Vice-Chairman)
• Patrick Gleeson
• Paul Haran (B.Sc., M.Sc.)
• Jerry Liston (B.A., MBA)
• Matthew Merrick
Key responsibilities
> Monitor and review the
effectiveness of the financial
reporting processes and systems
of internal control and risk
management.
> Monitor the role and effectiveness
of the Internal Audit function.
> Monitor management’s responses to
the findings and recommendations
of Internal Audit reports.
> Monitor the statutory audit of the
annual and consolidated financial
statements, review the application
of accounting policies and address
any significant financial reporting
issues arising.
> Review and approve the
annual and half-yearly reports.
> Consider and make
recommendations to the Board on
the appointment of the external
auditors (the ‘Auditors’).
> Assess the effectiveness of the
audit process.
> Review the relationship with and
the independence of the Auditors.
The full terms of reference of the Audit
Committee can be found on the Group’s
website www.glanbia.com or can be
obtained from the Group Secretary.
their independence and is approved
in advance by the Chairman of the
Committee.
Fees paid to the Auditors for audit
related and non-audit related services
are analysed in note 6 to the financial
statements. The main non-audit related
services provided by the Auditors
during the year were in respect of
due diligence work for potential
acquisitions and tax advice. The
Auditors were considered to be best
placed to provide these services and
the Committee reviewed the steps
to ensure that the non-audit services
would not impair their independence.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee Reports
www.glanbia.com
49
and the Group’s Internal Audit
function on the work undertaken
in reviewing and auditing the
control environment.
> The Committee assessed the
>
reviewed the financial statements
and, as part of this process, the
significant financial reporting
estimates contained within them;
and
effectiveness of the Group’s internal
controls in accordance with the
Turnbull Guidance and reviewed
the related disclosures
in the annual report.
> reviewed the financial statements
in the 2010 annual report and
the 2011 half-yearly report, and
received a report from the Auditors
on the financial statements.
As part of its responsibilities, the
Committee reviews the independence
of the Auditors (who as part of
the process have confirmed their
independence in wriiting) and the
amount and nature of non-audit work
they perform on an annual basis.
Activities
The principal activities undertaken by
the Committee in the period under
review are set out below.
Risk management
> Review of the risk reporting
processes.
> Evaluation of the key areas of risk
for the Group and the steps taken
to mitigate such risks through a
series of risk presentations from
senior management.
> Oversight of the annual Glanbia
Risk Management System which
confirmed the continued existence
of an operational risk awareness
culture throughout the Group.
> A full and half-year assessment of
the Board’s performance against
regulatory requirements and best
practice guidance was completed,
following which the Committee
reported to the Board expressing
its level of satisfaction with the
Group’s internal control and risk
management systems.
Internal controls
> The Committee received and
considered reports during
the year from the Auditors, in
order to assess the quality and
effectiveness of the internal control
system. These included reports on
any key matters arising from the
statutory audit in relation to the
financial reporting process
> Internal controls were assessed
in detail as part of the biannual
Control Self-Assessment process.
> The Committee reviewed and
updated the Group Treasury
policies.
> The Committee formally reviewed
the arrangements by which staff
of the Group may raise concerns
(in confidence) about possible
improprieties in matters of financial
reporting or other matters and
ensured that arrangements are in
place for the proportionate and
independent investigation and
follow-up action required in
relation to such matters.
Going concern
The Committee reviewed the
effectiveness of the process undertaken
by the Directors to evaluate going
concern, including the analysis
supporting the going concern statement
and disclosures in the financial
statements, and were satisfied that a
robust assessment had been made,
further detail in respect of which is
given on page 76.
Financial reporting
The Committee monitored the
statutory audit of the annual and
consolidated financial statements
and:
2011 Committee meeting attendance
Attendance at scheduled Committee meetings during the year ended
31 December 2011
Member
Appointed
Number of full
years on the
Committee
2011 meeting
attendance
J Callaghan
L Herlihy
Mn Keane
H Corbally
V Quinlan
P Gleeson
P Haran
J Liston
M Merrick
* Retired 26 May 2011
13 Jan 1998
8 June 2001
29 June 2010
7 July 2005
9 June 2005*
14
10
1
6
5
26 July 2011
Less than 1 year
9 June 2005
10 June 2002
6
9
26 July 2011
Less than 1 year
5/5
5/5
5/5
5/5
2/2
2/2
5/5
5/5
2/2
Internal Audit
The Committee:
> approved the Internal Audit
programme for 2011 based on
a Group risk profile assessment
across the key financial, operational
and regulatory risks;
> reviewed the output from the
Internal Audit programme during
the year and considered progress
against the programme; and
> reviewed the effectiveness of the
Group’s Internal Audit function.
Auditors
The Committee:
> agreed the approach and scope of
the audit work to be undertaken by
the Auditors;
> reviewed the Group’s processes
for disclosing information to the
Auditors;
> reviewed the effectiveness and
independence of the Auditors.
Based on the results of this review
the Committee proposed to the
Board that it recommend that the
shareholders support the re-
appointment of the Auditors at the
2012 Annual General Meeting; and
> agreed the Auditors’ fees in respect
of the 2011 audit work.
Review of Committee performance
The Board and Committee assessed
its performance, covering terms of
reference, composition, procedures,
contribution and effectiveness. As
a result of that assessment, the
Committee is satisfied that it is
functioning effectively and it has
met its terms of reference.
On behalf of the Audit Committee
John Callaghan
Audit Committee Chairman
50
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee Reports
www.glanbia.com
Nomination Committee report
Liam Herlihy
Nomination Committee
Chairman and
Group Chairman
Dear Shareholder,
I am pleased to present the
Nomination Committee Report
for 2011.
The current composition and size
of the Board is driven by the historic
custom and practice of Glanbia
Co-operative Society Limited, which
owns 54.4% of the Company, to
nominate from its Board of Directors
14 of the 18 Non-Executive Directors
for appointment to the Board of
the Company. Much of the work
of the Committee in 2011 involved
implementation of various changes
recommended by Glanbia
Co-operative Society Limited.
I am aware of the large debate
generally arising from the Davies
Report about diversity in the board
room with particular reference
to gender diversity. In 2012, the
Committee is planning to review the
composition of the Non-Executive
Directors and will look at succession
planning to evaluate the right balance
of independence, skills, knowledge
and gender required for our next phase
of growth, recognising the challenge
in the fact that Glanbia Co-operative
Society Limited nominates 14 of our
18 Non-Executive Directors.
Liam Herlihy
Nomination Committee Chairman
Governance
The Committee was in place throughout
2011. Liam Herlihy, the Group
Chairman, has been Chairman of
the Committee since 2008.
The Committee comprises four
Non-Executive Directors, of which
two members constitute a quorum.
The Group Secretary acts as Secretary
to the Committee.
When dealing with any matters
concerning his membership of the
Board, the Group Chairman will absent
himself from meetings of the Committee
as required and such meetings will
accordingly be chaired by the Senior
Independent Director, John Callaghan.
Activities
The principal activities undertaken
by the Committee in 2011 are set
out below.
Re-appointment of Directors
The Committee recommended to the
Board that all the Directors of the Board
be put forward for re-appointment by
the shareholders of the Company at the
2012 Annual General Meeting.
Review of Non-Executive Directors’
independence in accordance with
the guidance in the UK Corporate
Governance Code and the ISE
Annex (the ‘Codes’).
The Committee reviewed the
independence of Non-Executive
Directors in accordance with the
guidance in the Codes. The guidance
in the Codes suggests a number
Members
• Liam Herlihy (Committee Chairman)
• John Callaghan (FCA,FIB)
• Paul Haran (B.Sc., M.Sc.)
• Jerry Liston (B.A., MBA)
Key responsibilities
> Making recommendations to the
Board on the appointment and
re-appointment of Directors.
> Planning for the orderly succession
of new Directors to the Board.
> Keeping under review the
leadership needs of the Group
both Executive and Non-Executive,
with a view to ensuring the
continued ability of the Group
to compete effectively in the
market place.
> Recommending to the Board
the membership and chairmanship
of the Audit and Remuneration
Committees.
> Keeping the extent of Directors’
other interests under review to
ensure that the effectiveness of
the Board is not compromised.
The full terms of reference of the
Nomination Committee can be
found on the Group’s website
www.glanbia.com or can be obtained
from the Group Secretary.
of factors could be relevant to the
determination of a Non-Executive
Director’s independence including:
representing a significant shareholder,
former service as an executive and
extended service to the Board.
However, the Codes also make it clear
that a director may be considered
independent notwithstanding the
presence of one or more of these
factors. This reflects the Board’s view
that independence is determined by a
director’s character and judgement.
The Committee concluded that,
throughout the reporting period, all
Non-Executive Directors demonstrated
the essential characteristics of
independence and brought independent
challenge and deliberations to the
Board through their character,
objectivity and integrity. This conclusion
was presented to and agreed with
the Board.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee Reports
www.glanbia.com
51
The Committee acknowledged that:
> John Callaghan had served on the
Board for 14 full years;
> Jerry Liston had served on the
Board for nine full years;
> William Murphy, who retired as
Deputy Group Managing Director
in September 2005, remains on the
Board as a Non-Executive Director;
and
> 14 of the Non-Executive Directors
are nominated by the Board of
Glanbia Co-operative Society
Limited, for appointment to the
Board of the Company, of which
both Liam Herlihy and Henry
Corbally had served as Directors
for nine years or more.
Appointment of Directors of
the Company
During 2011, the Committee
recommended the appointment of four
new Non-Executive Directors, William
Carroll, David Farrell, Patrick Murphy
and Eamon Power to the Board. The
Committee noted their nominations
by Glanbia Co-operative Society
Limited, the experience and suitability
of the nominees and recommended
their appointment to the Board of the
Company which was subsequently
approved by the Board.
Appointment of Henry Corbally as
Vice-Chairman of the Company
The Committee recommended the
appointment of Henry Corbally as Vice-
Chairman of the Company to the Board.
The Committee noted his nomination by
Glanbia Co-operative Society Limited,
the experience of Mr. Corbally and his
suitability for the role of Vice-Chairman
of the Company and recommended
his appointment as Vice-Chairman of
the Board of the Company which was
subsequently approved by the Board.
Board and Committee membership
During the year the Committee
recommended to the Board that
Henry Corbally be appointed to the
Remuneration Committee following
the retirement of Victor Quinlan. The
Committee also recommended that
Patrick Gleeson and Matthew Merrick
be appointed to the Audit Committee.
These changes were implemented
during the year by the Board.
Review of the time required from
a Non-Executive Director
The Committee assessed the time
dedicated to the Company by each
Non-Executive Director. This review
also considered the extent of the Non-
Executive Directors’ other interests to
ensure that the effectiveness of the
Board is not compromised by such
interests.
The Board and Committee are satisfied
that the Group Chairman and each of
the Non-Executive Directors commit
sufficient time to the fulfilment of
their duties as Group Chairman and
Directors of the Company respectively.
The Group Chairman held a number
of other directorships during the year
including Irish Dairy Board Co-operative
Society Limited and Irish Co-operative
Organisation Society Limited (from which
he resigned during the year) and farms
at Headborough, Knockanore, Tallow,
Co. Waterford, but the Committee and
the Board considers that these did not
interfere with the discharge of his duties
to the Group.
Review of Committee performance
The Board and Committee assessed
its performance, covering terms of
reference, composition, procedures,
contribution and effectiveness. As
a result of that assessment, the
Committee is satisfied that it is
functioning effectively and it has met
its terms of reference.
The Committee did not use an external
search consultancy or open advertising
for the appointment of the new Non-
Executive Directors as they were
nominated by the Board of Glanbia
Co-operative Society Limited for
appointment to the Board.
On behalf of the Nomination Committee
2011 Committee meeting attendance
Attendance at scheduled Committeee meetings during the year ended
31 December 2011
Liam Herlihy
Chairman
Director
Appointed
Number of
full years on the
Committee
2011 meeting
attendance
L Herlihy
J Callaghan
P Haran
J Liston
5 June 2008
8 June 2001
9 June 2005
10 June 2002
3
10
6
9
2/3
3/3
3/3
3/3
52
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee Reports
www.glanbia.com
Remuneration Committee report
Jerry Liston
Remuneration
Committee Chairman
Dear Shareholder,
I am pleased to present the
Remuneration Committee Report for
the year ended 31 December 2011.
The report details the remuneration
principles, policy and actual
remuneration of the Group’s Executive
Directors for that period.
The report also details the proposed
changes to executive remuneration
policy, which was reviewed by the
Remuneration Committee in 2011 and
which will be effective from 2012 to
2014 inclusive. The revised executive
remuneration policy was approved by
the Board in November 2011. The key
objectives of the 2012–2014 policy are
to ensure that Glanbia’s remuneration
policy represents:
> an executive reward system
designed to drive superior
performance and sustainable,
growth for the Group;
> best practice in executive reward;
and
>
latest governance practice.
An advisory non-binding resolution to
approve this report and an ordinary
resolution to approve an amended
2008 LTIP will be put to the Annual
General Meeting ('AGM') on 9 May
2012.
Jerry Liston
Remuneration Committee Chairman
Composition of the
Remuneration Committee and
attendance at meetings
The Remuneration Committee
comprises six Non-Executive Directors,
of which three members constitute a
quorum. The Remuneration Committee
met eight times during 2011.
The Group Managing Director and the
Group Human Resources/Operations
Development Director attend
Committee meetings by invitation
only. They absent themselves when
their remuneration is discussed and
no Director is involved in considering
their own remuneration. The Group
Secretary acts as secretary to the
Remuneration Committee.
Advice and assistance to the
Remuneration Committee
The Remuneration Committee
received independent external advice
from Towers Watson Remuneration
Consultants, particularly in the
formulation and design of the
executive remuneration policy 2012-
2014, market trends and competitive
positioning of remuneration packages,
as required. Towers Watson is
a member of the Remuneration
Consultants Group and adheres to the
Voluntary Code of Conduct in relation
to executive remuneration consulting.
Legal advice to the Remuneration
Committee has been provided by
Arthur Cox, who also provided other
legal services to the Group during
the year.
The Remuneration Committee also
received assistance and advice on
remuneration policy, when required,
during the year from the Group Human
Resources/Operations Development
Director, Brian Phelan.
Members
• Jerry Liston (B.A., MBA)
(Committee Chairman)
• Liam Herlihy (Group Chairman)
• Martin Keane (Vice-Chairman)
• Henry Corbally (Vice-Chairman)
• John Callaghan (FCA, FIB)
• Paul Haran (B.Sc., M.Sc.)
Key responsibilities
> Determine and agree with the
Board the framework or broad
policy for remuneration of the
Non-Executive Directors, the
Executive Directors and other senior
executives as required.
> Determine, within the agreed policy,
individual total compensation
packages for the Non-Executive
Directors, the Executive Directors
and other senior executives as
required.
> Recommend to the Board any
employee share-based incentive
schemes, award levels and vesting
and any performance conditions to
be used for such schemes.
> Consider and approve Executive
Directors’ and other senior
executives total compensation
arrangements annually.
The full terms of reference of the
Remuneration Committee can be
found on the Company’s website
www.glanbia.com or can be obtained
from the Group Secretary.
Executive remuneration
principles and 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 by growing and
developing the business. Performance-
related elements of remuneration are
designed to form an appropriate portion
of the overall remuneration package
of Executive Directors. These link
remuneration to Group performance and
individual performance, whilst aligning
the interests of Executive Directors with
those of shareholders.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
53
This framework is applied, as far as
possible, to all senior executives, in
addition to Executive Directors, to create
a consistent global approach to driving
sustainable performance and to provide
a competitive benefits package.
The principles and policy are also
applied, as far as possible, across the
Group below senior executive level,
taking account of seniority and local
market practice. It is our aim to ensure
that our remuneration arrangements are
fully aligned with our approach to risk
management.
Remuneration policy and
design 2012 - 2014
Executive remuneration policy and
design is reviewed by the Remuneration
Committee on a three year basis and
accordingly was reviewed in 2011,
with the advice of Towers Watson
Remuneration Consultants.
Key elements of remuneration for Executive Directors for 2011
Element
Description
Purpose
Policy and design for 2011
Base Salary
(fixed)
Annual fixed pay.
Recognise market value of role and
reflect individual skills and experience.
Annual
Incentive
(variable)
Annual payment only
earned if agreed
target performance is
achieved.
Incentivise Executive Directors to
achieve specific short term business
and personal performance objectives
during a one year period.
Long Term
Incentives
(variable)
Award shares in the
Company if target
performance is
achieved over a three
year period.
Focus on long-term performance.
Promote stability and retention.
Balance longer term risk/reward.
Aligns Executive Directors’ interests with
those of shareholders and incentivises
them to pursue superior results over a
three year period within the limits of the
Group’s risk appetite.
Set by reference to the relevant local
market median based on an external
independent evaluation of the role.
Incentivise Executive Directors to achieve
specific performance goals which are
linked to the Group’s business plans.
Range of incentive potential of 0% to
100% of Base Salary based on growth
in annual adjusted Earnings Per Share (‘EPS’)
and achievement of personal objectives.
Incentivise Executive Directors to deliver
superior earnings growth and total shareholder
returns.
Align the interests of Executive Directors
to shareholders interests.
Maximum individual annual award level of
115% of Base Salary, other than in exceptional
circumstances.
Vesting level determined by reference
to relative Total Shareholder Return (‘TSR’)
and annual adjusted EPS performance - each
representing 50% of maximum vesting level.
Summary of aspects of the remuneration policy that the 2011 review sought to address and outcomes
Remuneration policy aspect
Outcome
Greater linkage of Executive Directors’
remuneration to performance.
Linkage to long term sustainability and
alignment to Group risk
management policy.
Stronger Long Term Incentives and
introduction of an additional performance
measure in the amended 2008 LTIP.
Flexibility and discretion in plans.
Potential levels of Annual and Long Term Incentives increased.
Superior performance required to receive material increases in variable pay element.
Achieved by:
> deferral of portion of Annual Incentive which is converted into shares;
> requirement to hold shares received pursuant to the Long Term Incentive; and
> proposed shareholding requirement levels.
Achieved with the addition of an appropriate Group investment measure, as determined
by the Remuneration Committtee, and less relative TSR and EPS dependence.
Remuneration Committee flexibility for change and review of performance criteria
where deemed appropriate.
Alignment with shareholders/
share value growth.
Significant proportion of Annual Incentive linked to share awards and share
ownership requirements.
Reflect latest governance.
Achieved by:
> Share ownership guidelines; and
> Claw back potential on Annual Incentive deferral to reflect best practice.
54
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
Key review findings and agreed policy and design changes for Executive Directors for 2012-2014
Description
Policy changes
Design changes
Base Salary (fixed)
No proposed policy changes.
No proposed design changes.
Variable elements
of pay
> Annual Incentive
(variable)
> Long Term
Incentives
(variable)
Definition of ‘market’ to be
determined by reference to a
mixture of Irish companies of a
similar size/complexity and UK
companies in the food industry.
Total direct compensation (Base
Salary plus Annual Incentive and
Long Term Incentive) positioned
above the median of the ‘market’ to
encourage stretching performance
and value creation.
Greater proportion of overall total
direct compensation based on long
term sustainable results and greater
linkage to more key performance
indicators through the addition of
appropriate cash and investment
return measures.
Range of Annual Incentive potential of 0% to 150% of Base Salary
(previous maximum 100%) based on growth in annual adjusted EPS
and an appropriate cash management measure as determined by
the Remuneration Committee annually.
Long Term Incentive individual annual award level of a maximum
of 150% of Base Salary (previous maximum 115%) determined by
reference to relative TSR, EPS and an appropriate Group investment
measure, with each of these performance conditions representing
one-third of maximum vesting level, unless otherwise determined
by the Remuneration Committee. The appropriate Group investment
measure for 2012 is Return on Capital Employed as set out on
page 57.
Share ownership
Minimum share
ownership
requirements to ensure
a greater alignment
of shareholders’
interests through own
shareholding
Deferral of a proportion of
Annual Incentive.
Deferral of the proportion of the Annual Incentive earned in
excess of 75% of Base Salary which is then converted into shares
and delivered to the Executive Directors two years following deferral.
Recommended minimum Executive
Director shareholding levels.
Requirement to hold shares received pursuant to the vesting of LTIP
awards for a minimum period of one year post-vesting (previously
no requirement to hold).
Share ownership guidelines introduced to encourage ownership of
shares to be built up over a maximum period of five years.
Recommended levels:
Group Managing Director - 200% of Base Salary.
Other Executive Directors - 100% of Base Salary.
Key review findings and agreed policy and design changes for other senior executives for 2012-2014
Description
Policy changes
Design changes
Total direct
compensation
The above framework will apply to
all senior executives in addition to
the Executive Directors, to create
a consistent global approach
to reward and to provide a
competitive benefits package.
The exceptions set out opposite
should be noted.
Annual Incentive
For business unit CEOs, the Annual Incentive potential will also
be based on appropriate and specific business unit measures,
as determined by the Remuneration Committee.
Long Term Incentives
In exceptional cases and in relation to specific local needs (USA)
the maximum share award under the 2008 LTIP scheme may be
up to 200% of Base Salary.
For business unit CEOs, the Long Term Incentive level will be
determined by reference to relative TSR, EPS and an appropriate
business unit measure, with each of these performance conditions
representing one-third of maximum vesting level, unless otherwise
determined by the Remuneration Committee.
Deferral and share ownership
For business unit CEOs, deferral of the proportion of the Annual
Incentive earned in excess of 50% of Base Salary which is then
converted into shares and delivered to the executive two years
following deferral.
For business unit CEOs, the share ownership recommended
level is 75% of Base Salary to be built up over a maximum period
of five years.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
55
December 2011 the level of Annual
Incentives due to Executive Directors
as shown below.
Following the remuneration policy
review, for 2012 the maximum
potential Annual Incentive payable
to Executive Directors will 150% of
Base Salary and an appropriate cash
management measure will be added
as an additional element of the Annual
Incentive performance scheme.
Annual Incentive payable for 2011
Executive
Director
Annual
Incentive
J Moloney
K Toland
S Talbot
€509,000
€370,000
€316,000
% of
Base
Salary
100%
88%
100%
The Executive Directors achieved full
bonus potential in 2010 and received
no bonus in 2009.
A summary of Executive Director
remuneration for 2011 is detailed on
pages 64 to 65.
Deferral of Annual Incentive
Following the 2011 remuneration
policy review, it is proposed that any
incentive earned in excess of 75% of
Base Salary by Executive Directors
will be subject to a mandatory deferral
for the first time in 2012. The deferred
proportion of Annual Incentive will be
converted into shares and transferred
to the Executive Director two years
following deferral.
Deferred incentives may be subject
to clawback, to the extent deemed
appropriate by the Remuneration
Committee, in the event of a material
misstatement of the published Group
accounts (to which the deferred
incentive relates) which requires them
to be restated.
Executive remuneration features
Base Salary
Base salaries of the Executive Directors
are determined by the Remuneration
Committee, taking into account the
performance, skills and experience
of the individual in conjunction with
the market value of the role. The
Group benchmarks base salaries in
comparison to the relevant market, as
appropriate to the individual.
Annual Incentive plan
Summary
The Group operates a performance-
related incentive scheme for Executive
Directors and other senior executives.
Payments under the scheme for
Executive Directors depend on the
achievement of pre-determined
Group financial targets and an
assessment of individual performance
against pre-agreed objectives. The
Committee believes that this method
of assessment is transparent, rigorous
and balanced, and provides an
appropriate and objective assessment
of annual performance.
The Annual Incentive payable to
Executive Directors for achieving target
performance is 50% of Base Salary.
The maximum Annual Incentive payable
to Executive Directors for achieving
outperformance is 100% of Base Salary.
Performance targets
The Group’s financial targets of each
Executive Director’s Annual Incentive
were derived from the approved annual
business plan and are based on
growth in annual adjusted EPS.
In addition to the above (once the
financial targets have been met) each
Executive Director has individual
performance targets which must
also be met to obtain the maximum
incentive level. The personal objectives
are specific and measurable.
Annual Incentive payments
At its meeting on 22 February 2012,
the Remuneration Committee reviewed
the 2011 performance of the Group.
In light of the achievement of financial
targets and individual objectives, the
Remuneration Committee agreed
in respect of the year ended 31
Long Term Incentive Plans (LTIPs)
Summary
The principal long term incentive
plan for Executive Directors is the
2008 Long Term Incentive plan (2008
LTIP), which has received shareholder
approval. Subject to the approval of
shareholders, future LTIP awards will
be granted to Executive Directors,
and other senior executives, under
the amended and restated 2008 Long
Term Incentive Plan (Amended 2008
LTIP). At the 2012 AGM, amendments
to the 2008 LTIP will be proposed as
detailed on page 57.
The combination of the Annual
Incentive Plan and the LTIPs provide
an appropriate balance between short-
term reward and long-term share-
based reward in accordance with
recommended best practice.
2008 LTIP
Each year since its adoption,
conditional awards of shares are made
under the 2008 LTIP.
Key features:
>
>
>
>
the vesting of awards is subject
to the satisfaction of three-year
performance conditions;
shares may not vest for at least
three years after the grant of the
award;
the maximum annual award is
115% of Base Salary other than in
exceptional circumstances;
the extent to which awards vest is
determined by reference to relative
TSR and EPS - each representing
50% of maximum vesting level;
>
shares under award do not attract
dividends prior to vesting; and
> awards will vest early in the event
of a takeover, merger, scheme of
arrangement or other similar event
involving a change of control of
the Company or a demerger of a
substantial part of the Group or
a special dividend which has the
effect of materially changing the
Group’s business or other similar
event that affects the Company’s
shares to a material extent, subject
to the pro-rating of the awards to
56
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
reflect the reduced period of time
between the commencement
of the performance period and
the early vesting, although the
Remuneration Committee can
decide not to pro-rate an award if it
regards it as inappropriate to do so
in the particular circumstances.
An award shall not vest unless the
Remuneration Committee is satisfied
that the Group’s underlying financial
performance has shown a sustained
improvement in the period since the
date of grant. The extent of vesting
shall be determined by the TSR and
EPS performance conditions.
The TSR and EPS performance
conditions are designed to ensure that
an appropriate proportion of Executive
Directors’ total incentive package
is delivered through longer-term
performance. To the extent that any
performance condition is not met, the
relevant part of the award will lapse.
EPS performance condition
The rationale for the EPS performance
condition is that investors consider
EPS to be a key indicator of long-
term financial performance and value
creation of a public limited company.
100% of the EPS element (50% of
overall share award) is capable of
vesting as determined by the rate of
growth in the EPS as compared to the
Consumer Price Index (CPI) over the
three-year performance period.
The EPS element of the awards vest
on the following basis:
Three-year
adjusted EPS
growth
Vesting level
Less than CPI + 5% Nil
CPI + 5%
compounded
50%
Between CPI + 5%
compounded and CPI
+ 10% compounded
CPI + 10%
compounded
Pro rata vesting
on a straight line
basis between
50% and 100%
100%
EPS is calculated as the profit for the
year attributable to the equity holders
of the Parent before exceptional items
and amortisation of intangible assets,
net of tax.
Proposed Amendments to 2008 LTIP
Subject to shareholder approval, future
LTIP awards will be granted to Executive
Directors (and other senior executives)
under the amended 2008 LTIP.
TSR performance condition
The rationale for using a TSR
performance condition is that major
investors regard TSR as an important
indication of both earnings and
capital growth relative to other major
companies in the same sector and to
ensure that awards only vest if there
has been a clear improvement in the
Group’s relative performance over the
relevant period.
100% of the TSR condition (50% of
overall share award) is capable of
vesting as determined by the Group’s
TSR ranking relative to an agreed
comparator group of companies.
The TSR element of the awards vest
on the following basis:
TSR ranking in the
comparator group
Vesting level
Ranked below the
top half
Nil
Rank half-way
30%
Ranked between
half-way and the
top quartile
Pro rata vesting
on a straight line
basis between
30% and 100%
Ranked in the top
quartile
100%
TSR represents the change in capital
value of a listed/quoted company over
a period, plus dividends, expressed
as a plus or minus percentage of the
opening value.
Vesting/lapse during 2011 under
the 2008 LTIP
In relation to the awards granted in 2008
which were based on TSR and EPS
performance in the three year period
to 1 January 2011, the Remuneration
Committee assessed the performance
criteria and approved the final vesting
levels of the awards having reviewed the
performance metrics. Accordingly,
none of the TSR element vested and
88% of the EPS element vested,
equating to 44% of the overall award.
Following the remuneration policy review
in 2011 as set out on pages 54 and
55, the key changes outlined below
have been approved by the Board
and for which shareholder approval
will be sought at the 2012 AGM. The
Remuneration Committee also sought
the views of the Irish Association of
Investment Managers who are satisfied
that the proposed amendments are
appropriate.
Key changes:
>
>
>
the maximum annual award will be
150% of Base Salary, in exceptional
cases and in relation to specific
local needs (USA) this maximum
will be up to 200% of Base Salary;
the requirement for Executive
Directors to hold shares received
pursuant to the vesting of LTIP
awards for a minimum period of
one year post-vesting.
the extent to which awards vest
will be determined by reference
to relative TSR and EPS (on the
same basis as the approved 2008
LTIP) plus an appropriate Group
investment measure for Executive
Directors or an appropriate business
unit measure for business unit CEOs
as determined by the Remuneration
Committee. The proposed
investment measure vesting criteria
for Executive Director awards for
2012 is set out below:
Vesting
level
Investment
measure -
Return on Capital
Employed
(‘ROCE’)
Less than 12.5%
Nil
Between 12.5%
and 13.5%
Greater than or
equal to 13.5%
Pro rata
vesting on
a straight
line basis
between 0%
and 100%
100%
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
57
> each of the EPS, TSR and
investment measure elements,
will represent one-third of the
maximum vesting level, unless
otherwise determined by the
Remuneration Committee; and
>
the Remuneration Committee
shall have the discretion to
change the performance criteria
where deemed appropriate. Any
changes to these performance
conditions will be disclosed in the
Remuneration Committee Report
which will be subject to a general
shareholder non-binding advisory
vote.
Return on capital employed is
calculated as Group Earnings before
Interest, Taxation and Amortisation
(‘EBITA’) plus the Group’s share of
results of Joint Ventures & Associates
after interest and tax, over capital
employed. Capital employed is
calculated as the Group’s non-current
assets plus working capital.
2002 Long Term Incentive Plan.
Options over 270,000 shares were
granted in 2011 under the 2002 Long
Term Incentive Plan. No share options
under this scheme have been granted
to Executive Directors since the
adoption of the 2008 LTIP. The 2002
Long Term Incentive Plan will expire in
May 2012.
Exercisability of options under the
2002 Long Term Incentive Plan
In relation to the 2009 grant which
was based on EPS performance in
the three year period 2009-2011, the
Remuneration Committee will assess
the performance criteria of the 2002
Long Term Incentive Plan during 2012.
Pension
All Executive Directors are members
of a Glanbia defined benefit pension
scheme.
Summary of Pay Mix
A significant proportion of the
Executive Directors’ total remuneration
package is variable. The variable
element of Executive Director pay
has increased following the 2011
remuneration policy review. The
balance between fixed (Base Salary)
and variable (Annual and Long Term
Incentives) elements of remuneration
varies depending on performance.
The charts below show the current
mix between fixed and variable pay for
Executive Directors and the proposed
mix for 2012 following the recent
remuneration policy review:
Current
Fixed pay 47%
Variable pay 53%
Proposed
Fixed pay 39%
Variable pay 61%
Share usage for LTIPs and
dilution
Both the 2008 LTIP and 2002 Long
Term Incentive Plan place a limit on
the number of new shares that may be
issued under the Plans so as to ensure
that the minimum shareholding of
Glanbia Co-operative Society Limited
in the Company cannot be diluted
below 54% of the fully diluted issued
share capital.
The Company intends to use existing
shares to satisfy future share vesting
under the 2008 LTIP and an employee
benefit trust was established to
manage the purchase of these shares.
At 31 December 2011, 740,576
ordinary shares were held by the
employee benefit trust.
The Company currently intends to issue
new shares to satisfy future exercise
of share options granted under the
2002 Long Term Incentive Plan. The
table below sets out the dilutive effect
on the share capital if all outstanding
options granted under the 2002 Long
Term Incentive Plan capable of being
exercised were exercised:
Total issued
share capital:
Outstanding share
options under 2002
Long Term Incentive
Plan capable of being
exercised
Outstanding share
awards under 2002
Long Term Incentive
Plan
Enlarged issued
share capital
294,532,684
1,233,000
32,900
295,798,584
Shareholding guidelines
The new share ownership guidelines
are designed to help maintain long-
term commitment and business
understanding, offering the opportunity
to benefit from any growth in
shareholder value - thereby aligning
Executive Directors’ interests with
those of shareholders.
58
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
With effect from 2012, the Group
Managing Director is encouraged to
build up a holding in shares in the
Company at least equal in value to
200% of Base Salary, with ownership
built up over a maximum period of five
years. The guideline for other Executive
Directors is 100% of Base Salary and,
for other senior executives, 75% of
Base Salary - built up over the same
maximum period.
The Group Chairman and
Non-Executive Directors
Liam Herlihy was appointed Group
Chairman on 28 May 2008. His
appointment is subject to annual re-
appointment by the shareholders at the
AGM of the Company. His appointment
as Group Chairman will automatically
terminate if he ceases to be a Director
of the Company or a Director of
Glanbia Co-operative Society Limited.
Details of the dates of appointment
of each Non-Executive Director who
served during the year are provided
on page 68.
Review of Committee performance
The Board and Committee assessed
its performance, covering terms of
reference, composition, procedures,
contribution and effectiveness. As
a result of that assessment, the
Committee is satisfied that it is
functioning effectively and it has met
its terms of reference.
C. Information subject to audit
The information in Tables A, B and
C are covered by the Independent
auditors' report on pages 80
and 81. The Tables give details
of the Directors’ remuneration
and interests in shares in Glanbia
plc and Glanbia Co-operative
Society Limited held by Directors,
Secretary and their connected
persons for those individuals who
were Directors and Secretary of
the Company as at 31 December
2011. There have been no changes
in the interests of the Directors
and Secretary listed in the Tables
between 1 January 2012 and 28
February 2012. The market price
of the ordinary shares as at 31
December 2011 was €4.63 and
the range during the year was
€3.55 to €5.02. The average price
for the year was €4.42.
The Chairman's fee is set by the
Remuneration Committee and
is €88,000 per annum. This fee
reflects the level of commitment and
responsibility of the role.
The Non-Executive Directors do not
have service contracts, but have letters
of appointment detailing the basis
of their appointment. The terms and
conditions of appointment of Non-
Executive Directors are available for
inspection at the Company’s registered
office during normal business hours
and at the AGM of the Company.
The Non-Executive Directors do not
have periods of notice and the Group
has no obligation to pay compensation
when their appointment terminates.
They are subject to annual re-election
at the AGM of the Company.
Non-Executive Directors’ fees are set
by the Remuneration Committee and
the details are outlined on page 64.
2011 Committee meeting attendance
Attendance at scheduled Committee meetings during the year ended
31 December 2011
Member
Appointed
Number of full Years
on the Committee
Meeting
attendance
J Liston
L Herlihy
Mn Keane
H Corbally
V Quinlan
J Callaghan
P Haran
* Retired 26 May 2011
10 June 2002
8 June 2001
29 June 2010
9
10
1
26 July 2011
Less than 1 year
9 June 2005*
13 Jan 1998
9 June 2005
5
14
6
8/8
8/8
8/8
4/4
2/2
8/8
8/8
As at 31 December 2011, the
Executive Directors’ share ownership
is disclosed in Table A on page 60.
Executive Directors’ service
contracts
No Executive Director has a service
contract with a notice period in excess
of 12 months or with provisions for
pre-determined compensation on
termination which exceeds 12 months
salary and benefits-in-kind.
There have been no payments
made during the year in relation to
compensation for loss of office.
Policy on external board
appointments
The long-standing policy of allowing
Executive Directors to hold external
Non-Executive directorships with the
prior approval of the Remuneration
Committee will continue. The
Remuneration Committee considers
that external directorships provide
the Group’s Executive Directors with
valuable experience that is of benefit
to Glanbia. It is also considered
appropriate for Glanbia to contribute
to the pool of Non-Executive
expertise available for the benefit of
the wider business community. The
Remuneration Committee believes
that it is reasonable for the individual
Executive Director to retain any fees
received from such appointments given
the additional personal responsibility
that this entails. Such fees retained by
Executive Directors in 2011 were as
follows: John Moloney: The Irish Dairy
Board Co-operative Limited: €17,500
and DCC plc: €68,000.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
59
Table A: Directors and Secretary’s interests in Glanbia plc
As at 31 December 2011
As at 2 January 2011*
Ordinary
shares
2008 LTIP
Awards
2002 LTIP
Options
2002 LTIP
Awards
Ordinary
shares
2008 LTIP
Awards
2002 LTIP
Options
2002 LTIP
Awards
Directors
L Herlihy
H Corbally
Mn Keane
J Moloney
J Callaghan
W Carroll
D Farrell
J Gannon
P Gleeson
P Haran
B Hayes
Ml Keane
J Liston
M Merrick
J Murphy
P Murphy
W Murphy
E Power
R Prendergast
S Talbot
K Toland
Secretary
M Horan
1
2
2
2
2
1
1
91,804
9,995
20,000
-
-
-
-
-
-
-
-
-
91,804
7,495
20,000
-
-
-
-
-
-
-
-
-
137,460
492,000
220,000
9,900
104,593
484,000
510,000
38,900
65,000
-
-
12,552
24,923
7,462
28,420
22,104
25,000
3,600
4,000
21,692
230,827
37,550
4,007
39,029
53,914
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,000
-
-
12,552
24,923
7,462
18,920
22,104
15,000
3,600
4,000
21,692
230,827
37,550
4,007
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
272,500
75,000
7,900
29,693
221,000
75,000
7,900
381,000
148,000
-
23,243
337,000
312,000
16,400
15,153
136,000
-
-
10,093
110,000
-
-
1 Executive Director
2 Appointed 26 May 2011
* Or at date of appointment if later
60
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
Table A (1): Directors and Secretary’s interests in Glanbia Co-operative Society Limited
As at 31 December 2011
As at 2 January 2011*
“A” Ordinary
Shares of €1.00
“C” Shares
of €0.01
“A” Ordinary
Shares of €1.00
“C” Shares
of €0.01
Directors
L Herlihy
H Corbally
Mn Keane
J Moloney
W Carroll
D Farrell
J Gannon
B Hayes
Ml Keane
M Merrick
J Murphy
P Murphy
W Murphy
E Power
R Prendergast
S Talbot
Secretary
M Horan
1
2
2
2
2
1
1 Executive Director
2 Appointed 26 May 2011
* Or at date of appointment if later
91,425
39,750,658
5,912
6,626
-
17,626
5,646
10,974
12,996
20,157
6,309
16,334
13,698
1,107,616
3,118,390
4,985,000
-
662,000
-
2,900,000
3,300,000
187,464
-
12,143,890
-
1,942,703
27,320
6,683
40,357,336
-
-
11,192,766
-
574,000
91,425
5,912
6,626
48,176,819
1,040,133
84,564
-
4,952,304
17,626
3,446
10,974
9,996
20,157
6,309
14,834
13,698
-
27,320
6,683
-
-
-
630,000
142,905
1,500,000
1,875,940
387,464
-
7,959,921
1,714,149
31,547,368
-
9,145,071
1,000,000
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
61
Table B: Share Options and LTIP Awards – John Moloney
2002
LTIP
Options
2-Jan-11 Granted
during
the
year
Exercised
during
the
year
Lapsed
during
the
year
31-Dec-11 Exercise
price
Date of
grant
€
Date of
exercise
or lapse
Market
price
on
exercise
€
Earliest
date
exercisable
from
Expiry
date
Note
2002EPS
290,000
- 290,000
2002EPS
150,000
2002EPS
70,000
-
-
-
-
Total:
510,000
-
290,000
-
-
-
-
2008
LTIP
Awards
2-Jan-11 Granted
during
the
year
Vested
during
the
year
Lapsed
during
the
year
-
1.55 29-Aug-02 12-Sep-11 €4.80 30-Aug-05 12-Sep-11
150,000
2.725
9-Dec-04
70,000
4.03 30-Aug-07
-
-
- 10-Dec-07 8-Dec-14
- 31-Aug-10 29-Aug-17
1, 2
1, 3
1
220,000
31-Dec-11 Market
price at
date of
award
€
Date of
award
Date of
vesting
or lapse
Market
price
at
vesting
€
Earliest
Date
for
vesting
Expiry
Date
Performance
Period
Note
2008TSR
71,000
2008EPS
71,000
2008TSR
71,000
2008EPS
71,000
2008TSR
100,000
2008EPS
100,000
-
-
-
-
-
-
2008TSR
2008EPS
-
75,000
-
75,000
- 71,000
63,176
7,824
-
-
4.45 28-Aug-08 30-Aug-11
4.11 28-Aug-11 30-Aug-11
2008-2010
4.45 28-Aug-08 30-Aug-11
4.11 28-Aug-11 30-Aug-11
2008-2010
-
-
-
-
-
-
-
-
-
-
-
-
71,000
2.72
9-Jun-09
71,000
2.72
9-Jun-09
100,000
2.82 25-May-10
100,000
2.82 25-May-10
75,000
4.35 28-Mar-11
75,000
4.35 28-Mar-11
-
-
-
-
-
-
-
-
9-Jun-12
9-Jun-13
2009-2011
9-Jun-12
9-Jun-13
2009-2011
- 25-May-13 25-May-14
2010-2012
- 25-May-13 25-May-14
2010-2012
- 28-Mar-14 28-Mar-15
2011-2013
- 28-Mar-14 28-Mar-15
2011-2013
4
5
6
6
6
6
6
6
Total:
484,000 150,000
63,176 78,824
492,000
Note: Performance conditions for the options and awards set out above are detailed below.
1 Subject to a performance condition that has been met.
2 A share award of 10% of the 290,000 shares lapsed on the sale of the shares.
3 Eligible for a share award of 6.6% the ordinary shares he continues to hold following the second anniversary of the exercise of the option.
4 The award lapsed in 2011 having not met the performance condition.
5 Subject to a performance condition that has been met in part.
6 Subject to a performance condition that is yet to be tested.
Table B(1): Share Options and LTIP Awards – Siobhan Talbot
2002
LTIP
Options
2002EPS
Total:
2008
LTIP
Awards
2-Jan-11 Granted
during
the
year
Exercised
during
the
year
Lapsed
during
the
year
75,000
75,000
-
-
-
-
-
-
2-Jan-11 Granted
during
the
year
Vested
during
the
year
Lapsed
during
the
year
31-Dec-11 Exercise
price
Date of
grant
€
Date of
exercise
or lapse
Market
price on
exercise
€
Earliest
date
exercisable
from
Expiry
date
Note
75,000
2.725
9-Dec-04
-
- 10-Dec-07
8-Dec-14
1, 2
75,000
31-Dec-11 Market
price at
date of
award
€
Date of
award
Date of
vesting
or lapse
Market
price at
vesting
Earliest
Date for
vesting
Expiry
Date
Performance
Period
Note
€
2008TSR
22,500
2008EPS
22,500
2008TSR
28,000
2008EPS
28,000
2008TSR
60,000
2008EPS
60,000
-
-
-
-
-
-
2008TSR
2008EPS
-
48,250
-
48,250
- 22,500
17,946
4,554
-
-
4.45 28-Aug-08 30-Aug-11
4.11 28-Aug-11 30-Aug-11
2008-2010
4.45 28-Aug-08 30-Aug-11
4.11 28-Aug-11 30-Aug-11
2008-2010
-
-
-
-
-
-
-
-
-
-
-
-
28,000
2.72
9-Jun-09
28,000
2.72
9-Jun-09
60,000
2.82 25-May-10
60,000
2.82 25-May-10
48,250
4.35 28-Mar-11
48,250
4.35 28-Mar-11
-
-
-
-
-
-
-
-
9-Jun-12
9-Jun-13
2009-2011
9-Jun-12
9-Jun-13
2009-2011
- 25-May-13 25-May-14
2010-2012
- 25-May-13 25-May-14
2010-2012
- 28-Mar-14 28-Mar-15
2011-2013
- 28-Mar-14 28-Mar-15
2011-2013
3
4
5
5
5
5
5
5
Total:
221,000
96,500
17,946 27,054
272,500
Siobhan Talbot is also eligible for a share award of 10% of the 4,000 ordinary shares (400) allotted to her on 28 August 2008.
Note: Performance conditions for the options and awards set out above are detailed below.
1 Subject to a performance condition that has been met.
2 Eligible for a share award of 10% the ordinary shares she continues to hold following the second anniversary of the exercise of the option.
3 The award lapsed in 2011 having not met the performance condition.
4 Subject to a performance condition that has been met in part.
5 Subject to a performance condition that is yet to be tested.
62
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
Table B(2): Share Options and LTIP Awards – Kevin Toland
2002
LTIP
Options
2-Jan-11 Granted
during
the
year
Exercised
during
the
year
Lapsed
during
the
year
31-Dec-11 Exercise
price
€
Date of
grant
Date of
exercise
or
lapse
Market
price on
exercise
€
Earliest
date
exercisable
from
Expiry
date
Note
2002EPS
164,000
2002EPS
100,000
2002EPS
48,000
-
-
-
164,000
-
-
Total:
312,000
-
164,000
-
-
-
-
2008
LTIP
Awards
2-Jan-11 Granted
during
the
year
Vested
during
the
year
Lapsed
during
the
year
0.00
1.55 29-Aug-02 9-Sep-11
4.67 30-Aug-05 9-Sep-11
100,000
2.725
9-Dec-04
48,000
4.03 30-Aug-07
-
-
- 10-Dec-07 8-Dec-14
- 31-Aug-10 29-Aug-17
1, 2
1
1
148,000
31-Dec-11 Market
price at
date of
award
€
Date of
award
Date of
vesting
or
lapse
Market
price
at
vesting
€
Earliest
Date
for
vesting
Expiry
Date
Performance
Period
Note
2008TSR
48,000
2008EPS
48,000
2008TSR
48,000
2008EPS
48,000
2008TSR
72,500
2008EPS
72,500
-
-
-
-
-
-
2008TSR
2008EPS
-
70,000
-
70,000
- 48,000
42,710
5,290
-
-
4.45 28-Aug-08 30-Aug-11
4.11 28-Aug-11 30-Aug-11
2008-2010
4.45 28-Aug-08 30-Aug-11
4.11 28-Aug-11 30-Aug-11
2008-2010
-
-
-
-
-
-
-
-
-
-
-
-
48,000
2.72
9-Jun-09
48,000
2.72
9-Jun-09
72,500
2.82 25-May-10
72,500
2.82 25-May-10
70,000
4.35 28-Mar-11
70,000
4.35 28-Mar-11
-
-
-
-
-
-
-
-
9-Jun-12
9-Jun-13
2009-2011
9-Jun-12
9-Jun-13
2009-2011
- 25-May-13 25-May-14
2010-2012
- 25-May-13 25-May-14
2010-2012
- 28-Mar-14 28-Mar-15
2011-2013
- 28-Mar-14 28-Mar-15
2011-2013
3
4
5
5
5
5
5
5
Total:
337,000 140,000
42,710 53,290
381,000
Note: Performance conditions for the options and awards set out above are detailed below.
1 Subject to a performance condition that has been met.
2 A share award of 10% of the 164,000 shares lapsed on the sale of the shares.
3 The award lapsed in 2011 having not met the performance condition.
4 Subject to a performance condition that has been met in part.
5 Subject to a performance condition that is yet to be tested.
Table B(3): LTIP Awards – Michael Horan
2008
LTIP
Awards
2-Jan-11 Granted
during
the
year
Vested
during
the
year
Lapsed
during
the
year
31-Dec-11 Market
price at
date of
award
€
Date of
award
Date of
vesting
or
lapse
Market
price
at
vesting
€
Earliest
Date for
vesting
Expiry
Date
Performance
Period
Note
2008TSR
12,000
2008EPS
12,000
2008TSR
12,000
2008EPS
12,000
2008TSR
31,000
2008EPS
31,000
-
-
-
-
-
-
2008TSR
2008EPS
-
-
25,000
25,000
- 12,000
9,727
2,273
-
-
4.45 28-Aug-08 30-Aug-11
4.11 28-Aug-11 30-Aug-11
2008-2010
4.45 28-Aug-08 30-Aug-11
4.11 28-Aug-11 30-Aug-11
2008-2010
-
-
-
-
-
-
-
-
-
-
-
-
12,000
2.72
9-Jun-09
12,000
2.72
9-Jun-09
31,000
2.82 25-May-10
31,000
2.82 25-May-10
25,000
4.35 28-Mar-11
25,000
4.35 28-Mar-11
-
-
-
-
-
-
-
-
9-Jun-12
9-Jun-13
2009-2011
9-Jun-12
9-Jun-13
2009-2011
- 25-May-13 25-May-14
2010-2012
- 25-May-13 25-May-14
2010-2012
- 28-Mar-14 28-Mar-15
2011-2013
- 28-Mar-14 28-Mar-15
2011-2013
1
2
3
3
3
3
3
3
Total:
110,000
50,000
9,727 14,273
136,000
Note: Performance conditions for the options and awards set out above are detailed below.
1 The award lapsed in 2011 having not met the performance condition.
2 Subject to a performance condition that has been met in part.
3 Subject to a performance condition that is yet to be tested.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
63
Table C: Directors remuneration
Salary
€’000
Fees
€’000
Annual
Incentive
€’000
Pension
contribution
€’000
Other
benefits
€’000
2011
Total
€’000
2010
Total
€’000
Executive Directors
J Moloney
K Toland
S Talbot
2011
2010
509
419
316
1,244
1,047
Non-Executive Directors
L Herlihy
H Corbally (note (a))
Mn Keane (note (b))
J Callaghan
W Carroll (note (c))
N Dunphy (note (d))
D Farrell (note (c))
J Fitzgerald (note (f))
E Fitzpatrick (note (e))
J Gannon
J Gilsenan (note (e))
P Gleeson
P Haran
B Hayes (note (g))
C Hill (note (d))
Ml Keane (note (g))
J Liston
M Merrick
J Murphy (note (g))
P Murphy (note (c))
W Murphy
A O’Connor (note (e))
E Power (note (c))
R Prendergast
V Quinlan (note (h))
2011
2010
Total 2011
Total 2010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,244
1,047
-
-
-
-
-
88
33
42
70
15
-
15
-
8
23
8
23
62
23
-
23
70
23
23
15
62
8
15
23
17
689
591
689
591
509
370
316
1,195
1,336
144
129
105
378
227
32
7
20
59
108
1,194
1,159
925
757
2,876
907
652
2,718
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,195
1,336
378
227
59
108
88
33
42
70
15
-
15
-
8
23
8
23
62
23
-
23
70
23
23
15
62
8
15
23
17
79
18
28
63
-
9
-
19
18
18
18
18
56
9
9
9
63
18
9
-
56
18
-
18
38
689
3,565
591
3,309
(a) Mr H Corbally was appointed Vice-Chairman on 26 May 2011.
(b) Mr Mn Keane was appointed Vice-Chairman on 29 June 2010.
(c) Messrs W Carroll, D Farrell, P Murphy and E Power were appointed Directors on 26 May 2011.
(d) Messrs N Dunphy and C Hill resigned as Directors on 29 June 2010.
(e) Messrs E Fitzpatrick, J Gilsenan and A O’Connor resigned as Directors on 26 May 2011.
(f) Mr J Fitzgerald resigned as a Vice-Chairman and Director on 29 June 2010.
(g) Messrs B Hayes, Ml Keane and J Murphy were appointed Directors on 29 June 2010.
(h) Mr V Quinlan resigned as a Vice-Chairman and Director on 26 May 2011.
All emoluments and compensation paid to the Directors during the year are shown above. Where the individual was appointed
during the year the amount shown is for the period from appointment.
Other benefits include the provision of a car (or car allowance), suitable medical insurance and insured life benefits.
64
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
Table C: Directors remuneration (continued)
The pension benefits of each of the Executive Directors during the year were as follows:
Transfer value
of increase in
accrued pension
€’ 000
Annual pension
accrued in 2011
in excess of inflation
€’ 000
Total annual accrued
pension at
31 December 2011
€’ 000
62
68
313
443
163
7
9
31
47
24
317
131
132
580
573
J Moloney
K Toland
S Talbot
2011
2010
On behalf of the
Remuneration Committee
Jerry Liston
.
Remuneration Committee Chairman
Glanbia plc Annual Report 2011
Directors' Report: Governance
Committee reports
www.glanbia.com
65
Applying the Principles of the UK Corporate Governance Code
It is our view that, except in relation to the representation of Glanbia Co-operative
Society Limited on the Board, the Company has been compliant throughout the
year with the provisions of the 2010 UK Corporate Governance Code and the Irish
Corporate Governance Annex. There is no current expectation that this will change
in the foreseeable future.
The following report details how the
Board has applied the principles set
down in the UK Corporate Governance
Code (which is referred to in the Listing
Rules, applicable to Irish and UK
listed companies and which is publicly
available on the Financial Reporting
Council’s website http://www.frc.org.
uk/corporate/ukcgcode.cfm) (the
‘UK Code’) and the Irish Corporate
Governance Annex published in
December 2010 by the Irish Stock
Exchange and which is publicly
available on the Financial Reporting
Council’s website http://www.ise.ie/
ISE_Regulation/Consultation-Papers/
Historic_Consultation_Papers/
Corporate_Governance_Annex/) (the
‘Irish Corporate Governance Annex’)
(collectively the ‘Codes’).
The Board accepts that the Codes
represent an authoritative statement
of best practice and as such it has
reviewed its practices relative to them.
The Board also acknowledges that
frequently it is the case that laws,
regulations and policies do not provide
guidance on all types of behaviour. As
a result, we have a code of conduct
for everybody in Glanbia. The Glanbia
Code of Conduct is intended as a code
of best practice and provides a broad
range of guidance about the standards
of integrity and business conduct
expected. Our Code of Conduct is
not intended to be a substitute for our
responsibility and accountability to
exercise good judgement and obtain
guidance on proper business conduct.
Glanbia employees are encouraged and
expected to seek additional guidance
and support from others when in doubt.
Leadership
Our Board
Our Board consists of the Group
Chairman (Liam Herlihy), two Vice-
Chairmen (Martin Keane and Henry
Corbally); 15 other Non-Executive
Directors (including John Callaghan, the
Senior Independent Director) and three
Executive Directors (John Moloney,
the Group Managing Director, Siobhán
Talbot, the Group Finance Director and
Kevin Toland, the CEO and President
Glanbia USA & Global Nutritionals).
14 of the Non-Executive Directors are
nominated by our majority shareholder,
Glanbia Co-operative Society Limited,
further detail in respect of which is given
on pages 44 to 47.
Our Directors come from a diversity
of backgrounds, ranging from public
service, accountancy and banking to
industry (dairy, pharmaceutical, drinks
and fruit), more particular details of
which are set out on pages 44 to 47.
We involve all Directors in formulating
our strategic business plan (which
is the route map which guides us to
meet our objectives and provides a
vital framework within which the Group
operates) and in all key decision-making.
Directors’ roles and responsibilities are
clarified from the outset and continually
updated to reflect the evolving business
Division of Responsibilities
and changing dynamics. We encourage
training and personal development,
and as part of the annual evaluation
process, the Group Chairman discusses
individual training and development
requirements for each Director.
Additionally, the Senior Independent
Director is available to all fellow Non-
Executive Directors, either individually
or collectively, to discuss any matters of
concern in a forum that does not include
Executive Directors or the management
of the Company.
Succession planning is used by the
Board to ensure that the Board has the
right balance of individuals to be able to
effectively discharge its responsibilities.
We feel it is important to get the right
balance of independence, skills,
knowledge, experience and diversity.
We are aware of these challenges, in
particular in recognising the challenge
in the fact that Glanbia Co-operative
Society Limited nominates 14 of our 18
Non-Executive Directors.
The Group Chairman is
responsible for the efficient and
effective working of the Board
and his particular responsibilities
include:
The Group Managing Director
is responsible for all aspects of
the operation and management
of the Group and his particular
responsibilities include:
>
>
>
Leading corporate strategic
decision making and developing
strategy for approval;
Leading the business
Ensuring Group policies and
procedures are followed;
Ensuring business
complies with relevant
legislation and regulation; and
> Overseeing investor relations.
>
>
>
>
Leading the Board;
Providing accurate,
timely and clear information
to the Board;
Promoting the highest
standards of corporate
governance;
Facilitating active engagement
and challenge by the Board;
Acting as Chairman of
Nomination Committee;
> Conducting the annual
>
>
>
evaluation of the Directors; and
Acting as a sounding board for
the Group Managing Director.
66
Glanbia plc Annual Report 2011
Directors' Report: Governance
Application of the Codes
www.glanbia.com
Our governance structure
The Group’s governance structure is
based on the leadership principles in
the Codes.
The core activities of the Board and
its Committees are documented and
planned on an annual basis and this
forms the basic structure within which
the Board operates. Biographical details
of the Directors and the members of the
Audit, Nomination and Remuneration
Committees are set out on pages 44
to 47.
While the Board is ultimately responsible
for the success of the Group, given the
size and complexity of its operations
the day-to-day operations of the Group
is managed on a delegated basis by
the Group Managing Director and the
senior executives working with him, as
set out on pages 47 to 48.
The Board appoints the Group
Managing Director and monitors his
performance in leading the Group. The
Group Managing Director is responsible
for all aspects of the operation and
management of the Group and its
business. Specifically, he is responsible
for developing (for the Board’s approval)
appropriate values and standards
to guide all activities undertaken
by the Group and also for making
recommendations on appropriate
delegation of responsibilities.
The Senior Independent Director
supports the Group Chairman
on all governance issues and his
particular responsibilities include:
>
>
Acting as a sounding board for
the Group Chairman;
Acting as an intermediary for
other Directors;
> Conducting the annual appraisal
of the Group Chairman’s
performance;
Acting as Chairman of the Audit
Committee;
Ensuring the views of the Non-
Executive Directors are heard;
and
To be available to shareholders.
>
>
>
The Board and its Committees monitor
the application of values, standards
and processes. This includes an agreed
annual calendar of the main business to
be considered at each Board meeting.
At each scheduled Board meeting, the
Group Managing Director, the CEO
and President of Glanbia USA & Global
Nutritionals and the Group Finance
Director provide operational and
financial updates. Depending on the
nature of the proposal to be considered,
other senior executives are invited to
make presentations or participate in
Board discussions to ensure that Board
decisions are supported by a full
analysis of each proposal.
The Board held 10 scheduled meetings
in 2011 and one two-day planning
and strategy session. The two-day
planning and strategy session has
been developed to ensure that Non-
Executive Directors can constructively
challenge and help develop proposals
on strategy. This includes a full
consideration of the key risks and
opportunities facing the Group on a
rolling three year basis.
The attendance of each Director
at the scheduled Board meetings
and the two-day planning and
strategy session is shown on page 68.
The Audit, Nomination and
Remuneration Committee
The Group Secretary assists the
Group Chairman in promoting the
highest standards of corporate
governance and his particular
responsibilities include:
>
>
Acting as a sounding board for
the Directors;
Assisting the Group Chairman in
ensuring Directors receive timely
and clear information and are
equipped for robust debate and
informed decision making;
> Central source of guidance
and advice on policy, procedure,
governance and ethics;
> Compliance with all legal
and regulatory matters;
Providing a high quality service
to shareholders; and
> Coordinating access to
>
independent professional advice
by Directors from time to time.
membership and attendances for all
or part of the year are shown in their
respective reports.
US Advisory Board
The US Advisory Board was established
in 2005 to assist the Board in developing
a greater awareness of activities and
market trends in the relevant industry
sectors in the USA. Liam Herlihy, the
Group Chairman, is chairman of the
US Advisory Board. The membership
of the US Advisory Board comprises
John Callaghan, Henry Corbally, Martin
Keane, Matthew Merrick, Joseph
McCullough and Kevin Toland. John
Moloney and Siobhán Talbot also attend
meetings of the US Advisory Board.
Susan Davis and Peter Rogers retired
towards the end of the year,
Joseph McCullough, retired, is former
Chief Executive Officer of CRH Americas
Products and Distribution. He joined
CRH in 1979 and has held a number
of senior management positions with
that company.
The composition of the US Advisory
Board is to be reviewed in 2012.
Effectiveness
Succession planning is used by the
Board to deliver two key responsibilities:
firstly to ensure that the Group is
managed by executives with the
necessary skills, experience and
knowledge; and secondly to ensure
that the Board itself has the right
balance of individuals to be able to
discharge its responsibilities effectively.
The Nomination Committee has
specific responsibilities in this area but
the Board as a whole is also involved
in overseeing the development of
management resources with the aim of
ensuring the Group has the individuals
with the right skills to meet the needs
of an increasingly complex and global
business.
All Directors are subject to re-election at
every Annual General Meeting.
All Non-Executive Directors are
advised of the likely time commitments
at appointment and are asked to
seek approval from the Nomination
Committee if they wish to take on
additional external appointments. The
ability of individual Directors to allocate
Glanbia plc Annual Report 2011
Directors' Report: Governance
Application of Codes
www.glanbia.com
67
sufficient time to the discharge of their
responsibilities is considered as part
of the Directors’ annual evaluation
process overseen by the Group
Chairman. Any issues concerning the
Group Chairman’s time commitment
are dealt with by the Nomination
Committee, chaired for this purpose by
the Senior Independent Director.
An induction programme is agreed for
all new Directors aimed at ensuring that
they are able to develop an
understanding and awareness of the
Group’s core processes, its people
and businesses. A typical induction
programme is shown on page 69.
All Directors also have access to the
advice and services of the Group
Secretary, who is responsible for
advising the Board on all governance
matters. The Directors also have access
to independent professional advice, if
required, at the expense of the Group.
2011 Board meeting attendance
Attendance at scheduled Board meetings during the year ended 31 December 2011
Director
Appointed
Number of
full years on
the Board
2011
meeting
attendance
L Herlihy
H Corbally
Mn Keane
V Quinlan
J Moloney
J Callaghan
W Carroll
D Farrell
E Fitzpatrick
J Gannon
J Gilsenan
P Gleeson
P Haran
B Hayes
Ml Keane
J Liston
M Merrick
J Murphy
P Murphy
W Murphy
A O’Connor
E Power
R Prendergast
S Talbot
11 Sept 1997
9 June 1999
24 May 2006
8 June 2001
11 Sept 1997
13 Jan 1998
26 May 2011
26 May 2011
9 June 1999
27 May 2009
9 June 1999
24 May 2006
9 June 2005
29 June 2010
29 June 2010
10 June 2002
9 June 2005
29 June 2010
14
12
5
101
14
14
Less than 1
Less than 1
121
2
121
5
6
1
33
9
6
1
26 May 2011
Less than 1
1 June 1989
28 May 2008
26 May 2011
28 May 2008
1 July 2009
22
31
92
3
2
11/11
11/11
11/11
4/4
11/11
11/11
7/7
7/7
4/4
11/11
4/4
11/11
11/11
11/11
11/11
11/11
11/11
11/11
7/7
11/11
4/4
7/7
11/11
11/11
K Toland
(cid:2)(cid:2)
1 Retired 26 May 2011
2 E Power was re-appointed to the Board in 2011 having previously served nine years
10 Jan 2003
9
9/11
on the Board
3 Ml Keane was re-appointed to the Board in 2011 having previously served two years
on the Board
The Group Chairman, with the assistance
of the Group Managing Director and
Group Secretary, is responsible for
ensuring that Directors are supplied with
information in a timely manner that it is in
a form and of a quality appropriate that
enables them to discharge their duties.
In the normal course of business, such
information is provided by the Group
Managing Director in a regular report
to the Board that includes information
on operational matters, strategic
developments, financial performance
relative to the business plan, business
development, corporate responsibility
and investor relations.
In addition to the induction programme
that all Directors undertake on joining
the Board, an ongoing programme
of Director development and Group
awareness has been developed.
For example, as part of the annual
programme of Board meetings,
Directors will typically visit the Group’s
principal operations to meet employees
and gain an understanding of the
Group’s products and services. In
2011, the Board visited the Group’s
Performance Nutrition businesses in
Chicago and the Customised Solutions
businesses in Carlsbad, California. Also,
the Board undertakes training sessions
on particular matters, and last year
Directors participated in an externally
facilitated Board development day,
designed to enhance motivation,
team dynamics and reinforce Board
relationships. As part of the recently
completed evaluation process, the
Group Chairman met with all Directors
individually and agreed training and
development plans as appropriate.
We have established a formal process
for the annual evaluation of the
performance of the Board, its principal
Committees and individual Directors.
The evaluation of the performance of
the Board is to be externally facilitated
every three years. The last external
review was completed in 2009.
As part of the evaluation process,
questionnaires are drawn up to
provide the framework for the
evaluation process. In order to ensure
the robustness of the process, the
68
Glanbia plc Annual Report 2011
Directors' Report: Governance
Applications of the Codes
www.glanbia.com
Directors tenure on Board
Less than 3 years
Between 3 and 6 years
Between 6 and 9 years
Over 9 years
Composition of the Board
Executive Director
Non-Executive Director
Non-Executive Directors
nominated by Glanbia
Co-operative Society Limited
questionnaires are designed to be
forward looking and to lead to insights
for improvement. The questions are
open-ended to encourage dialogue
about the workings of the Board.
Additionally, each member of the Board
or appropriate Committee is invited
to comment on the performance
of peer Directors (if necessary), the
collective Board and/or the appropriate
Committee.
Once completed, the questionnaires
are collated and reviewed by the
Group Chairman, who then meets with
each Director individually to discuss
the performance of the Board or the
appropriate Committee and individual
Directors. These interviews are
designed to be informal and open to
encourage active participation.
Following the interviews the Group
Chairman meets with the Group
Secretary to analyse the findings and
prepare a report to the Board identifying
the central themes and recommendations
for the Board to consider.
A diagramatic representation of the
evaluation process is set on page 70.
During 2011, our Board and/or its
Committees conducted an evaluation
of its own performance, its principal
Committees and individual Directors,
further detail in respect of which is
given on page 42. The performance of
the Group Chairman is included in the
above process. The Group Chairman’s
evaluation is managed by the Senior
Independent Director. As part of the
Group Chairman’s evaluation, the Non-
Executive Directors meet separately
under the chairmanship of the Senior
Independent Director.
The Group Chairman wishes to confirm
that, following the completion of the
performance evaluation process,
the members of the entire Board
who are all being proposed for re-
appointment continue to be effective
and demonstrate commitment to
their roles. The Senior Independent
Director, John Callaghan, confirms that
the Group Chairman, also standing
for re-appointment at this year’s
Annual General Meeting, continues to
perform effectively and demonstrates
commitment to his role. Biographical
details of all of the Directors are set out
on pages 44 to 47.
Independence
During the year, the Nomination
Committee reviewed the independence
of the Non-Executive Directors
in accordance with the guidance
in the Codes and reported its
recommendations to the Board. Further
detail in relation to the review of the
Directors’ independence is set out in the
Nomination Committee Report on pages
51 to 52.
Typical Non-Executive Director induction programme
Matters Covered
Directors’ duties, corporate governance and Board procedures - the Company has a corporate manual which is issued
to all Directors and is regularly updated for new legislation and procedures
Business planning and internal control processes
Strategy and planning
Metrics used to monitor business performance
Investor relations
Corporate responsibility (including ethical business conduct, and health and safety)
Internal audit
Site visits
Glanbia plc Annual Report 2011
Directors' Report: Governance
Applications of the Codes
www.glanbia.com
69
Accountability
Through this Annual Report and,
as required, through other periodic
financial statements, the Board is
committed to providing shareholders
and other stakeholders with a clear
assessment of the Company and the
Group’s position and prospects.
The arrangements established by
the Board for the application of risk
are detailed in the Risk Management
Report on pages 22 to 26. The Board
has delegated to the Audit Committee
oversight of the management of the
relationship with the Company’s
Auditors, further details of which can
be found in the Audit Committee Report
on pages 49 to 50.
Internal control and risk
management
The Board has overall responsibility for
the Group’s system of risk management
and internal control, for reviewing its
effectiveness and for confirming that
a process exists for the identification,
evaluation and management of risk
in order to ensure that the Group’s
strategic objectives are achieved.
The Board also has responsibility for
determining the Group’s risk appetite.
These processes have been in place
throughout the year covered in this
Annual Report and financial statements
and up to the date of its approval. The
Group’s systems of risk management
and internal control are regularly
reviewed by the Audit Committee and
the Board and accord with the Turnbull
guidance which the Board has fully
adopted.
While acknowledging our responsibility
for the system of internal control, we are
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.
Our Board has reviewed the
effectiveness of the current systems of
risk management and internal control
specifically for the purpose of this
statement. Details of the processes
the Group has put in place to manage
risk can be found on pages 22 to 26.
The Board has delegated to the Audit
Committee responsibility for reviewing
in detail the effectiveness of the Group’s
internal controls. Having undertaken
such reviews, the Audit Committee
reports to the Board on its findings
so that the Board can take a view on
Evaluation of the effectiveness of our Board
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The objective of the annual
evaluation is to:
>
>
provide assurance to our
shareholders and other
stakeholders that we are
committed to the highest
standards of governance
and probity, and
gain insight into Board
effectiveness to help our
Board perform as well
as possible and help us
understand how well our
Board is operating in key
areas. These include:
-
-
-
Board performance;
Board processes;
Board culture and
relationships;
- Non-Executive Directors;
-
Board composition;
- Overall performance
including: strategy,
business principles,
risk management and
internal control,
performance and
measurement, stakeholder
management and
Committee effectiveness
-
Additional issues
70
Glanbia plc Annual Report 2011
Directors' Report: Governance
Application of the Codes
www.glanbia.com
this matter. In order to assist the Audit
Committee and the Board in their review,
the Group has developed a Control Self
Assessment programme. This is subject
to regular review. The Board is satisfied
that the Group risk management and
internal controls systems are properly
reviewed and effective. Steps are
being taken to embed internal control
and risk management further into the
operations of the business and to deal
with areas of improvement which come
to management’s attention.
The Directors, through the use of
appropriate procedures and systems,
have also ensured that measures are
in place to secure compliance with the
Company and the Group’s obligation to
keep proper books of account.
These books of account are kept at the
registered office of the Company.
Share ownership and dealing
In order to maintain investor confidence
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 has
issued 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 or
the Group.
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
the Group Secretary and the Group
Finance Director as Compliance Officers,
from one of whom approval must be
obtained, in advance, for any share
dealings by persons to whom the rules
apply. Directors’ dealings must also be
approved by the Group Chairman.
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 and societies are
set out in the Remuneration Committee
Report on pages 60 to 63.
Risk Management Framework
The Board
Sets risk appetite and tolerance
Assurance/
self assessment
Audit Committee
Oversight of risk.
Internal Audit function
Audit plan and output reviewed
by the Audit Committee.
Group Operating
Executive reporting
Monthly performance reports
and quarterly risk assessment.
Financial reporting
Ongoing procedures in place
designed to ensure financial
reporting reliability.
Internal management
representation letter
Biannual process to assess the
effectiveness of internal controls
over financial reporting.
Control Self Assessment
Biannual programme to assess
internal control and fraud
prevention processes.
Risk management
Review and Identify
Quarterly key risk review
by each business unit CEO
and function head.
Evaluate
Risks analysed for impact
and probability to determine
the exposure.
Respond
Risk owners and action plans
identified to manage key risks.
Report
Risk exposure and mitigation
reviewed by the Group
Management Committee
and the Board.
Operational framework
The Group’s risk management
structures operate within
a framework of defined
organisation structure,
mandated policies and
processes and delegated
authority to key personnel.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Applications of the Codes
www.glanbia.com
71
Main features of internal control and risk management systems in relation to the process for preparing
consolidated accounts and financial reporting
>
Board approval of the annual
business and three-year
strategic plans following Group
and business unit strategy plan
reviews.
> Monitoring of performance against
the annual plan through monthly
Board reports detailing actual
versus budgeted results, analysis
of material variances, review of
key performance indicators and
re-forecasting where required.
> Monthly reporting by all business
units and review by Group
Finance.
> Well resourced control and finance
function to faciliate segregation of
duties.
>
>
>
Audit Committee review of the
integrity of the annual report and
half-yearly report. Any resulting
recommendations are included in
the Audit Committee Chairman’s
Board report.
Board review and approval of the
Group consolidated half-yearly
accounts, consolidated annual
accounts, interim management
statements and any formal
announcements.
The use of a Group Finance
management manual that clearly
sets out Group accounting
policies and financial control
procedures.
> Centralised Taxation and Treasury
functions.
>
Board approved Treasury risk
management policies, designed
to ensure that Group foreign
exchange and interest rate
exposures are managed within
defined parameters.
>
Appropriate IT security
environment.
Remuneration
The Board has delegated to the
Remuneration Committee responsibility
for agreeing remuneration policy and
the individual remuneration of the
Executive Directors and other senior
executives, further details of which
can be found in the Remuneration
Committee Report on page 53.
Given the increased focus on executive
compensation in recent years, in 2011
the Remuneration Committee (with
the assistance of Towers Watson)
completed a thorough analysis of our
compensation practices for senior
executives, the outcomes of which was
approved by the Board. Further details
can be found in the Remuneration
Committee Report on page 53.
Relations with shareholders
The Group has a well-developed
investor relations programme managed
by the Group Finance Director. This
includes regular contact with major
shareholders including Glanbia Co-
operative Society Limited to keep
them informed of progress on Group
performance. In order to assist in
developing an understanding of the
views of major shareholders, the
Company commissioned a survey
of investors which was undertaken
by external consultants in December
2011. The results of the survey will
be presented to the Board for its
consideration.
The Group maintains a comprehensive
investor relations website that provides,
amongst other things, information on
investing in Glanbia and copies of the
materials used for key shareholder
presentations. This can be accessed
via the Company’s website,
www.glanbia.com.
The Company’s Annual General
Meeting (‘AGM’) provides all
shareholders with the opportunity to
vote on the resolutions put to them.
At the AGM, the Group Managing
Director provides a brief summary of
the Group’s activities for the previous
year to the shareholders. Whenever
possible, all Directors attend the AGM
and shareholders are invited to ask
questions during the meeting and
have an opportunity to meet with the
Directors following the conclusion of the
formal part of the meeting. In line with
the Codes, details of proxy voting by
shareholders, including votes withheld,
are made available on request and
are placed on the Company’s website
following the meeting.
To ensure shareholders have time to
consider the annual report and financial
statements, and notice of the AGM
and lodge their proxy votes, they are
issued more than 20 working days prior
to the meeting. The Group offers all
shareholders the choice of submitting
proxy votes either electronically or in
paper format. It also offers them the
option to abstain.
72
Glanbia plc Annual Report 2011
Directors' Report: Governance
Applications of the Codes
www.glanbia.com
Other Statutory Information
Principal activities
Glanbia plc is an integrated global
nutritional solutions and large scale
global dairy business, headquartered
in Ireland. Our operations are based
in Ireland, mainland Europe, the USA,
Africa and Asia. Further detail can
be found in ‘Our Global Footprint’
on pages 34 to 35.
The Company has set out in this
report a fair review of the business of
the Group during the financial year
ended 31 December 2011, including
an analysis of the position of the
Group at the end of the financial year
and a description of the principal risks
and uncertainties facing the Group
(known as a ‘Business Review’).The
information that fulfils the Business
Review requirements can be found in
the Group and Divisional Performance
sections of this Report on pages 2
to 41.
Directors
The current Directors who served
during the 2011 financial year are
listed on pages 44 to 47. William
Carroll, David Farrell, Patrick Murphy
and Eamon Power were appointed to
the Board on 26 May 2011 following
the retirement of Edward Fitzpatrick,
James Gilsenan, Anthony O’Connor
and Victor Quinlan.
Retirement of Directors
In accordance with the UK Corporate
Governance Code, all Directors will
retire at the 2012 Annual General
Meeting (‘AGM’) and, being eligible,
offer themselves for re-appointment.
Annual General Meeting
The Company’s AGM will be held
on 9 May 2012. Full details of the
AGM, together with explanations of
the resolutions to be proposed, are
contained in the Notice of Meeting
available on the Group’s website www.
glanbia.com and, if requested, posted
with this Annual Report.
In addition to the usual ordinary
business to be transacted at the AGM,
shareholders are being asked to:
Ordinary business
>
to receive and consider the
Remuneration Committee Report
for the year ended 31 December
2011. This is being proposed as an
advisory non-binding resolution.
Special business
>
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 equal to the authorised
but unissued share capital of the
Company on the date of the AGM
which is currently equal to 3.89% of
the nominal value of the Company’s
issued share capital;
>
>
>
>
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 nominal amount equal to
the nominal value of the Company’s
authorised but unissued share
capital on the date of the AGM
which is currently equal to 3.89% of
the nominal value of the Company’s
issued share capital;
extend the authority to purchase
up to 10% of its own shares until
the earlier of the close of business
on 8 August 2013 or the date of the
AGM of the Company in 2013;
pass a resolution authorising the
Company to reissue such shares
purchased by it and not cancelled
as treasury shares;
approve a resolution to permit an
Extraordinary General Meeting to
be called on 14 days notice; and
>
approve a resolution to authorise
the amendment of the 2008
Long Term Incentive Plan, the
rationale for and the principal
features of which are set out in the
Remuneration Committee Report
on page 53.
Powers of the Directors
The Directors are responsible for
the management of the business of
the Company and the Group and may
exercise all powers of the Company
subject to applicable legislation
and regulation and the Articles of
Association.
At the 2011 AGM, the Directors were
given the power to issue new shares up
to a nominal amount of €722,658.96.
This power will expire on the earlier of
the conclusion of the 2012 AGM or 10
August 2012. Accordingly, a resolution
will be proposed at the 2012 AGM to
renew the Company’s authority to issue
further new shares.
At the 2011 AGM, the Directors were
also given the power to disapply the
strict statutory pre-emption provisions
in the event of a rights issue or in any
other issue up to an aggregate nominal
amount of €722,658.96. This authority
too will expire on the earlier of the
conclusion of the 2012 AGM or 10
August 2012 and a resolution will be
proposed at the 2012 AGM to renew
this additional authority.
At the 2011 AGM, the Directors
were given the power to buy back
a maximum number of 29,395,568
ordinary shares (equivalent to 10% of
its own shares) within a price range
specified in the resolution. A special
resolution will be proposed at the 2012
AGM to renew the Company’s authority
to acquire its own shares. If approved,
the minimum price which may be paid
by the Company will be €0.06 per
share and the maximum price will be
the higher of the 5 day average closing
prices and the last independent trade
prior to the buy-back.
At the 2011 AGM, shareholders
also authorised the maximum and
minimum prices at which the Company
may reissue off-market such shares
as it may purchase.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Other Statutory Information
www.glanbia.com
73
This authority will expire at the earlier of
the conclusion of the 2012 AGM or 10
August 2012 and a resolution will be
proposed at the 2012 AGM to renew this
authority.
Dividends
An interim dividend of 3.33 cent per
share was paid on 14 October 2011 to
shareholders on the register at the close
of business on 2 September 2011.
294,532,684 (2010: 293,835,684)
ordinary shares of €0.06 each, of
which 54.4% was held by Glanbia
Co-operative Society Limited. All the
Company’s shares are fully paid up
and quoted on the Irish and London
Stock Exchanges. During the year
697,000 ordinary shares of €0.06
each were allotted, upon the exercise
of outstanding share options under the
2002 Long Term Incentive Plan.
The Directors propose a final dividend
of 4.94 cent per share. Subject to
shareholder approval, the final dividend
will be paid on 11 May 2012 to
shareholders on the share register on
30 March 2012.
Following approval of shareholders at the
AGM in 2010, all dividend payments will
be made by direct credit transfer into a
nominated bank or financial institution.
If a shareholder has not provided his/
her account details prior to the payment
of the dividend, a shareholder will be
sent the normal tax voucher advising
a shareholder of the amount of his/
her dividend and that the amount is
being held because his/her direct
credit transfer instructions had not
been received in time. A shareholder’s
dividends will not accrue interest while
they are held. Payment will be transferred
to a shareholder’s account as soon
as possible on receipt of his/her direct
credit transfer instructions. Additionally,
if a shareholder’s registered address
is in the UK and a shareholder has not
previously provided the Company with a
mandate form for an Irish euro account,
a shareholder‘s dividend will default to a
sterling payment. All other shareholders
dividends will default to a euro payment.
Political donations
The Electoral Act, 1997 requires
companies to disclose all political
donations over €5,079 in aggregate
made during the financial year. The
Directors, on enquiry, have satisfied
themselves that no such donations in
excess of this amount have been made
by the Company.
Issued share capital
At 31 December 2011 the authorised
share capital of the Company was
306,000,000 ordinary shares of €0.06
each and the issued share capital was
Details of the Company’s share capital
and shares under option or award at 31
December 2011 are given in notes 22
and 23 to the financial statements.
Rights and obligations of
ordinary shares
On a show of hands at a general
meeting every holder of ordinary shares
present in person or by proxy and
entitled to vote shall have one vote. On a
poll, every member present in person or
by proxy, shall have one vote for every
ordinary share held. In accordance
with the provisions of the Articles
of Association, holders of ordinary
shares are entitled to a dividend where
declared or paid out of profits available
for such purposes. On a return of capital
on a winding up, holders of ordinary
shares are entitled to participate.
Restrictions on transfer of shares
With the exception of restrictions on
transfer of shares under the Company’s
share schemes, while the shares are
subject to the schemes, there are no
restrictions on the voting rights attaching
to the Company’s ordinary shares or the
transfer of securities in the Company.
Under the Articles of Association of the
Company, the Directors have the power
to impose restrictions on the exercise
of rights attaching to share(s) where the
holder of the share(s) fails to disclose the
identity of any person who may have an
interest in those shares.
No person holds securities in the
Company carrying special rights with
regard to control of the Company.
The Company is not aware of any
agreements between holders of
securities that may result in restrictions
in the transfer of securities or
voting rights.
Exercise of rights of shares in
employee share schemes
As detailed in note 22 to the financial
statements at 31 December 2011,
740,576 ordinary shares were held in an
employee benefit trust for the purpose of
the Group’s employee share schemes.
The Trustees of the employee trusts
do not seek to exercise voting rights
on shares held in the employee trusts
other than on the direction of the
underlying beneficiaries. No voting
rights are exercised in relation to shares
unallocated to individual beneficiaries.
Rights under the Shareholders’
Rights (Directive 2007/36/EC)
Regulations 2009
Shareholder(s) have the right to ask
questions related to items on the
agenda of a general meeting and to
receive answers, subject to certain
qualifications.
Shareholder(s) holding 3% of the
issued share capital of the Company,
representing at least 3% of its total
voting rights, have the right to put
items on the agenda and to table draft
resolutions at AGMs. The request must
be received by the Company at least 42
days before the relevant meeting.
Further details of shareholders’ rights
under the Shareholders’ Rights (Directive
2007/36/EC) Regulations 2009 are
contained in the notice of the 2012 AGM
available on the Group website www.
glanbia.com and, if requested, posted
with this Annual Report.
Restrictions on voting deadlines
The notice of any general meeting shall
specify the deadline for exercising
voting rights and appointing a proxy or
proxies to vote in relation to resolutions
to be proposed at the general meeting.
The number of proxy votes for, against
or withheld in respect of each resolution
are published on the Company’s
website after the meeting.
Substantial interests
As at 28 February 2012, the Company
has been advised of the following
notifiable interests in its ordinary share
capital:
74
Glanbia plc Annual Report 2011
Directors' Report: Governance
Other Statutory Information
www.glanbia.com
No of
ordinary
shares
%
of issued
share
capital
160,277,308
54.4%
11,978,374
4.06%
Shareholder
Glanbia
Co-operative
Society
Limited
Prudential
plc group of
companies
Memorandum and Articles
of Association
The Company’s Memorandum and
Articles of Association set out the
objects and powers of the Company.
The Articles detail the rights attaching
to the shares; the method by which the
Company’s shares may be purchased
or re-issued; the provisions which apply
to the holding of and voting at general
meetings; and the rules relating to the
Directors, including their appointment,
retirement, re-election, duties and
powers. A copy of the Memorandum
and Articles of Association can be
obtained from the Company’s website,
www.glanbia.com.
Unless expressly specified to the
contrary in the Articles of Association
of the Company, the Company’s
Memorandum and Articles of
Association may be amended by
special resolution of the Company’s
shareholders.
Change of control provisions
The Group has certain debt facilities
which may require repayment in the
event that a change in control occurs
with respect to the Group.
There are also a number of agreements
that take effect, alter or terminate upon
a change of control of the Group, which
include the Group’s Joint Ventures
with Leprino Foods Company and
PZ Cussons plc. If a third party were
to acquire control of the Group,
Leprino Foods Company could elect
to terminate its Joint Venture with the
Group and, if this were to occur, the
Group could then be required to sell
its shareholding in the Joint Venture
to Leprino Foods Company at a price
equal to its fair value. In the same
circumstances PZ Cussons plc can
also elect to terminate its Nutricima
Joint Venture with the Group and, if this
were to occur, the Group could then
be required to sell to PZ Cussons plc
at a nominal price certain trade marks
which were originally transferred from
the PZ Cussons group to the Nutricima
business. The Nutricima Joint Venture
company would then be wound up.
In addition, the Company’s long term
incentive plans contain change of control
provisions which can allow for the
acceleration of the exercisability of share
options and the vesting of share awards
in the event that a change of control
occurs with respect to the Company.
Corporate social responsibility
As the Group grows and develops as
a leading integrated global nutritional
solutions and large scale global dairy
business, so also does the Group’s
commitment to conducting its business
in a way that is economically, socially
and environmentally sustainable.
During 2011 the Group made further
progress in its corporate citizenship
objectives, more particular details
of which are summarised in 'Our
Responsibilities' on pages 27 to 33.
Research and development
The Group’s key business objectives
include central ownership of its
worldwide intellectual property (IP)
in Ireland, whether acquired IP or
developed organically, to facilitate
central management and control over
IP development and its commercial
exploitation. Accordingly, the Group’s
principal research and development
centre is Global Nutritionals’ Glanbia
Innovation Centre, Kilkenny (the ‘GIC’)
which has direct responsibility for overall
Group research and development
activity, including that undertaken at the
Group’s other substantial research and
development centre at Twin Falls, Idaho
where it also operates a Customer
Collaboration Centre.
The Group is committed to achieving
the highest standards of best practice
in relation to science-based innovation
and to an ongoing and extensive
innovation programme to support a
consumer-led business and marketing
approach. The programme is directed
towards the development of technically
superior dairy-based food ingredients,
nutritional products, cheese and high-
value consumer food products, using
proprietary technologies and processes.
Through its research and development
facilities at the GIC and Idaho, the Group
has developed and launched advanced,
differentiated and branded ingredients
and consumer products, bringing a
range of nutritional benefits that enhance
physiological wellbeing, and the texture
and flavour enhancements in foods.
In Kilkenny, the research and
development activity has focused on the
customer-led areas of sports nutrition,
beverages, protein and energy bars,
food texture and functionality, weight
management, healthy aging and medical
nutrition (the ‘developments’) and
dietetic products. These developments
assist the Group’s global business
growth through the Customer
Collaboration Centres at Idaho and
Glanbia Deutschland. The GIC has
performed a key role in connecting the
Glanbia research and development
community with Food for Health Ireland
(FHI), a joint development programme
between Enterprise Ireland, Irish
dairy research universities (University
of Limerick, UCC and UCD) and
organisations (including Moorepark),
and the Irish dairy industry. In 2011,
the collaboration with FHI focused
on Glanbia-produced milk and whey
products that were screened for a
variety of physiological functions. These
programme collaborations will continue
through 2012.
The work programme performed at
the Customer Collaboration Centre in
Twin Falls, Idaho for the GIC during
2011 included the above-mentioned
developments, fresh dairy products
and pet food. These development
areas are being addressed through
whey, flax-derived ingredients and
solutions, and outsourced dairy and
non-dairy proteins and ingredients. The
US Customer Collaboration Centre has
become a focal point for joint research
with USA customers, particularly in
beverage and bar applications and,
mediated through the GIC, it was also
able to connect to the FHI programme.
Glanbia plc Annual Report 2011
Directors' Report: Governance
Other Statutory Information
www.glanbia.com
75
Subsidiary and associated
undertakings
A list of the principal subsidiary and
associated undertakings is included in
note 39 to the financial statements.
Accountability and audit
Financial reporting
Directors’ responsibilities for preparing
the financial statements for the
Company and the Group are detailed
on page 77. The Auditors’ Report
details the respective responsibilities of
Directors and Auditors.
Going concern
The Group’s business activities,
together with the factors likely to affect
its future development, performance
and position are set out in the Group
Managing Director’s Review on pages
8 to 13. The financial position of the
Company and the Group, its cash
flows, liquidity position and borrowing
facilities are outlined in the Group
Finance Director’s Review on pages 16
to 21. In addition, note 3 to the financial
statements includes the Company and
the Group’s objectives, policies and
processes for managing its capital; its
financial risk management objectives;
details of its financial instruments and
hedging activities; and its exposures to
credit risk and liquidity risk.
The Company and the Group have
considerable financial resources
and a large number of customers
and suppliers across different
geographic areas and industries. As
a consequence, the Directors believe
that the Company and the Group are
well placed to manage its business risks
successfully.
The Directors have a reasonable
expectation that the Company, and
the Group as a whole, have adequate
resources to continue in operational
existence for the foreseeable future. For
this reason, they continue to adopt the
going concern basis in preparing the
financial statements.
Auditors
The auditors, PricewaterhouseCoopers,
have expressed their willingness
to continue in office in accordance
with Section 160(2) of the Companies
Act, 1963.
76
Glanbia plc Annual Report 2011
Directors’ Report: Governance
Other Statutory Information
www.glanbia.com
Directors’ statement pursuant
to the Transparency (Directive
2004/109/EC) Regulations 2007
Each of the Directors, whose names
and functions are listed on pages 44
to 47 confirms that to the best of each
person’s knowledge and belief:
>
>
the financial statements prepared
in accordance with IFRS as
adopted by the EU give a true and
fair view of the assets, liabilities
and financial position of the
Company and the Group and of
the profit of the Group; and
the Directors’ Report contained
in the Annual Report includes a
fair review of the development
and performance of the business
and the position of the Company
and Group, together with a
description of the principal risks
and uncertainties that they face.
Statement of Directors’ responsibilities
The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance
with applicable law and regulations.
Irish company law requires the
Directors to prepare financial
statements for each financial year.
Under that law the Directors have
prepared the financial statements in
accordance with International Financial
Reporting Standards (IFRSs) as
adopted by the European Union. The
financial 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 profit or loss of
the Group.
In preparing these financial 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 financial statements
comply with IFRSs as adopted by
the European Union; and
> Prepare the financial 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 qualifications as
necessary.
The Directors are also required by
applicable law and the Listing Rules
issued by the Irish Stock Exchange
to prepare a Directors’ Report
and reports relating to Directors’
Remuneration and Corporate
Governance and the Directors are
required to include a management
report containing a fair review of the
business and a description of the
principal risks and uncertainties facing
the Group.
The Directors are responsible for
keeping proper books of account that
disclose with reasonable accuracy
at any time the financial position of
the Company and the Group and
to enable them to ensure that the
financial statements comply with
the Companies Acts 1963 to 2009
and, as regards the Group financial
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
corporate and financial information
included on the Company’s website.
Legislation in Ireland concerning the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Directors Report
On behalf of the Board
L Herlihy
Directors
J Moloney
S Talbot
Glanbia plc Annual Report 2011
Directors’ Report: Governance
Statement of Directors Responsibilities
www.glanbia.com
77
78
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Financial statements
Independent auditors’ report to the members of Glanbia plc
Group income statement
Group statement of comprehensive income
Group statement of changes in equity
Group statement of financial position
Group statement of cash flows
Company statement of financial position
Company statement of changes in equity
80
82
83
84
85
86
87
88
Company statement of comprehensive income and statement of cash flows 89
Notes to the financial statements
1. General information
2. Summary of significant accounting polices
3. Financial risk management
4. Critical accounting estimates and judgements
5. Segment information
6. Operating expenses
7. Exceptional items
8. Employee benefit expense
9. Directors’ remuneration
10. Finance income and costs
11. Income taxes
12. Earnings per share
13. Dividends
14. Property, plant and equipment
15. Intangible assets
16. Investments in associates
17. Investments in joint ventures
18. Available for sale financial assets
19. Trade and other receivables
20. Inventories
21. Cash and cash equivalents
22. Other reserves
23. Share capital and share premium
24. Retained earnings
25. Non-controlling interests
26. Borrowings
27. Deferred income taxes
28. Retirement benefit obligations
29. Provisions for other liabilities and charges
30. Capital grants
31. Trade and other payables
32. Derivative financial instruments
33. Contingent liabilities
34. Commitments
35. Cash generated from operations
36. Business combinations
37. Related party transactions
38. Events after the reporting period
39. Principal subsidiary and associated undertakings
Five year financial summary
Shareholders' information
90
90
98
103
105
110
111
111
112
112
113
114
115
115
116
120
121
122
123
124
124
125
129
130
130
131
133
135
138
139
139
139
140
141
141
142
143
145
146
148
149
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
79
Independent auditors’ report to the members of Glanbia plc
We have audited the Group and
Parent Company financial statements
(the “financial statements”) of Glanbia
plc for the year ended 31 December
2011, which comprise the Group
income statement, the Group and
Parent Company statements of
financial position, the Group and
Parent Company statements of
changes in equity, the Group and
Parent Company statements of cash
flows, the Group and Parent Company
statements of comprehensive income
and the related notes. These financial
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
financial 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
financial 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 Parent 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 financial
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 financial 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 2009. We also report to you
whether the financial statements have
been properly prepared in accordance
with Irish statute comprising the
Companies Acts, 1963 to 2009 and as
regards the Group financial statements
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 Parent
Company statement of financial
position is in agreement with the books
of account. We also report to you our
opinion as to:
> whether the Parent Company has
kept proper books of account;
> whether the Directors’ report is
consistent with the financial
statements; and
> whether at the reporting date there
existed a financial situation which
may require the Parent Company to
convene an extraordinary general
meeting of the Parent Company;
such a financial situation may exist
if the net assets of the Parent
Company, as stated in the Parent
Company statement of financial
position are not more than half of its
called-up share capital.
We also report to you if, in our opinion,
any information specified 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 are required by law to report to you
our opinion as to whether the
description in the statement on
corporate governance of the main
features of the internal control and risk
management systems in relation to the
process for preparing the Group
financial statements is consistent with
the Group financial statements.
In addition, we review whether the
statement on corporate governance
reflects the Company's compliance
with the nine provisions of the UK
Corporate Governance Code and the
two provisions of the Irish Corporate
Governance Annex specified for our
review by the Listing Rules of the Irish
Stock Exchange, and report if it does
not. We are not required to consider
whether the Board’s statements on
internal controls 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 financial statements.
The other information comprises
the following sections: Group
performance, divisional performance
and governance. We consider the
implications for our report if we
become aware of any apparent
misstatements or material
inconsistencies with the financial
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 financial
statements. It also includes an
assessment of the significant estimates
and judgments made by the Directors
in the preparation of the financial
statements, and of whether the
accounting policies are appropriate to
the Group’s and Parent 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
sufficient evidence to give reasonable
assurance that the financial 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 financial statements.
Opinion
In our opinion:
> the Group financial 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 31 December
2011 and of its profit and cash
flows for the year then ended;
> the Parent Company financial
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,
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
1963 to 2009 of the state of the
Parent Company’s affairs as at 31
December 2011 and cash flows for
the year then ended; and
> the financial statements have been
properly prepared in accordance
with the Companies Acts, 1963 to
2009 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 Parent
Company. The Parent Company
statement of financial position is in
agreement with the books of account.
In our opinion the information given in
the Directors’ report is consistent with
the financial statement, and the
description in the statements on
corporate governance of the main
features of the internal control and risk
management systems in relation to the
process for preparing the Group
financial statements is consistent with
the Group financial statements.
The net assets of the Parent Company,
as stated in the Parent Company
statement of financial position 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 31
December 2011 a financial situation
which under section 40 (1) of the
Companies (Amendment) Act, 1983
would require the convening of an
extraordinary general meeting of the
Company.
Siobhán Collier,
for and on behalf of
PricewaterhouseCoopers
Chartered Accountants and
Statutory Audit Firm
Waterford, Ireland
28 February 2012
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Group income statement
for the financial year ended 31 December 2011
Pre-
exceptional
2011
€’000
Exceptional
2011
€’000
(note 7)
Notes
Pre-
exceptional
2010
€’000
Total
2011
€’000
Exceptional
2010
€’000
(note 7)
Total
2010
€’000
–
2,166,695
– (1,784,263)
–
–
–
382,432
(115,896)
(130,029)
Revenue
Cost of sales
Gross profit
5
2,671,151
–
2,671,151
2,166,695
(2,233,556)
(2,959)
(2,236,515)
(1,784,263)
437,595
(2,959)
434,636
382,432
Distribution expenses
Administration expenses
Other gains and losses
(137,342)
(139,227)
–
(3,598)
(2,166)
–
(140,940)
(141,393)
–
(115,896)
(130,029)
–
10,238
10,238
Operating profit
161,026
(8,723)
152,303
136,507
10,238
146,745
Finance income
Finance costs
Share of results of Joint Ventures
& Associates
10
10
3,056
(30,997)
14,331
–
–
–
3,056
(30,997)
3,290
(25,420)
14,331
10,103
–
–
–
3,290
(25,420)
10,103
Profit before taxation
Income taxes
11
147,416
(26,975)
(8,723)
1,090
138,693
(25,885)
124,480
(25,527)
10,238
134,718
(558)
(26,085)
Profit for the year
120,441
(7,633)
112,808
98,953
9,680
108,633
Attributable to:
Equity holders of the Parent
Non-controlling interests
25
Basic earnings per share
(cents)
Diluted earnings per share
(cents)
12
12
112,178
630
112,808
38.22
37.90
108,047
586
108,633
36.86
36.63
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Group statement of comprehensive income
for the financial year ended 31 December 2011
Notes
2011
€’000
2010
€’000
Profit for the year
112,808
108,633
Other comprehensive income/(expense)
Actuarial (loss)/gain – defined benefit schemes
Deferred tax credit/(charge) on actuarial loss/gain
Share of actuarial (loss)/gain – Joint Ventures & Associates
Deferred tax (charge) on actuarial loss/gain – Joint Ventures & Associates
Currency translation differences
Net investment hedge
Revaluation of available for sale financial assets
Fair value movements on cash flow hedges
Deferred tax on cash flow hedges and revaluation of available for sale financial
assets
28
27
24
24
22
22
22
22
27
(17,029)
2,615
(38)
(77)
13,379
(1,250)
2,760
(316)
18,538
20,169
230
(1,484)
3,563
1,214
–
(5,381)
3,936
2,267
Other comprehensive income for the year, net of tax
7,532
35,564
Total comprehensive income for the year
120,340
144,197
Total comprehensive income attributable to:
Equity holders of the Parent
Non-controlling interests
119,710
143,611
25
630
586
120,340
144,197
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Group statement of changes in equity
for the financial year ended 31 December 2011
Attributable to equity holders of the Parent
Share
capital and
share
premium
€’000
Other
reserves
€’000
Retained
earnings
€’000
Total
€’000
(note 23)
(note 22)
(note 24)
Non-
controlling
interests
€’000
(note 25)
Total
€’000
Balance at 2 January 2010
99,219
108,672
83,004
290,895
6,493
297,388
Balance at 1 January 2011
99,741
132,227
185,544
417,512
6,892
424,404
Profit for the year
Other comprehensive income/(expense)
Actuarial gain – defined benefit schemes
Deferred tax on actuarial gain
Share of actuarial gain – Joint Ventures & Associates
Fair value movements
Deferred tax on fair value movements
Currency translation differences
Total comprehensive income for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, vesting or expiry of share
based payments
Shares issued
Premium on shares issued
Profit for the year
Other comprehensive income/(expense)
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
Fair value movements
Deferred tax on fair value movements
Currency translation differences
Net investment hedge
Total comprehensive income for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, vesting or expiry of share
based payments
Shares issued
Premium on shares issued
Purchase of own shares
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,445)
2,267
20,169
108,047
108,047
586
108,633
13,379
(1,250)
2,444
–
–
–
13,379
(1,250)
2,444
(1,445)
2,267
20,169
–
–
–
–
–
–
13,379
(1,250)
2,444
(1,445)
2,267
20,169
20,991
122,620
143,611
586
144,197
–
(20,453)
(20,453)
(187)
(20,640)
2,937
–
2,937
(373)
373
17
505
–
–
–
–
–
17
505
–
–
–
–
2,937
–
17
505
–
–
–
–
2,079
1,214
18,538
230
112,178
112,178
630
112,808
(17,029)
(17,029)
2,615
(115)
–
–
–
–
2,615
(115)
2,079
1,214
18,538
230
–
–
–
–
–
–
–
(17,029)
2,615
(115)
2,079
1,214
18,538
230
22,061
97,649
119,710
630
120,340
–
(22,942)
(22,942)
(387)
(23,329)
2,388
–
2,388
(1,057)
1,057
42
1,179
–
–
–
(2,075)
–
–
–
–
42
1,179
(2,075)
–
–
–
–
–
2,388
–
42
1,179
(2,075)
Balance at 31 December 2011
100,962
153,544
261,308
515,814
7,135
522,949
Goodwill previously written off amounting to €93.0 million (2010: €93.0 million) is included in opening and closing retained
earnings.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Group statement of financial position
as at 31 December 2011
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Investments in joint ventures
Trade and other receivables
Deferred income tax assets
Available for sale financial assets
Derivative financial instruments
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Notes
2011
€’000
2010
€’000
14
15
16
17
19
27
18
32
20
19
32
21
394,552
467,277
12,178
58,484
14,575
11,255
11,165
–
369,346
356,830
11,757
58,945
23,084
7,388
14,127
1,643
969,486
843,120
336,855
304,301
6,161
231,373
303,881
246,831
3,912
229,101
878,690
783,725
Total assets
1,848,176
1,626,845
EQUITY
Issued capital and reserves attributable to equity holders of the Parent
Share capital and share premium
Other reserves
Retained earnings
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred income tax liabilities
Retirement benefit obligations
Provisions for other liabilities and charges
Capital grants
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Derivative financial instruments
Provisions for other liabilities and charges
Total liabilities
Total equity and liabilities
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
23
22
24
100,962
153,544
261,308
99,741
132,227
185,544
515,814
417,512
25
7,135
6,892
522,949
424,404
26
32
27
28
29
30
31
26
32
29
658,896
1,319
93,459
48,425
22,120
17,161
636,251
3,315
75,966
48,560
22,392
18,609
841,380
805,093
400,850
6,656
52,808
5,657
17,876
366,246
2,538
972
6,487
21,105
483,847
397,348
1,325,227
1,202,441
1,848,176
1,626,845
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Group statement of cash flows
for the financial year ended 31 December 2011
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Payment of deferred consideration on acquisition of subsidiaries
Purchase of property, plant and equipment
Purchase of intangible assets
Dividends received from joint ventures
Loans repaid by joint ventures
Decrease in available for sale financial assets
Proceeds from sale of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Purchase of own shares
Private debt placement
(Decrease)/increase in borrowings
Finance lease principal payments
Dividends paid to Company shareholders
Dividends paid to non-controlling interests
Capital grants received
Net cash inflow from financing 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
35
17
23
22
13
25
2011
€’000
2010
€’000
145,386
3,134
(29,729)
(12,738)
107,214
3,054
(25,613)
(11,955)
106,053
72,700
(114,252)
(1,146)
(47,239)
(1,646)
14,761
–
2,283
420
–
(644)
(31,631)
(4,333)
11,210
23,280
438
1,163
(146,819)
(517)
1,221
(2,075)
226,828
(160,780)
(968)
(22,942)
(387)
564
522
–
–
21,823
(926)
(20,453)
(187)
1,432
41,461
2,211
695
74,394
229,101
1,577
152,789
1,918
Cash and cash equivalents at the end of the year
21
231,373
229,101
Reconciliation of net cash flow to movement in net debt
Net increase in cash and cash equivalents
Cash movements from debt financing
Fair value movement 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
Net debt comprises:
Borrowings
Cash and cash equivalents
2011
€’000
695
(65,080)
2010
€’000
74,394
(20,897)
(64,385)
53,497
387
(8,211)
(72,209)
(408,122)
(2,165)
(16,836)
34,496
(442,618)
(480,331)
(408,122)
26
21
(711,704)
231,373
(637,223)
229,101
(480,331)
(408,122)
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Company statement of financial position
as at 31 December 2011
ASSETS
Non-current assets
Investments in associates
Available for sale financial assets
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 and share premium
Retained earnings
Other reserves
Total equity
LIABILITIES
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Notes
2011
€’000
2010
€’000
16
18
18
19
21
23
24
2,259
–
2,298
265
599,325
599,325
601,584
601,888
6
5,280
109
8,200
5,286
8,309
606,870
610,197
456,230
455,009
77,807
6,596
40,578
7,340
540,633
502,927
31
66,237
107,270
66,237
107,270
606,870
610,197
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 financial
statements and from filing it with the Registrar of Companies. The profit for the year dealt with in the financial statements of
the Company amounts to €59.1 million (2010: €0.7 million).
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Company statement of changes in equity
for the financial year ended 31 December 2011
Other reserves
Share
capital
and
share
premium
€’000
Retained
earnings
€’000
Capital
reserve
€’000
Own
shares
€’000
Share
based
payment
reserve
€’000
Total
€’000
(note 23)
(note 24)
(note 22 a)
(note 22 f)
(note 22 g)
Balance at 2 January 2010
454,487
59,913
4,227
(1,899)
2,217
518,945
Profit for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, vesting or expiry of share
based payments
Transfer of reserves between Group companies
Shares issued
Premium on shares issued
–
–
–
–
–
17
505
745
(20,453)
–
373
–
–
–
–
–
–
–
–
–
–
–
–
–
283
–
–
–
–
–
745
(20,453)
2,937
2,937
(656)
231
–
–
–
231
17
505
Balance at 1 January 2011
455,009
40,578
4,227
(1,616)
4,729
502,927
Profit for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, vesting or expiry of share
based payments
Shares issued
Premium on shares issued
Purchase of own shares
–
–
–
–
59,114
(22,942)
–
1,057
42
1,179
–
–
–
–
–
–
–
–
–
–
–
–
–
59,114
(22,942)
2,388
2,388
–
–
917
(1,974)
–
–
(2,075)
–
–
–
–
42
1,179
(2,075)
Balance at 31 December 2011
456,230
77,807
4,227
(2,774)
5,143
540,633
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Company statement of comprehensive income and statement of cash flows
for the financial year ended 31 December 2011
Company statement of comprehensive income
Profit for the year
Total comprehensive income for the year
Company statement of cash flows
Cash flows from operating activities
Cash generated from operations
Notes
2011
€’000
24
59,114
59,114
2010
€’000
745
745
2011
€’000
2010
€’000
35
19,811
33,192
Net cash inflow from operating activities
19,811
33,192
Cash flows from investing activities
Decrease in available for sale financial assets
Acquisition of other Group companies
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Dividends paid to Company shareholders
Purchase of own shares
Capital contribution from other Group companies
1,065
–
475
(5,986)
1,065
(5,511)
23
13
22
1,221
(22,942)
(2,075)
522
(20,453)
–
10,000
Net cash (outflow) from financing activities
(23,796)
(9,931)
Net (decrease)/increase in cash and cash equivalents
(2,920)
17,750
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
8,200
(9,550)
5,280
8,200
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Notes to the financial statements
for the financial year ended 31 December 2011
1. General information
Glanbia plc (the “Company”) and its
subsidiaries (together the “Group”) is
an integrated global nutritionals and
large scale global dairy business with
its main operations in Ireland, mainland
Europe, the USA, Africa and Asia.
The Company is a public limited
company incorporated and domiciled
in Ireland. The address of its registered
office is Glanbia House, Kilkenny,
Ireland. The Group is controlled by
Glanbia Co-operative Society Limited
(“the Society”), which holds 54.4% of
the issued share capital of the
Company and is the ultimate parent of
the Group.
The Company shares are quoted on
the Irish and London Stock
Exchanges.
These consolidated financial
statements have been approved for
issue by the Board of Directors on 28
February 2012.
2. Summary of significant
accounting polices
New accounting standards and IFRIC
interpretations adopted by the Group
during the year ended 31 December
2011 are dealt with in section (z)
below. The adoption of these
standards and interpretations had no
significant impact on the results or
financial position of the Group during
the year.
The other principal accounting policies
adopted in the preparation of these
financial statements are set out below.
These policies have been consistently
applied to all years presented, unless
otherwise stated.
(a) Basis of preparation
These consolidated financial statements
have been prepared in accordance with
EU adopted International Financial
Reporting Standards (IFRS), IFRIC
interpretations and those parts of the
Companies Acts, 1963 to 2009
applicable to companies reporting
under IFRS. The consolidated financial
statements have been prepared under
the historical cost convention as
modified by use of fair values for
available for sale financial assets and
derivative financial instruments.
The preparation of the financial
statements in conformity with IFRS
requires the use of estimates,
judgements and assumptions that
affect the reported amounts of assets
and liabilities at the date of the financial
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.
Amounts are stated in euro thousands
(€’000) unless otherwise stated.
These financial statements are
prepared for a 52-week period ending
on 31 December 2011, comparatives
are for the 52-week period ended 01
January 2011. The statements of
financial position for 2011 and 2010
have been drawn up as at 31
December 2011 and 1 January 2011
respectively.
Going concern
After making enquiries the Directors
have a reasonable expectation that the
Group has adequate resources to
continue in operational existence for
the foreseeable future. The Group
therefore continues to adopt the going
concern basis in preparing its
consolidated financial statements.
(b) Consolidation
The Group financial statements
incorporate:
(i) The financial statements of the
Company and enterprises
controlled by it (“its subsidiaries”).
Control is achieved where the
Company has the power to govern
the financial and operating policies
of an entity so as to obtain benefits
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 Group uses the acquisition
method of accounting to account
for business combinations. The
consideration transferred for the
acquisition of a subsidiary is the fair
values of the assets transferred, the
liabilities incurred and the equity
interests issued by the Group. The
consideration transferred includes
the fair value of any asset or liability
resulting from a contingent
consideration arrangement.
Acquisition-related costs are
expensed as incurred. Identifiable
assets acquired and liabilities and
contingent liabilities assumed in a
business combination are
measured initially at their fair values
at the acquisition date. On an
acquisition-by-acquisition basis, the
Group recognises any non-
controlling interest in the acquiree
either at fair value or at the non-
controlling interest's proportionate
share of the acquiree's net assets.
The excess of the consideration
transferred, the amount of any non-
controlling interest in the acquiree
and the acquisition-date fair value
of any previous equity interest in
the acquiree over the fair value of
the Group's share of the identifiable
net assets acquired is recorded as
goodwill. If this is less than the fair
value of the net assets of the
subsidiary acquired in the case of a
bargain purchase, 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)
Investments in subsidiaries are
accounted for at cost less
impairment. Cost is adjusted to
reflect changes in consideration
arising from contingent
consideration amendments. Cost
also includes directly attributable
costs of investment.
(iii) The Group’s share of the results
and net assets of associated
companies and joint ventures is
included based on the equity
method of accounting. An
associate is an enterprise over
which the Group has significant
influence, but not control, through
participation in the financial 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 profits and
losses of associates and joint
Glanbia plc Annual Report 2011
Financial statements
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ventures is recognised in the
income statement and its share of
post acquisition movements in
reserves is recognised directly in
other comprehensive income. 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.
(c) Segment reporting
In accordance with the requirements of
IFRS 8 – Segment Reporting,
operating segments are reported in a
manner consistent with the internal
reporting provided to the Chief
Operating Decision Maker. The Chief
Operating Decision Maker responsible
for allocating resources and assessing
performance of the operating
segments has been identified as the
Group Operating Executive
Committee.
(d) Foreign currency translation
(i) Functional and presentation
currency
Items included in the financial
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
financial statements are
presented in euro, which is the
Company’s functional and the
Group’s 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. Foreign exchange
gains and losses resulting from
the settlement of such
transactions are recognised in the
income statement, except when
deferred in equity as qualifying
cash flow hedges. Monetary
assets and liabilities denominated
in foreign currencies are
retranslated at the rate of
exchange ruling at the reporting
date. Currency translation
differences on monetary assets
and liabilities are taken to the
income statement, except when
deferred in equity in the currency
translation reserve as (i) qualifying
cash flow hedges or (ii) exchange
gains or losses on long-term
intra-group loans and on foreign
currency borrowings used to
finance or provide a hedge
against Group equity investments
in non-euro denominated
operations to the extent that they
are neither planned nor expected
to be repaid in the foreseeable
future or are expected to provide
an effective hedge of the net
investment. When long-term intra-
group loans are repaid the related
cumulative currency translation
recognised in the currency
reserve is not recycled through
the income statement. Translation
differences on non-monetary
financial assets and liabilities held
at fair value through profit or loss
are recognised in the income
statement as part of the fair value
gain or loss. Translation
differences on non-monetary
financial assets such as equities
classified as available for sale are
included in the available for sale
financial asset reserve in equity.
(iii) Group companies
The income statement and
statement of financial position 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
reporting date are translated at
the closing rate at the reporting
date of the statement of
financial position.
> income and expenses in the
income statement are translated
at average exchange rates for
the year, or for the period since
acquisition, if appropriate.
Resulting exchange differences are
taken to a separate currency
reserve within equity. When a
foreign entity is sold outside the
Group, 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
exchange rate at the end of the
reporting period. In accordance
with IFRS 1, the cumulative
translation differences on foreign
subsidiaries was set to zero on
IFRS transition date (4 January
2004).
The Group uses the direct
method of consolidation for
revaluation of the net investments
in foreign operations where the
financial statements of the foreign
operation are translated directly
into the functional currency of the
ultimate parent.
(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 assets. Cost may also include
transfers from equity of any gains/losses
on qualifying cash flow hedges of
foreign currency purchases of property,
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 its estimated
useful life at the following rates:
Land
Buildings
Plant and equipment
Motor vehicles
%
Nil
2.5 – 5
4 – 33
20 – 25
Glanbia plc Annual Report 2011
Financial statements
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The assets’ residual values and useful
lives are reviewed, and adjusted if
appropriate, at each reporting date.
Assets held under finance 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 the carrying amount and are
included in operating profit.
Repairs and maintenance expenditure is
charged to the income statement during
the financial period in which it is
incurred. The cost of major renovations
is included in the carrying amount of the
asset when it is probable that future
economic benefits in excess of the
originally assessed standard of
performance of the existing asset will
flow to the Group. Major renovations are
depreciated over the remaining useful life
of the related asset.
Intangible assets
(f)
(i) Goodwill
Goodwill represents the excess of
the cost of an acquisition over the
fair value of the Group’s share of
the net identifiable 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 - First
time adoption of International
Financial Reporting Standards,
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. 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 benefit from
the business combination in which
the goodwill arose.
(ii) Research and 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 six years.
(iii) Brands/know-how,
customer relationships
and other intangibles
Expenditure to acquire
brands/know-how, customer
relationships and other intangibles
is capitalised and amortised using
the straight-line method over its
useful life, which is set out in note
15 - Intangible Assets. Indefinite
life intangible assets are those for
which there is no foreseeable limit
to their expected useful life.
Indefinite life intangible assets are
carried at cost less accumulated
impairment losses, if applicable,
and are not amortised on an
annual basis.
(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 – Intangible Assets.
Computer software costs
recognised as assets are written
off over their estimated useful
lives, which is normally between
five and ten years.
(g) Available for sale financial
assets
Available for sale financial assets are
non-derivatives that are either
designated in this category or not
classified in any of the other categories.
They are included in non-current assets
unless management intends to dispose
of the available for sale financial asset
within 12 months of the reporting date.
They are initially recognised at fair value
plus transaction costs and are
subsequently adjusted to fair value at
each reporting date. Unrealised gains
and losses arising from changes in the
fair value of the available for sale
financial assets classified as available
for sale are recognised in other
comprehensive income. When such
available for sale assets are sold or
impaired, the accumulated fair value
adjustments are included in the income
statement as gains or losses from
available for sale financial assets.
The fair values of quoted financial assets
are based on current bid prices. If the
market for a financial asset is not active
the Group establishes fair value using
valuation techniques. Where the range
of reasonable fair values is significant
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.
Impairment losses recognised in the
income statement on equity
instruments are not reversed through
the income statement.
(h) Leases
Leases of assets where the Group has
substantially all the risks and rewards of
ownership are classified as finance
leases. A determination is also made as
to whether the substance of an
arrangement could equate to a finance
lease, considering whether fulfilment of
the arrangement is dependent upon the
use of a specific asset and the
arrangement contains the right to use an
asset. If the specified criteria are met,
the arrangement is classified as a
finance 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 finance charges so as to achieve a
constant rate on the finance balance
outstanding. The corresponding rental
Glanbia plc Annual Report 2011
Financial statements
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obligation, net of finance charges is
included in borrowings and split
between current and non-current, as
appropriate. The interest element of the
finance cost is charged to the income
statement over the lease period. The
property, plant and equipment acquired
under finance leases is depreciated over
the shorter of the useful life of the asset
or the lease term.
Leases where a significant portion of the
risks and rewards of ownership are
retained by the lessor are classified 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.
Inventories
(i)
Inventories are stated at the lower of
cost or net realisable value. Cost is
determined by the first-in, first-out
(“FIFO”) method. The cost of finished
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 estimated costs of
completion and the costs of selling
expenses. Costs of inventories include
the transfer from equity of any
gains/losses on qualifying cash flow
hedges which relate to purchases of
raw materials.
(j) Trade and loan receivables
Trade receivables are recognised
initially at fair value and subsequently
measured at amortised cost using the
effective interest method less provision
for impairment.
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 classified as non-current
assets, except for those maturing
within 12 months of the reporting date.
A provision for impairment of
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. If collectability appears
unlikely compared with the original
terms of the receivable, the Group will
determine the appropriate provision
based on the available evidence at that
time. Significant financial difficulties of
the trade/loan receivable, probability
that the trade/loan receivable will enter
bankruptcy or financial reorganisation,
and default or delinquency in payments
are considered indicators that the
receivable is impaired. The amount of
the provision is the difference between
the asset’s carrying value and the
estimated future cash flows. 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
receivable is uncollectable, it is written
off against the provision account for
receivables. Subsequent recoveries of
amounts previously written off are
credited against distribution costs in
the income statement. Where risks
associated with receivables are
transferred out of the Group under
debt purchase agreements, such
receivables are recognised in the
statement of financial position to the
extent of the Group’s continued
involvement and retained risk.
(k) Cash and cash equivalents
Cash and cash equivalents comprise
cash on hand, deposits held on call
with banks, other short-term highly
liquid investments with original
maturities of six months or less and
bank overdrafts. In the statement of
financial position, bank overdrafts, if
applicable, are included in borrowings
in current liabilities.
Income taxes
(l)
The tax expense for the period
comprises current and deferred
income tax. Tax is recognised in the
income statement, except to the extent
that it relates to items recognised in
other comprehensive income or
directly in equity, in which case the tax
is also recognised in other
comprehensive income or directly in
equity respectively.
(i) Current tax
Current tax is calculated on the
basis of tax laws enacted or
substantially enacted at the
statement of financial position
date in countries where the Group
operates and generates taxable
income, taking into account
adjustments relating to prior
years. Management periodically
evaluates positions taken in tax
returns with respect to situations
in which applicable tax legislation
is subject to interpretation and
establishes provision, where
appropriate, on the basis of
amounts expected to be paid to
the tax authorities.
(ii) Deferred tax
Deferred income tax is provided in
full, using the liability method, on
temporary differences arising on
the reporting date between the
tax bases of assets and liabilities
and their carrying amounts in the
financial statements. However,
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
profit or loss. Deferred income tax
is determined using tax rates and
laws enacted or substantively
enacted by the reporting date.
Deferred tax assets are
recognised to the extent that it is
probable that future taxable profit
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 by
the Group and it is probable that
the temporary difference will not
reverse in the foreseeable future.
Deferred income tax assets and
liabilities are offset when there is a
legally enforceable right to offset
current tax assets against current
tax liabilities, only when the
deferred income tax assets and
liabilities relate to income taxes
levied by the same taxation
authority and where there is an
intention to settle the balance on
a net basis.
(m) Employee benefits
(i) Pension obligations
Group companies operate various
pension schemes. The schemes
are generally funded through
payments to insurance companies
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
or trustee-administered funds,
determined by periodic actuarial
calculations. The Group has both
defined benefit and defined
contribution plans.
The liability recognised in the
statement of financial position
in respect of defined benefit
pension plans is the present value
of the defined benefit obligation at
the reporting date less the fair
value of the plan assets, together
with adjustments for unrecognised
past-service costs. The defined
benefit obligation is calculated
annually by independent actuaries
using the projected unit credit
method. The present value of the
defined benefit obligation is
determined by discounting the
estimated future cash outflows
using interest rates of high-quality
corporate bonds that are
denominated in the currency in
which the benefits 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 other
comprehensive income. Past-
service costs, negative or
positive, are recognised
immediately in the income
statement, unless the changes to
the pension plan are conditional
on the employees remaining in
service for a specified period of
time (the vesting period). In this
case, the past service costs are
amortised on a straight line basis
over the vesting period.
A curtailment arises when the
Group is demonstrably committed
to make a significant reduction in
the number of employees covered
by a plan or amends the terms of a
defined benefit plan, so that a
significant element of future service
by current employees will no
longer qualify for benefits or will
qualify for reduced benefits. A past
service cost, negative or positive,
arises following a change in the
present value of the defined benefit
obligation for employee service in
prior periods, resulting in the
current period from the
introduction of, or changes to,
post employment benefits. A
settlement arises where the Group
is relieved of responsibility for a
pension obligation and eliminates
significant risk relating to the
obligation and the assets used to
effect the settlement. Losses
arising on settlement or curtailment
not allowed for in the actuarial
assumptions are measured at the
date on which the Group becomes
demonstrably committed to the
transaction. Gains arising on a
settlement or curtailment are
measured at the date on which all
parties whose consent is required
are irrevocably committed to the
transaction. Curtailment and
settlement gains and losses are
dealt with in the income statement.
Payments to defined 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 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 binomial
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 the date of transition
to IFRS (4 January 2004).
Non-market vesting conditions
are included in assumptions
about the number of options that
are expected to vest. At each
reporting 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.
(iii) Awards under the 2007
Long Term Incentive Plan and
2008 Long Term Incentive Plan
The fair value of shares awarded
under the 2007 LTIP and 2008
LTIP schemes are determined
using a Monte Carlo simulation
technique. The LTIP contains inter
alia a Total Shareholder Return
(TSR) based (and hence market-
based) vesting condition and,
accordingly, the fair value
assigned to the related equity
instruments on initial application
of IFRS 2 is adjusted so as to
reflect the anticipated likelihood at
the grant date of achieving the
market-based vesting condition.
(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. Research and
development taxation credits are
recognised at their fair value in
operating profit where there is
reasonable assurance that the credit
will be received.
(o) Revenue recognition
Revenue comprises the fair value of
the consideration receivable for the
sale of goods and services to external
customers net of value added tax,
rebates and discounts. The Group
recognises revenue when the amount
of revenue can be reliably measured,
when it is probable that future
economic benefit will flow to the entity
and when specific criteria have been
met for each of the Group’s activities.
Revenue from the sale of goods is
recognised when significant risks and
rewards of ownership of the goods are
transferred to the buyer in the ordinary
Glanbia plc Annual Report 2011
Financial statements
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course of the Group’s business, which
generally arises on delivery or in
accordance with specific terms and
conditions agreed with customers. The
timing of recognition of services
revenue equals the timing of when 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.
Impairment of assets
(p)
(i) Financial assets
The Group assesses at each
reporting date whether there is
objective evidence that a financial
asset or a group of financial
assets is impaired. In the case of
equity securities classified as
available for sale, a significant 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 financial assets, the
cumulative loss is measured as
the difference between the
acquisition cost and the current
fair value. 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-financial assets
Assets that have an indefinite
useful life are not subject to
amortisation and are tested
annually for impairment. Assets
which have a finite 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 their
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 identifiable cash
flows (cash generating units).
(q) Share capital
Ordinary shares are classified 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.
Ordinary shares purchased under the
terms of the 2007 LTIP and 2008 LTIP
schemes are accounted for as own
shares and recorded as a deduction
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 financial instruments
The activities of the Group expose it
primarily to the financial risks of
changes in foreign currency exchange
rates and interest rates. The Group
uses derivative financial instruments
such as foreign exchange contracts,
interest rate swap contracts and
currency swap contracts to hedge
these exposures.
The Group accounts for financial
instruments under IAS 32
(Amendment), ‘Financial Instruments:
Presentation’, IAS 39 (Amendment),
‘Financial Instruments: Recognition and
Measurement’ and IFRS 7 – Financial
Instruments Disclosures. 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 the
reporting 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 the
European Central Bank interest rate at
the measurement date.
The fair value of interest rate swaps is
based on discounting estimated future
cash flows based on the terms and
maturity of each contract and using
market interest rates for a similar
instrument at the measurement date.
The fair value of commodity contracts is
estimated by discounting the difference
between the contracted futures price
and the current forward price for the
residual maturity of the contracts using
the European Central Bank and US
Federal Reserve interest rates.
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 firm
commitment (fair value hedge); (2)
hedges of a particular risk associated
with a recognised asset or liability or a
highly probable forecast transaction
(cash flow 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 every six months, of whether the
derivatives that are used in hedging
transactions are highly effective in
offsetting changes in fair values or cash
flows of hedged items.
The fair values of various derivative
instruments used for hedging purposes
are disclosed in note 32. Movements
on the hedging reserve are shown in
note 22. The full fair value of a hedging
derivative is classified as a non-current
asset or liability if the remaining
maturity of the hedged item is more
than 12 months, and as a current
asset or liability if the remaining
maturity of the hedged item is less than
12 months. Trading derivatives are
classified as a current asset or liability.
(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. If
the hedge no longer meets the
criteria for hedge accounting, the
Glanbia plc Annual Report 2011
Financial statements
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adjustment to the carrying amount
of a hedged item for which the
effective interest method is used
is amortised to the income
statement.
(ii) Cash flow hedge
The effective portion of changes in
the fair value of derivatives that
are designated and qualify as
cash flow hedges is recognised in
other comprehensive income. 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 profit 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
interest rates on borrowings is
recognised in the income
statement within ‘finance 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-
financial asset (for example,
inventory) or a non-financial
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) 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.
(iv) Financial guarantee
contracts
Financial guarantee contracts are
issued to banking institutions by
the Company on behalf of certain
of its subsidiaries. These
subsidiaries engage in ongoing
financing arrangements with these
banking institutions. Under the
terms of IAS 39 – Financial
Instruments: Recognition and
Measurement, financial 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 company statement of
financial position.
Guarantees provided by the
Company over the payment of
employer contributions in respect
of the UK defined benefit pension
schemes are treated as insurance
contracts.
(t) Earnings per share
Earnings per share represents the
profit in cents attributable to owners of
the Company, divided by the weighted
average number of ordinary shares in
issue during the period.
Adjusted earnings per share is
calculated on the net profit attributable
to the owners of the Company, pre
exceptional items and intangible asset
amortisation (net of related tax). 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
In accordance with IAS 23 (Revised),
‘Borrowing Costs’, borrowing costs
directly attributable to the acquisition,
construction or production of a
qualifying asset are capitalised. 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 specific
date, are classified as borrowings. The
dividends on these preference shares
are recognised in the income
statement as a finance cost.
Borrowings are classified as current
liabilities unless the Group has an
unconditional right to defer settlement
of the liability for at least 12 months
after the reporting date.
(w) Provisions
Provisions are recognised when the
Group has a constructive or legal
obligation as a result of past events,
when it is more likely than not that an
outflow of resources will be required to
settle the obligation and the amount
has been reliably estimated. Provisions
are measured at the present value of
the expenditures expected to be
required to settle the obligation using a
pre-tax rate that reflects current market
assessments of the time value of
money and the risks specific to the
obligation. The increase in provision
due to passage of time is recognised
as an interest expense.
(x) Termination benefits
Termination benefits 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 benefits. The
Group recognises termination benefits
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
benefits as a result of an offer made to
encourage voluntary redundancy.
(y) Exceptional items
The Group has adopted an income
statement format that seeks to
highlight significant items within the
Group results for the year. Such items
Glanbia plc Annual Report 2011
Financial statements
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may include restructuring, impairment
of assets, profit or loss on disposal or
termination of operations, litigation
settlements, legislative changes and
profit 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) New accounting standards
and IFRIC interpretations
The Group’s assessment of the impact
of these new standards and
interpretations is set out below:
The following standards and
interpretations, issued by the IASB and
the International Financial Reporting
Interpretations Committee (‘IFRIC’), are
effective for the Group for the first time
in the year ended 31 December 2011
and have been adopted by the Group:
> Improvements to IFRS’s 2010
> IAS 24 (Amendment), ‘Related
Party Disclosures’
> IAS 32 (Amendment), ‘Classification
of Rights Issues’
> IFRIC 14, ‘Prepayments of a
minimum funding requirement’
> IFRIC 19, Extinguishing Financial
Liabilities with Equity Instruments’
Adoption of the standards and the
interpretations above had no significant
impact on the results or financial
position of the Group during the year
ended 31 December 2011.
The following standards,
amendments and interpretations
have been published. The Group
will apply the relevant standards
from their effective dates and is
currently assessing their impact on
the Group’s financial statements.
The standards are mandatory for
future accounting periods but are
not yet effective and have not been
early adopted by the Group.
Amendment to IFRS 7 ‘Disclosures-
Transfer of Financial Assets’,
(effective for annual periods
beginning on or after 1 July 2011).
The amendment is subject to EU
endorsement. The amendment
addressed disclosures required to help
users of financial statements evaluate
the risk exposures relating to transfer of
financial assets and the effect of those
risks on an entity’s financial position.
Amendment to IAS 12, ‘Recovery of
Underlying Assets’ (effective for
financial periods beginning on or after
1 January 2012).
The amendment provides a practical
approach for measuring deferred
income tax assets when investment
property is measured using the fair
value model in IAS 40 - Investment
Property. The amendment is subject to
EU endorsement.
IFRS 9, ‘Financial Instruments’,
(effective for financial periods
beginning on or after 1 January
2015).
This standard is still subject to EU
endorsement. IFRS 9 is the first step in
the process to replace IAS 39, ‘Financial
Instruments: Recognition and
Measurement’. IFRS 9 introduces new
requirements for classifying and
measuring financial assets and is likely
to affect the Group’s accounting for its
financial assets. IFRS 9 replaces the
multiple classification models in IAS 39
with a single model that has only two
categories: amortised cost and fair
value. Classification under IFRS 9 is
driven by the entity’s business model for
managing financial assets. IFRS 9
removes the requirement to separate
embedded derivatives from financial
asset hosts. IFRS 9 removes the cost
exemption for unquoted equities.
Amendment to IAS 19, ‘Employee
Benefits’, (effective for financial
periods beginning on or after 1
January 2013).
This amendment is still subject to EU
endorsement. The amendment makes
significant changes to the recognition
and measurement of defined benefit
pension expense and termination
benefits, and significantly increases the
volume of disclosures.
Amendment to IAS 1, ‘Presentation
of Items of Other Comprehensive
Income (OCI) (effective for financial
periods beginning on or after 1 July
2011).
The amendment introduces a
requirement for entities to group items
of OCI on the basis of whether they are
potentially reclassifiable to profit or loss
subsequently.
IFRS 10, Consolidated Financial
Statements’, (effective for financial
periods beginning on or after 1
January 2013).
This standard is still subject to EU
endorsement. IFRS 10 replaces all of the
guidance on control and consolidation in
IAS 27 and SIC 12. IFRS 10 changes the
definition of control so that the same
criteria are applied to all entities to
determine control. The core principle that
a consolidated entity presents a parent
and its subsidiaries as if they are a single
entity remains unchanged, as do the
mechanics of consolidation. IAS 27 is
renamed ‘Separate Financial
Statements’ and is now a standard
dealing solely with separate financial
statements.
IFRS 11, ‘Joint Arrangements’,
(effective for financial periods
beginning on or after 1 January 2013).
This standard is still subject to EU
endorsement. IFRS 11 eliminates the
existing accounting policy choice of
proportionate consolidation for jointly
controlled entities. IFRS 11 makes
equity accounting mandatory for
participants in joint ventures. Changes
in definitions also mean that the types
of joint arrangements have been
reduced from three to two; joint
operations and joint ventures.
IFRS 12, ‘Disclosure of Interest in
Other Entities’, (effective for financial
periods beginning on or after 1
January 2013).
This standard is still subject to EU
endorsement. IFRS 12 sets out the
required disclosures for entities’
reporting under IFRS 10 and IFRS 11.
IFRS 12 requires entities to disclose
information about the nature, risks and
financial effects associated with the
entity’s interest in subsidiaries,
associates, joint arrangements and
unconsolidated structured entities.
IFRS 13, ‘Fair Value Measurement’,
(effective for financial periods
beginning on or after 1 January 2013).
This standard is still subject to EU
endorsement. IFRS 13 explains how to
measure fair value and enhances fair
value disclosures.
Glanbia plc Annual Report 2011
Financial statements
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3. Financial risk
management
3.1 Financial risk factors
The conduct of its ordinary business
operations necessitates the Group
holding and issuing financial
instruments and derivative financial
instruments. The main risks arising
from issuing, holding and managing
these financial instruments typically
include currency risk, interest rate risk,
price risk, liquidity & cash flow risk and
credit 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 financial
instruments or derivatives thereof. The
Group finances its operations by a
mixture of retained profits, preference
shares, medium-term committed
borrowings and short-term
uncommitted bank borrowings. The
Group borrows in the major global
debt markets in a range of currencies
at both fixed and floating rates of
interest, using derivatives where
appropriate to generate the desired
effective currency profile and interest
rate basis.
Risk management, other than credit risk
management, is carried out by a central
treasury department (Group Treasury)
under policies approved by the Board
of Directors. Group Treasury identifies,
evaluates and hedges financial risks in
close cooperation with the Group’s
business units.
The Board provides written principles
for overall risk management, as well as
written policies covering specific areas,
such as liquidity risk, foreign exchange
risk, interest rate risk, credit risk, use of
derivative financial instruments and
non-derivative financial instruments,
and investment of excess liquidity.
Market risk
(a) Currency risk
Although the Group is based in Ireland
and has extensive euro operations, it
has significant investment in overseas
operations primarily in the USA. As a
result currency movements, particularly
movements in the US dollar/euro
exchange rate, can significantly affect
the Group’s euro statement of financial
position and income statement. The
Group actively seeks to manage these
currency exposures by financing
currency assets with equivalent
currency borrowings, leaving the
residual net assets unhedged and
accordingly exposed to foreign
currency translation risk.
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.
Management has set up a policy to
require Group companies to manage
their foreign exchange risk against their
functional currency. Group companies
are required to hedge foreign
exchange risk exposure through Group
Treasury.
Group Treasury monitors and manages
these currency exposures on a
continuous basis, using approved
hedging strategies, (including net
investment hedges) and appropriate
currency derivative instruments. Group
Treasury’s risk management practice is
to hedge up to 100% of contracted
and highly probable currency cash
flows (mainly export sales and
purchase of inventory) over succeeding
12 month time frames.
At 31 December 2011 and 1 January
2011, if the euro had weakened/
strengthened by 5% against the US
dollar with all other variables held
constant, post-tax profit for the year
would not have been materially
impacted as a result of foreign
exchange gains/losses on translation of
US dollar denominated non-hedged
trade receivables, cash and cash
equivalents.
A weakening/strengthening of the euro
against the US dollar by 5% as at 31
December 2011 would have resulted in
a currency translation gain/loss of
approximately €20.6 million (2010:
€19.7 million), which would be
recognised directly in other
comprehensive income.
At 31 December 2011 and 1 January
2011, if the euro had weakened/
strengthened by 5% against the UK
pound with all other variables held
constant, post-tax profit for the year
would not have been materially
impacted as a result of foreign
exchange gains/losses on translation
of UK pound-denominated non-
hedged trade receivables, cash and
cash equivalents.
A weakening/strengthening of the
euro against the UK pound by 5% as
at 31 December 2011 would have
resulted in a currency translation
gain/loss of approximately €1.8 million
(2010: €1.0 million), which would be
recognised directly in other
comprehensive income.
Interest rate risk
(b)
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 profitability. This is
achieved by determining a long-term
strategy against a number of policy
guidelines, which focus on (a) the
amount of floating 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
profitability. The Group borrows at
both fixed and floating rates of
interest and uses interest rate swaps
to manage the Group’s resulting
exposure to interest rate fluctuations.
Borrowings issued at floating rates
expose the Group to cash flow interest
rate risk. Borrowings issued at fixed
rates expose the Group to fair value
interest rate risk. Group policy is to
maintain no more than one third of its
projected debt exposure on a floating
rate basis over any succeeding 12
month period, with further minimum
guidelines over succeeding 24 and 36
month periods.
The Group, on a continuous basis,
monitors the level of fixed rate cover
dependent on prevailing fixed market
rates, projected debt and market
informed interest rate outlook.
Based on the Group’s unhedged
variable rate debt in all currencies
throughout 2011, a 1% increase in
prevailing market interest rates would
have resulted in a €1.8 million loss
(2010: €1.8 million loss), with no impact
on other comprehensive income.
The Group manages its cash flow
interest rate risk by using floating to
fixed interest rate swaps. Such interest
rate swaps have the economic effect
of converting borrowings from floating
rates to fixed rates. Under these
interest rate swaps, the Group agrees
with other parties to exchange at
specified intervals, the difference
Glanbia plc Annual Report 2011
Financial statements
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weighted average maturity of these
facilities was 3.4 years (2010: 2.2
years).
For further details regarding the
Group’s borrowing facilities see note 26
– borrowings.
(e) Credit risk
Credit risk is managed on a Group
basis. Credit risk arises from cash and
cash equivalents, derivative financial
instruments and deposits with banks
and financial institutions, as well as
credit exposures to customers,
including outstanding receivables and
committed transactions. For banks and
financial institutions, only independently
rated parties with a minimum credit
rating of A- are accepted. The minimum
credit rating applicable to a
counterparty used for derivative
financial instruments is A-. Exception to
this policy is currently being permitted
for credit risk to relationship banks that
do not meet the designated credit
rating but are covered by an Irish
sovereign guarantee.
The Group’s credit risk management
policy in relation to trade receivables
involves periodically assessing the
financial reliability of customers, taking
into account their financial position,
past experience and other factors. The
utilisation of credit limits is regularly
monitored and where appropriate,
credit risk is covered by credit
insurance and by holding appropriate
security or liens.
The Group enters into debt purchase
agreements with certain financial
institutions for part of its trade receivable
balances. Where this is done the credit
risk is transferred but in some cases
limited late payment risk is retained.
For further details regarding the
Group’s credit risk see note 19 –
trade and other receivables.
between fixed interest rate amounts
and floating rate interest amounts
calculated by reference to the agreed
notional amounts.
Occasionally the Group enters into fixed
to floating interest rate swaps to hedge
the fair value interest rate risk arising
where it has borrowed at fixed rates.
(c) Price risk
The Group is exposed to equity
securities price risk because
of investments held by the Group in
listed and unlisted securities and
classified on the Group statement of
financial position as available for sale
financial assets. Certain securities are
carried at cost and therefore are not
exposed to price risk.
To manage its price risk arising from
investments in listed equity securities,
the Group does not maintain a
significant balance with any one entity.
Diversification of the portfolio must be
done in accordance with the limits set
by the Group. The impact of a 5%
increase or decrease in equity indexes
across the eurozone countries would
not have any impact on Group
operating profit.
To manage its exposure to certain
commodity markets the Group enters
commodity futures contracts.
For further details regarding the
Group’s price risk see note 32 –
derivative financial instruments.
(d) Liquidity and cash flow risk
The Group’s objective is to maintain a
balance between the continuity of
funding and flexibility 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 finance
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
finance 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 €987.7 million (2010: €734.2
million) of which €279.2 million (2010:
€101.2 million) was undrawn. The
Glanbia plc Annual Report 2011
Financial statements
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The table below analyses the Group’s financial liabilities, which will be settled on a net basis into relevant maturity groupings
based on the remaining period from the reporting date to the contractual maturity date. The amounts disclosed in the table
are the contractual undiscounted cash flows. Balances due within one year equal their carrying value balances as the impact
of discounting is not significant.
Financial liabilities
At 31 December 2011
Borrowings
Future finance costs
Derivative financial instruments
Trade and other payables1
Less future finance costs
Financial liabilities
At 1 January 2011
Borrowings
Future finance costs
Derivative financial instruments
Trade and other payables1
Less than
1 year
€’000
Between 1
and 2 years
€’000
Between 2
and 5 years
€’000
More than 5
years
€’000
52,808
34,052
5,657
223,458
315,975
(34,052)
343,108
25,618
1,339
–
370,065
(25,618)
62,971
43,239
–
–
251,179
60,495
–
–
106,210
(43,239)
311,674
(60,495)
1,103,924
(163,404)
281,923
344,447
62,971
251,179
940,520
Less than
1 year
€’000
Between 1
and 2 years
€’000
Between 2
and 5 years
€’000
More than 5
years
€’000
972
25,307
6,487
186,612
205,853
426,423
20,107
2,221
–
10,328
1,155
–
219,378
228,181
437,906
Total
€’000
710,066
163,404
6,996
223,458
Total
€’000
633,248
55,742
9,863
186,612
885,465
(55,742)
829,723
–
–
–
–
–
–
–
Less future finance costs
(25,307)
(20,107)
(10,328)
194,071
208,074
427,578
The Company has cash at bank of €5.3 million at year end (2010: €8.2 million). The contractual undiscounted cash flows
equal the balance as at 31 December 2011 and 1 January 2011.
1 Excludes accrued expenses and social security costs.
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The table below analyses the Group’s foreign exchange contracts, which will be settled on a gross basis into relevant
maturity groupings based on the remaining period from the reporting date to the contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Foreign exchange contracts
At 31 December 2011
Foreign exchange contracts – cash flow hedges
Inflow
Outflow
Foreign exchange contracts
At 1 January 2011
Foreign exchange contracts – cash flow hedges
Inflow
Outflow
Less than
1 year
€’000
Between 1
and 2
years
€’000
Between 2
and 5
years
€’000
More
than 5
years
€’000
717
(2,028)
(1,311)
–
–
–
–
–
–
–
–
–
Less than
1 year
€’000
Between 1
and 2
years
€’000
Between 2
and 5
years
€’000
More
than 5
years
€’000
590
(600)
(10)
–
–
–
–
–
–
–
–
–
Total
€’000
717
(2,028)
(1,311)
Total
€’000
590
(600)
(10)
3.2 Capital risk management
The Group’s objective when managing
capital are to safeguard the Group’s
ability to continue as a going concern
in order to provide returns for
shareholders and benefits for other
stakeholders and to maintain an
optimal capital structure to reduce the
cost of capital. Total capital is
calculated based on equity as shown
in the statement of financial position
and net debt which amounted to
€1,003.3 million (2010: €832.5 million).
In order to maintain or adjust the
capital structure, the Group may adjust
the amount of dividends paid to
shareholders, return capital to
shareholders, issue new shares or sell
assets to increase or reduce debt or
buy back shares.
The Group monitors debt capital on
the basis of interest cover and debt to
EBITDA ratios. At 31 December 2011,
the Group’s debt/adjusted EBITDA
ratio was 2.1 times (2010: 2.1 times),
which is deemed by management to
be prudent and in line with industry
norms. Adjusted EBITDA for the
purpose of financing ratios is Group
EBITDA plus dividends received from
Joint Ventures & Associates.
3.3 Fair value estimation
The fair value of financial instruments
traded in active markets (such as
available for sale securities) is based
on quoted market prices at 31
December 2011. The quoted market
price used for financial assets held by
the Group is the current bid price.
The fair value of financial instruments that
are not traded in an active market (for
example, over the counter derivatives) is
determined by using valuation
techniques. The Group uses a variety of
methods and makes assumptions that
are based on market conditions existing
at each reporting date. Quoted market
prices or dealer quotes for similar
instruments are used for long-term debt.
Other techniques, such as estimated
discounted cash flows, are used to
determine fair value for the remaining
financial instruments. The fair value of
interest rate swaps is calculated as the
present value of the estimated future
cash flows. The fair value of forward
foreign exchange contracts is
determined using quoted forward
exchange rates at 31 December 2011.
The carrying value less impairment
provision of trade receivables and
payables is assumed to approximate
their fair values due to the short-term
nature of trade receivables and trade
payables. The fair value of financial
liabilities for disclosure purposes is
estimated by discounting the future
contractual cash flows at current
market interest rates that are available
to the Group for similar financial
instruments.
In accordance with IFRS 7 – ‘Financial
Instruments: Disclosures’, the Group
has disclosed the fair value of
instruments by the following fair value
measurement hierarchy:
> quoted prices (unadjusted) in active
markets for identical assets and
liabilities (level 1);
> inputs, other than quoted prices
included in level 1, that are
observable for the asset and liability,
either directly (that is, as prices) or
indirectly (that is, derived from
prices) (level 2); and
> inputs for the asset or liability that
are not based on observable market
data (that is, unobservable inputs)
(level 3).
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The following table presents the Group’s assets and liabilities, which are measured at fair value at 31 December 2011 and 1
January 2011.
At 31 December 2011
Notes
Level 1
€’000
Level 2
€’000
Level 3
€’000
Total
€’000
Assets
Derivatives used for hedging
Available for sale financial assets – equity securities
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
At 1 January 2011
Assets
Derivatives used for hedging
Available for sale financial assets – equity securities
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
32
18
32
–
152
152
–
–
6,161
1,490
7,651
(6,976)
(6,976)
–
–
–
–
–
6,161
1,642
7,803
(6,976)
(6,976)
Notes
Level 1
€’000
Level 2
€’000
Level 3
€’000
Total
€’000
32
18
32
–
143
5,555
2,983
143
8,538
–
–
(9,802)
(9,802)
–
–
–
–
–
5,555
3,126
8,681
(9,802)
(9,802)
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4. Critical accounting
estimates and judgements
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 definition, seldom equal the related
actual results. The estimates and
assumptions that could have a
significant risk of causing a material
adjustment to the carrying amounts of
assets and liabilities within the next
financial year are discussed below.
(a)
Impairment reviews of goodwill
and indefinite life intangibles
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 intangible assets of Customised
Premix Solutions - Europe,
Customised Premix Solutions - North
America and Performance Nutrition -
North America, including goodwill
arising on acquisition of €254.4 million
(2010: €229.1 million), were tested for
impairment using projected cash flows
over a ten year period. A reduction in
projected EBITDA of 10% or an
increase in the discount factor used by
1% would not result in an impairment
of the assets. A rate of zero percent
has been used to estimate cash flow
growth between three and ten years.
Indefinite life intangible assets are
those for which there is no foreseeable
limit to their expected useful life. The
classification of intangible assets as
indefinite is reviewed annually.
Additional information in relation to
impairment reviews are disclosed in
note 15 - intangibles assets.
Income taxes
(b)
The Group is subject to income tax in
numerous jurisdictions. Significant
judgement is required in determining
the worldwide provision for income
taxes. There are many transactions
during the ordinary course of business
for which the ultimate tax
determination is uncertain. The Group
recognises liabilities for anticipated tax
audit issues based on estimates of
whether additional taxes will be due.
Where the final outcome of these tax
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. The Group takes the advice of
external experts to help minimise this
risk.
Deferred income tax assets are
recognised to the extent that it is
probable that future taxable profit will
be available against which the unused
tax losses and unused tax credits may
be utilised. The Group estimates the
most probable amount of future
taxable profits, using assumptions
consistent with those employed in
impairment calculations and taking into
consideration applicable tax legislation
in the relevant jurisdiction. These
calculations also require the use of
estimates.
The decision to recognise deferred
income tax assets (or not) also
requires judgement as it involves
an assessment of future recoverability
of those assets.
(c) Post-employment benefits
The Group operates a number of post
employment defined benefit plans. The
rates of contributions payable, the
pension cost and the Group’s total
obligation in respect of defined benefit
plans is calculated and determined by
independent qualified actuaries and
updated at least annually. The Group
has plan assets totalling €400.0 million
(2010: €389.3 million) and plan liabilities
of €448.4 million (2010: €437.9 million)
giving a net pension deficit of €48.4
million (2010: €48.6 million) for the
Group. The size of the obligation and
cost of the benefits are sensitive to
actuarial assumptions. These include
demographic assumptions covering
mortality and longevity, and economic
assumptions covering price inflation,
benefit and salary increases together
with the discount rate used. The Group
has reviewed the impact of a change in
the discount rate used and concluded
that based on the pension deficit at 31
December 2011, an increase in the
discount rates applied of 10 basis
points across the various defined benefit
plans, would have the impact of
decreasing the pension deficit for the
Group by €7.1 million (2010: €6.7
million).
The curtailment gains and negative past
service costs have been calculated by
management using certain estimates
and judgements, primary among these
being the inflation rate, investment
strategy approach and discount rate
assumed, the final determination of
which may be different as actual results
become certain. Additional information
in relation to post employment benefits
is disclosed in note 28 - retirement
benefit obligations.
(d) Estimating lives for
depreciation of property,
plant and equipment and
intangible assets
Long-lived assets comprising primarily
property, plant and equipment and
intangible assets, represent a significant
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 reflect
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 significant impact on the
depreciation and amortisation charge
for the period. Details of the useful lives
are included in the accounting policies
2 (e) and 2 (f) above. The impact of any
change could vary significantly
depending on the individual changes in
assets and the classes of assets
impacted. The Group has reviewed the
impact of a change in useful lives on
land and buildings and a one-year
reduction in useful lives would result in a
€0.2 million (2010: €0.2 million)
reduction in operating profit.
The Group has also reviewed the
impact of a change in useful lives in
plant and equipment and a one year
reduction in useful lives would result in
a €2.2 million (2010: €2.2 million)
reduction in operating profit.
The Group has reviewed the impact of
a change in the amortisation period of
customer relationships and a one-year
reduction in the write-off period would
result in a €1.0 million (2010 €0.7
million) reduction in operating profit.
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(h) Provisions
Provisions are recognised when the
Group has constructive or legal
obligations as a result of past events,
when it is more likely than not that an
outflow of resources will be required to
settle the obligation, and when the
amount has been reliably estimated.
The amount recognised as a provision
is the best estimate of the amount
required to settle the present obligation
at the reporting date, taking account of
the risks and uncertainties surrounding
the obligation. Actual results may differ
from these estimates.
The Group has reviewed the impact on
indefinite life intangible assets by
assigning a finite life to these assets and
a 20-year useful life estimate would
have a €4.6 million (2010: €4.5 million)
negative impact on operating profit.
Additional information in relation to
property, plant and equipment and
intangible assets is disclosed in notes
14 and 15.
(e) Fair value of derivatives and
other financial instruments
The fair value of financial instruments
that are not traded in an active market
(for example, over-the-counter
derivatives) is determined by using
valuation techniques. The Group uses
its judgement to select a variety of
methods and make assumptions that
are mainly based on market conditions
existing at each reporting date. The
Group has used discounted cash flow
analysis for various available for sale
financial assets that are not traded in
active markets. The carrying amount of
available for sale financial assets would
not be materially different were the
discounted rate used in the discounted
cash flow analysis to differ by 10%
from management’s estimates.
(f)
Impairment of available for
sale financial assets
The Group follows the guidance of IAS
39 to determine when an available for
sale financial asset is impaired. This
determination can require significant
judgement. In making this judgement,
the Group evaluates, among other
things the extent to which the fair value
of an investment is less than its costs;
the financial health of and short term
business outlook for the investee;
industry factors such as industry and
sector performance; and changes in
technology and operational and
financing cashflow. At 31 December
2011 the fair value of available for sale
financial assets is greater than the
original cost.
(g) Risks associated with the
future of the euro currency
In December 2011, the Board
considered the risks associated with
the future of the euro currency across a
number of dimensions such as; market
locations, currency impact on earnings,
assets and liabilities and financing
requirements. The Board concluded
that the Group is positioned to deal
with any change to the euro as a
currency bloc.
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5. Segment information
In accordance with IFRS 8 - Operating
Segments the Group has four
segments, as follows: US Cheese &
Global Nutritionals, Dairy Ireland, Joint
Ventures & Associates and Other
Business. These segments align with
the Group’s internal financial reporting
system and the way in which the Chief
Operating Decision Maker assesses
performance and allocates the Group’s
resources. A segment manager is
responsible for each segment and is
directly accountable for the
performance of that segment to the
Group Operating Executive Committee
which acts as the Chief Operating
Decision Maker for the Group. Each
segment derives its revenue as
follows: US Cheese & Global
Nutritionals earns its revenue from the
manufacture and sale of cheese, whey
protein and other nutritional solutions;
Dairy Ireland earns its revenue from the
manufacture and sale of a range of
dairy products and farm inputs; Joint
Ventures & Associates revenue arises
from the manufacture and sale of
cheese, whey proteins and dairy
consumer products. The Other
Business segment refers to all other
businesses which comprise a Property
business unit, a small dairy sales office
in Mexico which ceased trading in
June 2011 and a small dairy
processing operation in Mexico which
was disposed of in September 2010.
Each segment is reviewed in its totality
by the Chief Operating Decision Maker.
The Group Operating Executive
Committee assesses the trading
performance of operating segments
based on a measure of earnings before
interest, tax, amortisation and
exceptional items.
5.1 The segment results for the year ended 31 December 2011 are as follows:
US Cheese &
Global
Nutritionals
€’000
Dairy
Ireland
€’000
JV's &
Associates
€’000
Other
Business
€’000
Group
including JV's
& Associates
€’000
Total gross segment revenue
(a)
1,319,944 1,365,823
524,293
1,046
3,211,106
Inter-segment revenue
(3,023)
(12,639)
–
–
(15,662)
Segment external revenue
1,316,921 1,353,184
524,293
1,046
3,195,444
Segment earnings before interest, tax,
amortisation and exceptional items
(b)
122,194
57,854
25,226
(550)
204,724
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €98.7 million
and related party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of €12.4 million.
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also
be available to unrelated third parties.
5.1 (a): Segment revenue is reconciled to reported external revenue as follows:
Segment revenue
Inter-segment revenue
Joint Ventures & Associates revenue
Reported external revenue
2011
€’000
3,211,106
(15,662)
(524,293)
2,671,151
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5.1 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported
profit before tax and profit after tax as follows:
Segment earnings before interest, tax, amortisation and exceptional items
Amortisation
Exceptional items – rationalisation costs
Joint Ventures & Associates interest and tax
Finance income
Finance costs
Reported profit before tax
Income taxes
Reported profit after tax
2011
€’000
204,724
(18,472)
(8,723)
(10,895)
3,056
(30,997)
138,693
(25,885)
112,808
Finance income, finance costs and income taxes are not allocated to segments, as this type of activity is driven by central
treasury and taxation functions which manage the cash and taxation position of the Group.
Other segment items included in the income statement for the year ended 31 December 2011 are as follows:
US Cheese &
Global
Nutritionals
€’000
Dairy
Ireland
€’000
JV's &
Associates
€’000
Other
Business
€’000
Group
including JV's
& Associates
€’000
Depreciation of property, plant and equipment
Amortisation of intangibles
Capital grants released to the income statement
Exceptional items – rationalisation costs
13,272
14,198
(57)
–
20,868
4,274
(1,383)
8,723
7,653
–
(268)
–
–
–
–
–
41,793
18,472
(1,708)
8,723
The segment assets and liabilities at 31 December 2011 and segment capital expenditure and acquisitions for
the year then ended are as follows:
US Cheese &
Global
Nutritionals
€’000
Dairy
Ireland
€’000
JV's &
Associates
€’000
Other
Business
€’000
Group
including JV's
& Associates
€’000
Segment assets
Segment liabilities
Segment capital expenditure and acquisitions
(c)
(d)
(e)
931,923
571,681
85,237
14,215
1,603,056
268,418
266,542
–
1,190
536,150
140,833
30,432
4,042
–
175,307
5.1 (c): Segment assets are reconciled to reported assets as follows:
Segment assets
Unallocated assets
Reported assets
2011
€’000
1,603,056
245,120
1,848,176
Unallocated assets primarily include tax, cash and cash equivalents, available for sale financial assets and derivatives.
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5.1 (d): Segment liabilities are reconciled to reported liabilities as follows:
Segment liabilities
Unallocated liabilities
Reported liabilities
Unallocated liabilities primarily include items such as tax, borrowings and derivatives.
2011
€’000
536,150
789,077
1,325,227
5.1 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and
acquisitions as follows:
Segment capital expenditure and acquisitions
Joint Ventures & Associates capital expenditure
Unallocated capital expenditure
Reported capital expenditure and acquisitions
2011
€’000
175,307
(4,042)
215
171,480
5.2 The segment results for the year ended 1 January 2011 are as follows:
US Cheese &
Global
Nutritionals
€’000
Dairy
Ireland
€’000
JV's &
Associates
€’000
Other
Business
€’000
Group
including JV's
& Associates
€’000
Total gross segment revenue
(a)
1,024,653
1,154,023
416,564
6,244
2,601,484
Inter-segment revenue
(2,752)
(15,473)
–
–
(18,225)
Segment external revenue
1,021,901
1,138,550
416,564
6,244
2,583,259
Segment earnings before interest, tax,
amortisation and exceptional items
(b)
104,506
47,943
21,560
(831)
173,178
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €69.2 million
and related party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of €9.4 million.
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also
be available to unrelated third parties.
5.2 (a): Segment revenue is reconciled to reported external revenue as follows:
Segment revenue
Inter-segment revenue
Joint Ventures & Associates revenue
Reported external revenue
2010
€’000
2,601,484
(18,225)
(416,564)
2,166,695
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5.2 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported
profit before tax and profit after tax as follows:
Segment earnings before interest, tax, amortisation and exceptional items
Amortisation
Exceptional items – defined benefit pension schemes
Joint Ventures & Associates interest and tax
Finance income
Finance costs
Reported profit before tax
Income taxes
Reported profit after tax
2010
€’000
173,178
(15,111)
10,238
(11,457)
3,290
(25,420)
134,718
(26,085)
108,633
Finance income, finance costs and income taxes are not allocated to segments, as this type of activity is driven by central
treasury and taxation functions which manage the cash and taxation position of the Group.
Other segment items included in the income statement for the year ended 1 January 2011 are as follows:
US Cheese &
Global
Nutritionals
€’000
Dairy
Ireland
€’000
JV's &
Associates
€’000
Other
Business
€’000
Group
including JV's
& Associates
€’000
Depreciation of property, plant and equipment
Amortisation of intangibles
Capital grants released to the income statement
12,514
10,711
(330)
19,997
4,400
(1,089)
Exceptional items – defined benefit pension schemes
–
(10,238)
6,823
6
(526)
–
58
–
–
–
39,392
15,117
(1,945)
(10,238)
The segment assets and liabilities at 1 January 2011 and segment capital expenditure and acquisitions for the
year then ended are as follows:
Segment assets
Segment liabilities
Segment capital expenditure and acquisitions
US Cheese &
Global
Nutritionals
€’000
Dairy
Ireland
€’000
JV's &
Associates
€’000
Other
Business
€’000
Group
including JV's
& Associates
€’000
(c)
(d)
(e)
725,960
556,455
87,362
17,041
1,386,818
200,380
288,125
–
1,536
490,041
23,085
13,522
11,901
124
48,632
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5.2 (c): Segment assets are reconciled to reported assets as follows:
Segment assets
Unallocated assets
Reported assets
2010
€’000
1,386,818
240,027
1,626,845
Unallocated assets primarily include tax, cash and cash equivalents, available for sale financial assets and derivatives.
5.2 (d): Segment liabilities are reconciled to reported liabilities as follows:
Segment liabilities
Unallocated liabilities
Reported liabilities
2010
€’000
490,041
712,400
1,202,441
Unallocated liabilities primarily include items such as tax, borrowings and derivatives.
5.2 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and
acquisitions as follows:
Segment capital expenditure and acquisitions
Joint Ventures & Associates capital expenditure
Reported capital expenditure and acquisitions
2010
€’000
48,632
(11,901)
466
37,197
5.3 Entity wide disclosures
Revenue from external customers for each group of similar product in the US Cheese & Global Nutritionals, Dairy Ireland,
Joint Ventures & Associates and Other Business segments are outlined in section 5.1 and 5.2 above.
Geographical information
Revenue by geographical destination is reviewed by the Chief Operating Decision Maker. The breakdown of revenue by
geographical destination is as follows:
Ireland
UK
Rest of Europe
USA
Other
2011
€’000
799,489
162,028
254,991
1,119,417
335,226
2010
€’000
725,834
137,874
189,308
901,717
211,962
2,671,151
2,166,695
Revenue of approximately €320.0 million (2010: €249.6 million) is derived from a single external customer. The breakdown
of revenue by geographical destination for 2010 has been updated to reflect the current year classification.
The total of non-current assets, other than financial instruments and deferred income tax assets, located in Ireland is €267.8
million (2010: €271.5 million) and located in other countries, mainly the USA is €690.4 million (2010: €562.6 million).
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6. Operating expenses
The following items have been included in arriving at operating profit:
Depreciation of property, plant and equipment
– Owned assets
– Leased assets under finance leases
Loss on disposal of property, plant and equipment
Repairs and maintenance expenditure on property, plant and equipment
Exceptional items (pre tax)
– Rationalisation costs
– Irish defined benefit pension schemes
Net foreign exchange (gain)/loss
Amortisation of intangible assets
– Software costs
– Other intangible assets
Increase in inventories
Raw materials and consumables used
Energy costs
Sales and marketing costs
Impairment charge for bad and doubtful debts
Notes
2011
€’000
2010
€’000
14
14
35
7
7
32,771
1,369
31,177
1,392
363
957
28,101
27,207
8,723
–
–
(10,238)
(1,108)
3,430
15
15
4,854
13,618
4,924
10,187
32,974
102,304
1,954,496
1,448,569
32,835
28,324
68,169
56,390
6,173
1,357
Amortisation of capital grants
30
(1,440)
(1,419)
Operating lease rentals
– Plant and machinery
– Other
Employee benefit expense – pre exceptional
Auditors' remuneration*
– Statutory audit of Group companies
– Other assurance services
– Tax advisory services
– Other non-audit services
Research and development costs
Other expenses
Total operating expenses
Reconciliation of total operating expenses to the income statement
Cost of sales
Distribution expenses
Administration expenses
Other gains and losses
Total operating expenses
14
14
8
4,493
8,618
8,376
3,345
201,070
190,172
566
697
986
270
546
834
930
2
8,397
8,037
111,853
103,147
2,518,848
2,019,950
2011
€’000
2010
€’000
2,236,515
1,784,263
140,940
141,393
–
115,896
130,029
(10,238)
2,518,848
2,019,950
* Auditors’ remuneration for the Company in respect of its statutory audit amounted to €35,000 (2010: €35,000)
Glanbia plc Annual Report 2011
Financial statements
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7. Exceptional items
Rationalisation costs
Irish defined benefit pension scheme
Total exceptional (charge)/credit before tax
Notes
(a)
(b)
2011
€’000
2010
€’000
(8,723)
–
–
10,238
(8,723)
10,238
Exceptional tax credit/(charge)
11
1,090
(558)
Net exceptional (charge)/credit
(7,633)
9,680
(a) An exceptional charge of €8.7 million was incurred during 2011, primarily relating to rationalisation costs in the Dairy
Ireland segment.
(b) During 2010, revisions to the Group’s pension arrangements for three Irish defined benefit pension schemes,
consistent with the revisions made to the Group’s main pension schemes, were finalised giving rise to an exceptional
gain, in accordance with IAS 19 - Employee Benefits, in the year of €10.2 million. This gain relates to curtailment gains
and negative past service costs of €1.7 million and €10.9 million respectively offset by a change in the estimate of the
prior year curtailment of €2.4 million.
8. Employee benefit expense
Wages and salaries
Termination costs
Social security costs
Cost of share based payments
Pension costs – defined contribution schemes
Pension costs – defined benefit schemes
Exceptional item – curtailment gains and negative past service costs
Exceptional item – rationalisation costs
Notes
2011
€'000
2010
€'000
172,949
–
19,483
2,388
3,020
3,230
159,434
749
17,234
2,937
2,750
7,068
201,070
190,172
–
8,723
(4,651)
–
209,793
185,521
22
28
28
7
The average number of employees, excluding the Group’s Joint Ventures & Associates, in 2011 was 3,560 (2010: 3,311)
and is analysed into the following categories:
US Cheese & Global Nutritionals
Dairy Ireland
Other Business
2011
1,858
1,699
3
3,560
2010
1,570
1,682
59
3,311
Glanbia plc Annual Report 2011
Financial statements
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9. Directors’ remuneration
The Directors’ remuneration information is shown on pages 60 to 65 in the Governance section of this report.
10. Finance income and costs
Finance income
Interest income
Interest income on deferred consideration
Total finance income
Finance costs
Bank borrowings repayable within five years
Interest cost on deferred consideration
UK pension provision
Finance lease costs
Interest rate swaps, transfer from equity
Interest rate swaps, fair value hedges
Fair value adjustment to borrowings attributable to interest rate risk
Finance cost of private debt placement
Finance cost of preference shares
Total finance costs
Net finance costs
2011
€'000
2,874
182
3,056
2010
€'000
3,008
282
3,290
(14,092)
(13,001)
(106)
(113)
(188)
(4,876)
2,308
(2,308)
(7,273)
(4,349)
(80)
(121)
(256)
(7,613)
2,733
(2,733)
–
(4,349)
(30,997)
(25,420)
(27,941)
(22,130)
Net finance costs exclude borrowing costs attributable to the acquisition, construction or production of a qualifying asset.
Glanbia plc Annual Report 2011
Financial statements
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11. Income taxes
Current tax
Irish current tax
Adjustments in respect of prior years
Irish current tax on income for the year
Foreign current tax
Adjustments in respect of prior years
Foreign current tax on income for the year
Total current tax
Deferred tax
Notes
2011
€'000
8,641
(435)
2010
€'000
11,620
(422)
8,206
11,198
6,223
1,539
2,285
1,050
7,762
3,335
15,968
14,533
27
11,007
10,994
Pre exceptional tax charge
26,975
25,527
Exceptional tax (credit)/charge
Current tax
Deferred tax
Total tax charge
(a)
(b)
(1,090)
–
–
558
25,885
26,085
(a) The rationalisation cost charged during the year resulted in an exceptional current tax credit of €1.1 million.
(b) The curtailment gains and negative past service costs recognised in the defined benefit pension schemes in 2010
resulted in an exceptional deferred tax charge of €0.6 million.
The exceptional net tax credit and charge in 2011 and 2010, relating to costs and income which have been presented as
exceptional, have been separately disclosed above.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise applying the corporation tax rate
in Ireland, as follows:
Profit before tax
2011
€'000
2010
€'000
138,693
134,718
Income tax calculated at Irish rate of 12.5% (2010: 12.5%)
17,337
16,840
Earnings at higher/(reduced) Irish rates
Difference due to overseas tax rates
Adjustment to tax charge in respect of previous periods
Tax on post tax profits of Joint Ventures & Associates included in profit before tax
Expenses not deductible for tax purposes and other differences
Total tax charge
836
7,496
(1,170)
(1,791)
3,177
(902)
6,999
(1,811)
(1,263)
6,222
25,885
26,085
Details of deferred income tax charged or credited directly to other comprehensive income during the year are outlined in
note 27.
Factors that may affect future tax charges and other disclosure requirements
The total tax charge in future periods will be affected by any changes to the applicable tax rates in force in jurisdictions in
which the Group operates and other relevant changes in tax legislation, including amendments impacting on the excess of
tax depreciation over accounting depreciation. The total tax charge of the Group may also be influenced by the effects of
corporate development activity.
Glanbia plc Annual Report 2011
Financial statements
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12. Earnings per share
Basic
Basic earnings per share is calculated by dividing the net profit attributable to the equity holders of the Parent 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 22 f).
Profit attributable to equity holders of the Parent (€’000)
2011
2010
112,178
108,047
Weighted average number of ordinary shares in issue
293,536,350
293,105,068
Basic earnings per share (cents per share)
38.22
36.86
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all potential dilutive ordinary shares. Share options are potential dilutive ordinary shares. In respect of
share options, a calculation is performed 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 above is compared with the
number of shares that would have been issued assuming the exercise of all share options.
Weighted average number of ordinary shares in issue
Adjustments for share options
2011
2010
293,536,350
293,105,068
2,413,436
1,874,570
Adjusted weighted average number of ordinary shares
295,949,786
294,979,638
Diluted earnings per share (cents per share)
37.90
36.63
Adjusted
Adjusted earnings per share is calculated on the net profit attributable to equity holders of the Parent, before net exceptional
items and intangible asset amortisation (net of related tax). Adjusted earnings per share is considered to be more reflective
of the Group’s overall underlying performance.
Profit attributable to equity holders of the Parent
Amortisation of intangible assets (net of related tax)
Net exceptional items
Adjusted net income
Adjusted earnings per share (cents per share)
Diluted adjusted earnings per share (cents per share)
2011
€'000
112,178
16,163
7,633
2010
€'000
108,047
13,222
(9,680)
135,974
111,589
46.32
45.94
38.07
37.83
Glanbia plc Annual Report 2011
Financial statements
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13. Dividends
The dividends paid in 2011 and 2010 were €22.9 million (7.82 cents per share) and €20.5 million (6.98 cents per share)
respectively. On 14 October 2011 an interim dividend of 3.33 cents per share on the ordinary shares amounting to
€9.7 million was paid to shareholders on the register of members at 2 September 2011. The Directors have recommended
the payment of a final dividend of 4.94 cents per share on the ordinary shares which amounts to €14.5 million. Subject to
shareholders approval, this dividend will be paid on 11 May 2012 to shareholders on the register of members at 30 March
2012, the record date. These financial statements do not reflect this final dividend.
14. Property, plant and equipment
Year ended 1 January 2011
Opening net book amount
Exchange differences
Additions
Disposals
Reclassification
Depreciation charge
Land and
buildings
€'000
Plant and
equipment
€'000
Motor
vehicles
€'000
Notes
132,006
4,105
4,082
(417)
–
(5,158)
230,786
7,103
25,746
(1,648)
(434)
(27,052)
15
360
66
215
(55)
–
(359)
Total
€'000
363,152
11,274
30,043
(2,120)
(434)
(32,569)
Closing net book amount
134,618
234,501
227
369,346
At 1 January 2011
Cost
Accumulated depreciation
205,037
(70,419)
643,062
(408,561)
19,262
(19,035)
867,361
(498,015)
Net book amount
134,618
234,501
227
369,346
Year ended 31 December 2011
Opening net book amount
Exchange differences
Acquisitions
Additions
Disposals
Reclassification
Depreciation charge
134,618
2,577
1,211
20,110
(325)
32
(5,264)
234,501
3,646
572
31,343
(416)
146
(28,581)
15
227
26
28
438
(42)
–
(295)
369,346
6,249
1,811
51,891
(783)
178
(34,140)
Closing net book amount
152,959
241,211
382
394,552
At 31 December 2011
Cost
Accumulated depreciation
228,642
(75,683)
678,353
(437,142)
19,712
(19,330)
926,707
(532,155)
Net book amount
152,959
241,211
382
394,552
Depreciation expense of €34.1 million (2010: €32.6 million) has been charged as follows: cost of sales €29.1 million
(2010: €28.7 million), distribution expenses €1.2 million (2010: €1.1 million) and administration expenses €3.8 million
(2010: €2.8 million).
Included in the cost of plant and equipment is an amount of €22.3 million (2010: €4.9 million) incurred in respect of assets
under construction.
The Group does not have any assets secured against borrowings and no borrowing costs were capitalised during the year
(2010: nil).
Glanbia plc Annual Report 2011
Financial statements
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Leased assets, comprising plant and equipment where the Group is a lessee under a finance lease are as follows:
Cost – capitalised finance leases
Accumulated depreciation
Net book amount
2011
€'000
41,673
(32,105)
2010
€'000
41,673
(30,736)
9,568
10,937
Operating lease rentals amounting to €13.1 million (2010: €11.7 million) are included in the income statement.
15. Intangible assets
Year ended 1 January 2011
Opening net book amount
Exchange differences
Additions
Reclassification
Write-off of intangibles
Amortisation
Goodwill
€'000
note (b)
Other
intangibles
€'000
note (a)
Notes
Software
costs
€'000
Development
costs
€'000
Total
€'000
142,052
170,773
21,621
9,885
12,911
14
35
–
–
(215)
–
269
4,333
434
(200)
–
–
–
(7,538)
(4,924)
7,666
548
2,821
–
(957)
(2,649)
342,112
23,613
7,154
434
(1,372)
(15,111)
Closing net book amount
151,722
176,146
21,533
7,429
356,830
At 1 January 2011
Cost
Accumulated amortisation
151,722
199,046
55,116
–
(22,900)
(33,583)
13,721
(6,292)
419,605
(62,775)
Net book amount
151,722
176,146
21,533
7,429
356,830
Year ended 31 December 2011
Opening net book amount
Exchange differences
Acquisitions
Additions
Reclassification
Write-off of intangibles
Amortisation
151,722
176,146
21,533
4,887
21,719
–
–
–
–
7,199
90,362
–
(388)
–
127
9
1,646
(178)
(151)
(11,577)
(4,854)
14
35
7,429
301
–
4,042
388
(1,044)
(2,041)
356,830
12,514
112,090
5,688
(178)
(1,195)
(18,472)
Closing net book amount
178,328
261,742
18,132
9,075
467,277
At 31 December 2011
Cost
Accumulated amortisation
178,328
296,219
56,569
–
(34,477)
(38,437)
17,408
(8,333)
548,524
(81,247)
Net book amount
178,328
261,742
18,132
9,075
467,277
Amortisation expense of €18.5 million (2010: €15.1 million) has been charged to administration expenses during the year.
The average remaining amortisation period for software costs is four years and development costs is four years.
Approximately €0.9 million (2010: €3.1 million) of software additions during the year were internally generated with the
remaining balance acquired from external parties. Development costs of €1.0 million (2010: €1.0 million) were written off
during the year due to uncertainty that these projects will reach commercialisation.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Note 15 (a): Other intangibles
Year ended 1 January 2011
Opening net book amount
Exchange differences
Amortisation
Brands/
know-how
€'000
Customer
relationships
€'000
93,220
6,361
(644)
75,112
5,158
(6,704)
Other
€'000
2,441
1,392
(190)
Total other
intangibles
€'000
170,773
12,911
(7,538)
Closing net book amount
98,937
73,566
3,643
176,146
At 1 January 2011
Cost
Accumulated amortisation
102,690
(3,753)
91,825
(18,259)
4,531
(888)
199,046
(22,900)
Net book amount
98,937
73,566
3,643
176,146
Year ended 31 December 2011
Opening net book amount
Exchange differences
Acquisitions
Reclassification
Amortisation
98,937
4,430
53,641
–
(2,140)
73,566
2,760
36,721
–
(9,261)
3,643
176,146
9
–
(388)
(176)
7,199
90,362
(388)
(11,577)
Closing net book amount
154,868
103,786
3,088
261,742
At 31 December 2011
Cost
Accumulated amortisation
160,761
(5,893)
131,306
(27,520)
4,152
(1,064)
296,219
(34,477)
Net book amount
154,868
103,786
3,088
261,742
Included in cost of brands/know-how are intangible assets of €92.2 million (2010: €89.2 million) which have indefinite lives.
In arriving at the conclusion that certain brands/know-how have indefinite useful lives, it has been determined that these
assets will contribute indefinitely to the cash flows of the Group. The factors that result in the durability of these
brands/know-how being capitalised is that there are no material legal, regulatory, contractual or other factors that limit the
useful life of these intangibles. In addition, the likelihood that market-based factors could truncate a brand’s life is relatively
remote because of the size, diversification and market share of the brands in question. There are no material internally
generated brand-related intangibles. The remaining average amortisation period for Performance Nutrition brands/know-
how is 39 years and the balance of brands/know-how is 10 years (2010: 11 years).
Included in customer relationships are individual significant intangible assets of €64.6 million (2010: €68.2 million) with a
remaining amortisation period of 10 years (2010: 11 years). The remaining customer relationships are amortised over a
period of 11 years (2010: 10 years). The remaining average amortisation period for all other intangibles is 10 years
(2010: 11 years).
No intangible assets were acquired by way of Government grant during the financial year (2010: nil).
Glanbia plc Annual Report 2011
Financial statements
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Note 15 (b): Impairment tests for goodwill and indefinite life intangibles
Goodwill is allocated to the Group’s cash generating units (CGUs) that are expected to benefit from the business acquisition,
rather than where the asset is owned. CGUs represent the lowest level within the Group at which the associated goodwill is
monitored for internal management purposes and are not larger than the operating segments determined in accordance
with IFRS 8, Operating Segments. A total of 12 (2010: 12) CGUs have been identified and these are allocated between the
Groups main segments as follows:
Cash generating units
US Cheese and Global Nutritionals
Dairy Ireland
A summary of goodwill by segment is as follows:
US Cheese & Global Nutritionals
Customised Premix Solutions - Europe
Customised Premix Solutions - North America
Performance Nutrition - North America
Other CGUs
Dairy Ireland
Multiple units without individual significant amounts of
goodwill
2011
2010
5
7
12
5
7
12
Goodwill
2011
€’000
Foreign
exchange
€’000
Acquisition
€’000
11,297
62,169
88,749
5,216
–
1,968
2,822
97
–
–
17,516
–
Goodwill
2010
€’000
11,297
60,201
68,411
5,119
167,431
4,887
17,516
145,028
10,897
–
4,203
6,694
178,328
4,887
21,719
151,722
A summary of indefinite life intangibles by segment is as follows:
US Cheese and Global Nutritionals
Performance Nutrition - North America
Indefinite
life
intangibles
2011
€’000
Foreign
exchange
€’000
Acquisition
€’000
Indefinite
life
intangibles
2010
€’000
92,190
2,918
–
89,272
Glanbia plc Annual Report 2011
Financial statements
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Impairment testing methodology and results
Goodwill and indefinite life intangibles are subject to impairment testing on an annual basis or more frequently if there are
indications they might be impaired. The recoverable amount of goodwill and indefinite life intangibles allocated to a CGU is
determined based on a value in use computation, which has been selected due to the impracticality of obtaining fair value
less costs to sell measurements for each reporting period.
The cash flow projections are based on a three year strategic plan formally approved by the Group Operating Executive
Committee and the Board of Directors. The Group expects growth between year three and ten but for the purposes of
impairment testing, a rate of zero percent has been used to estimate cash flow growth between three and ten years. In
addition, a conservative reducing success factor is applied against the average net cash flow, consistent with prior years.
In forecasting terminal values, a multiple of between five and ten times EBITDA is generally used. No impairments arose in
either 2011 or 2010. The present value of future cashflows is calculated using pre tax discount rates which is the Group’s
weighted average cost of capital adjusted to reflect risks associated with the CGU and are set out in the table below:
US Cheese & Global Nutritionals
Customised Premix Solutions - Europe
Customised Premix Solutions - North America
Performance Nutrition - North America
Other CGUs
Dairy Ireland
Discount
rates
2011
Discount
rates
2010
8.4%
8.3%
8.3%
8.3%
5.3%
5.3%
5.3%
5.3%
Multiple units without individual significant amounts of goodwill
8.4%
5.7%
Key sources of estimation uncertainty
The key assumptions employed in arriving at the estimates of future cash flows factored into impairment testing are
inherently subjective. Key assumptions include management’s estimates of future profitability, discount rates, the duration of
the discounted cashflow model, replacement capital expenditure requirements and working capital investment. These
assumptions are based on managements past experience. Capital expenditure requirements and profitability are based on
the Group’s strategic plans and broadly assume that historic investment patterns will be maintained. Working capital
requirements are forecast to increase in line with activity.
Sensitivity analysis
Sensitivity analysis has been performed in respect of 5 of the 12 CGUs. These 5 CGUs had aggregate goodwill of
€167.4 million and indefinite life intangibles of €92.2 million at the date of testing. If the estimated EBITDA margin was
10% lower than managements estimates, there would have been no requirement on the Group to recognise any impairment
against goodwill or indefinite life intangibles. If the estimated cashflow forecasts used in the value in use estimates were
10% lower than managements estimates or the discount rate used was 1% higher, again there would have been no
requirement on the Group to recognise any impairment against goodwill or indefinite life intangibles.
Glanbia plc Annual Report 2011
Financial statements
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16. Investments in associates
At the beginning of the year
Share of profit after tax
(Loss)/gain recognised through the statement of
comprehensive income
Additions
Write-down of investment
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
2,298
11,757
1,395
–
–
–
(39)
645
(224)
–
–
–
–
903
–
2010
Group
€'000
10,041
79
1,637
–
–
At the end of the year
2,259
12,178
2,298
11,757
The Group’s share of the results of associates, all of which are unlisted, and its share of the assets (including goodwill) and
liabilities are as follows:
2010
Co-operative Animal Health Limited1
South Eastern Cattle Breeding Society Limited1
Malting Company of Ireland Limited
South East Port Services Limited
Westgate Biological Limited
Greenfield Dairy Partners Limited
2011
Co-operative Animal Health Limited1
South Eastern Cattle Breeding Society Limited1
Malting Company of Ireland Limited
South East Port Services Limited
Westgate Biological Limited
Greenfield Dairy Partners Limited
Assets
€'000
Liabilities
€'000
Revenue
€'000
Profit/
(loss)
€'000
Interest
held
%
8,306
5,187
4,632
7,178
116
405
(5,906)
(717)
(1,638)
(5,182)
(299)
(325)
15,732
1,821
1,902
1,595
–
134
25,824
(14,067)
21,184
92
(157)
42
321
(183)
(36)
79
50.00
57.00
33.33
49.00
49.99
33.33
Assets
€'000
Liabilities
€'000
Revenue
€'000
Profit/
(loss)
€'000
Interest
held
%
8,396
5,114
5,242
7,027
–
408
(6,103)
(756)
(2,183)
(4,671)
–
(296)
15,527
2,398
2,893
1,647
–
188
26,187
(14,009)
22,653
157
(111)
27
362
183
27
645
50.00
57.00
33.33
49.00
49.99
33.33
1
In accordance with Group accounting policy, Co-operative Animal Health Limited and South Eastern Cattle Breeding Society Limited
are included in the Group result based on the equity method of accounting, as the Group has significant influence over the entities but
not control, due to their co-operative structure.
Further details in relation to principal associates are outlined in note 39.
Glanbia plc Annual Report 2011
Financial statements
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17. Investments in joint ventures
At the beginning of the year
Share of profit after tax
Additions
(Loss)/gain recognised through the statement of comprehensive income
Deferred tax movement
Dividends received
Exchange differences
At the end of the year
2011
€'000
58,945
13,686
–
(777)
1,645
(14,761)
(254)
2010
€'000
58,276
10,024
399
1,295
(3,054)
(11,210)
3,215
58,484
58,945
The following amounts represent the Group’s share of the assets, liabilities, revenue and profits from joint ventures:
Assets
Non-current assets
Current assets
Liabilities
Non-current liabilities
Current liabilities
Net assets
Revenue
Expenses
Share of profit after tax
Proportionate interest in joint ventures’ commitments
A listing and description of interests in significant joint ventures is outlined in note 39.
2011
€'000
2010
€'000
136,668
75,204
135,903
59,588
211,872
195,491
84,725
68,663
78,340
58,206
153,388
136,546
58,484
58,945
2011
€'000
2010
€'000
501,641
(487,955)
395,380
(385,356)
13,686
10,024
2,193
4,930
The Group holds 51% of the share capital of Glanbia Cheese Limited but this is considered to be a joint venture as the Group does not have
control of the company, as it only controls 50% of the voting rights and is only entitled to appoint 50% of the total number of directors.
Therefore, the Group does not have the power to govern the financial or operating policies of the entity.
Glanbia plc Annual Report 2011
Financial statements
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18. Available for sale financial assets
At the beginning of the year
Disposals/redemption
Fair value movement recognised through
the statement of comprehensive income
Additions
Available
for sale
financial
assets
2011
Group
€'000
14,127
(1,478)
(1,484)
Investments
2010
Company
€'000
453,554
(5,229)
–
–
151,265
Available
for sale
financial
assets
2010
Group
€'000
20,397
(889)
(5,381)
–
Investments
2011
Company
€'000
599,590
(265)
–
–
At the end of the year
599,325
11,165
599,590
14,127
Investments and available for sale financial assets include the following:
Listed securities
Equity securities – eurozone countries
Unlisted securities
One51 plc
Irish Dairy Board Co-operative Limited
Glanbia Enterprise Fund Limited
Moorepark Technology
Other Group companies
Other available for sale financial assets
Available
for sale
financial
assets
2011
Group
€'000
Investments
2010
Company
€'000
Available
for sale
financial
assets
2010
Group
€'000
152
1,490
8,612
–
198
–
713
1
–
–
265
–
599,324
–
143
2,983
9,830
265
198
–
708
Investments
2011
Company
€'000
1
–
–
–
–
599,324
–
599,325
11,165
599,590
14,127
There were no impairment provisions on available for sale financial assets or investments in 2011 or 2010.
The unlisted equity shares in One51 plc are currently traded on an informal ‘grey’ market. These shares are fair valued by
reference to published bid prices.
Available for sale financial assets are fair valued at each reporting date. For financial assets 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 flows discounted using a rate based on
the market interest rate and the risk premium specific to the unlisted securities.
Available for sale financial assets with a carrying value of €9.5 million (2010: €11.0 million) are included at cost. These available
for sale financial assets comprise the following – Irish Dairy Board, Moorepark Technology and other financial assets. The fair
value of these shares cannot be reliably measured as they are not actively traded or there is not a readily available market for
such instruments. The Group has no plans to dispose of these financial assets in the foreseeable future.
Available for sale financial assets are classified as non-current assets, unless they are expected to be realised within 12
months of the reporting date or unless they will need to be sold to raise operating capital. All available for sale financial
assets are euro denominated.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
19. Trade and other receivables
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Prepayments
Receivables from Joint Ventures & Associates
Loans to joint ventures
Amounts due from subsidiary companies
Value added tax
Other receivables
Total
Less non-current trade receivables:
Other receivables
Receivables from Joint Ventures & Associates
Loans to joint ventures
Non-Current
Current
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
2010
Group
€'000
Notes
–
–
–
6
–
–
–
–
–
287,672
(11,219)
276,453
11,153
3,987
13,475
–
5,560
8,248
–
–
–
22
–
–
87
–
–
230,794
(12,802)
217,992
6,344
6,882
13,060
–
4,505
21,132
6
318,876
109
269,915
–
–
–
–
6
(1,100)
–
(13,475)
(14,575)
–
–
–
–
(6,424)
(3,600)
(13,060)
(23,084)
304,301
109
246,831
37
37
37
In 2011, under a debt purchase agreement with a financial institution, the Group has transferred credit risk and retained late
payment risk on certain trade receivables, amounting to €10.8 million (2010: €32.1 million). The Group has continued to
recognise an asset of €0.1 million (2010: €0.4 million), representing the extent of its continuing involvement, and an
associated liability of a similar amount. The carrying value of receivables is a reasonable approximation of fair value. The net
movement in the provision for impairment of receivables has been included in distribution expenses in the income statement.
As shown in note 5.3, the Group has one significant external customer. Management are satisfied that they have satisfactory
credit control procedures in place in respect of this customer.
The Group’s objective is to minimise credit risk by carrying out credit checks where appropriate, by the use of credit
insurance in certain situations, by holding charges over assets and by active credit management. Management do not
expect any significant loss from receivables that have not been provided for at year end.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Euro
US dollar
GBP sterling
Other
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
2010
Group
€'000
6
155,411
109
126,725
–
–
–
141,482
5,867
1,541
–
–
–
113,506
5,323
1,277
6
304,301
109
246,831
Movement on the Group’s provision for impairment of trade receivables is as follows:
At the beginning of the year
Provision for receivables impairment
Receivables written off during the year as uncollectible
Unused amounts reversed
At the end of the year
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
2011
€'000
2010
€'000
12,802
12,035
3,363
(4,784)
(162)
1,481
(261)
(453)
11,219
12,802
As of 31 December 2011, trade receivables of €11.2 million (2010: €18.1 million) were impaired. Trade receivable balances
are generally considered for an impairment review when falling due outside trade terms and are normally partially or wholly
provided for depending on the assessment of likely recoverability of the balance. The amount of the provision was
€11.2 million (2010: €12.8 million). Set out below is an analysis of trade receivables which remain outstanding outside of
trade terms as at 31 December 2011:
Past due:
Up to 3 months
3 to 6 months
Over 6 months
2011
€'000
377
353
10,489
2010
€'000
1,652
2,863
13,597
11,219
18,112
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
The Group holds charges on property and other assets of certain trade debtors, valued at €5.0 million (2010: €9.6 million).
As of 31 December 2011, trade receivables of €37.0 million (2010: €39.5 million) were past due but not impaired, as they
are considered recoverable.
Past due not impaired:
Up to 3 months
3 to 6 months
Over 6 months
20. Inventories
Raw materials
Finished goods
Consumables
2011
€'000
23,973
13,075
–
2010
€'000
36,100
2,580
838
37,048
39,518
2011
€'000
79,028
239,331
18,496
2010
€'000
57,142
230,140
16,599
336,855
303,881
Included above are inventories carried at net realisable value amounting to €51.5 million (2010: €8.1 million). The amount
written off in respect of these inventories was €5.2 million (2010: €2.0 million).
21. Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
2011
Company
€'000
5,280
–
2011
Group
€'000
75,367
156,006
2010
Company
€'000
2010
Group
€'000
8,200
–
59,554
169,547
5,280
231,373
8,200
229,101
The fair value of cash and cash equivalents are not materially different to their book values. The maximum exposure to credit
risk at the reporting date is the carrying value of the cash and cash equivalent balances.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
22. Other reserves
Capital
reserve
€'000
(note a)
Merger
reserve
€'000
(note b)
Currency
reserve
€'000
(note c)
Hedging
reserve
€'000
(note d)
Available
for sale
financial
asset
reserve
€'000
(note e)
Share
based
payment
reserve
€'000
(note g)
Own
shares
€'000
(note f)
Total
€'000
Balance at 2 January 2010
2,825 113,148
380 (14,601)
6,371
(1,899)
2,448 108,672
Currency translation differences
Revaluation of interest rate swaps
– loss in year
Foreign exchange contracts
– gain in year
Transfers to income statement:
– Foreign exchange contracts
– loss in year
Foreign commodity contracts
– gain in year
– Interest rate swaps – loss in year
Revaluation of forward commodity
contracts – loss in year
Revaluation of available for sale
financial assets – loss in year
Deferred tax on fair value movements
Cost of share based payments
Transfer on exercise, vesting or
expiry of share based payments
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,169
–
–
–
–
–
–
–
–
(4,180)
38
743
(202)
7,613
(76)
–
–
–
–
–
–
–
–
–
–
–
(5,381)
922
1,345
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,937
20,169
(4,180)
38
743
(202)
7,613
(76)
(5,381)
2,267
2,937
283
(656)
(373)
Balance at 1 January 2011
2,825 113,148
20,549
(9,743)
2,335
(1,616)
4,729 132,227
Currency translation differences
Net investment hedge
Revaluation of interest rate swaps
– loss in year
Foreign exchange contracts
– loss in year
Transfers to income statement:
Foreign exchange contracts
– gain in year
Forward commodity contracts
– loss in year
Interest rate swaps
– loss in year
Revaluation of forward commodity contracts
– gain in year
Revaluation of available for sale financial
assets – loss in year
Deferred tax on fair value movements
Cost of share based payments
Transfer on exercise, vesting or
expiry of share based payments
Purchase of own shares
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18,538
230
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,343)
(146)
(38)
77
4,876
137
–
–
–
–
–
–
–
–
–
(1,484)
928
286
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,388
18,538
230
(1,343)
(146)
(38)
77
4,876
137
(1,484)
1,214
2,388
917
(1,974)
(1,057)
(2,075)
–
(2,075)
Balance at 31 December 2011
2,825 113,148
39,317
(5,252)
1,137
(2,774)
5,143 153,544
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Note 22 (a): Capital reserve
The capital reserve comprises of a capital redemption reserve and a capital reserve which arose due to the re-nominalisation
of the Company’s share capital on conversion to the euro.
At the beginning and the end of the year
Note 22 (b): Merger reserve
2011
Company
€'000
4,227
2011
Group
€'000
2,825
2010
Company
€'000
4,227
2010
Group
€'000
2,825
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 adjustment1
2011
€'000
2010
€'000
355,271
355,271
(327,085)
(327,085)
Share premium and other reserves relating to nominal value of shares in Waterford Foods plc
84,962
84,962
113,148
113,148
1 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 (now named Glanbia plc) in 1997.
Note 22 (c): Currency reserve
The currency reserve reflects the foreign exchange gains and losses that form part of the net investment in foreign operations.
See note 32 - derivative financial instruments for further details. In addition, where Group companies have a functional
currency different from the presentation currency, their assets and liabilities are translated at the closing rate at the reporting
date, income and expenses in the income statement are translated at the average rate for the year and resulting exchange
differences are taken to the currency reserve within equity.
Note 22 (d): Hedging reserve
The hedging reserve reflects the effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges. Amounts accumulated in the hedging reserve are recycled to the income statement in the periods when
the hedged item affects income or expense.
Note 22 (e): Available for sale financial asset reserve
Unrealised gains and losses arising from changes in the fair value of available for sale financial assets are recognised in the
available for sale financial asset reserve. When such available for sale financial assets are sold or impaired, the accumulated
fair value adjustments are recycled to the income statement.
Note 22 (f): Own shares
The amount included as own shares relates to 740,576 (2010: 485,304) 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 Halifax EES Trustees International Limited; a
Jersey based trustee services company.
The shares included in the Employee Share Trust at 31 December 2011 cost €2.8 million (2010: €1.6 million) and had a
market value of €3.4 million (2010: €1.8 million). The dividend rights in respect of these shares have been waived, save 0.001
pence per share.
Shares purchased under the 2007 LTIP scheme and the 2008 LTIP scheme are deemed to be own shares in accordance
with IAS 32 - Financial Instruments: Presentation.
Note 22 (g): Share based payment reserve
The share based payment reserve reflects charges relating to granting of both shares and options under the 2002 LTIP,
2007 LTIP and 2008 LTIP schemes.
At the beginning of the year
Transfer of reserves between Group companies
Transfer on exercise, vesting or expiry of share based payments
Cost of share based payments
At the end of the year
2011
Company
€'000
4,729
–
(1,974)
2,388
5,143
2011
Group
€'000
4,729
–
(1,974)
2,388
5,143
2010
Company
€'000
2,217
231
(656)
2,937
4,729
2010
Group
€'000
2,448
–
(656)
2,937
4,729
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
2002 Long Term Incentive Plan (‘the 2002 LTIP’)
Movement in the 2002 LTIP for the year ended 31 December 2011 and 1 January 2011 is as follows:
At the beginning of the year
Granted
Exercised
Expired
2011
Average
exercise price
in € per share
2011
Number
of
options
2010
Average
exercise price
in € per share
2.37
4.22
(1.75)
–
1,980,000
270,000
(697,000)
–
2.35
–
(1.86)
(4.03)
2010
Number
of
options
2,308,000
–
(280,000)
(48,000)
At the end of the year
2.97
1,553,000
2.37
1,980,000
Expiry date in
Exercise price
€
2012
2013
2014
2014
2016
2017
2019
2020
2021
2021
2021
2021
2021
2021
1.55
1.90
2.47
2.73
2.87
4.03
2.29
2.65
3.68
3.95
4.38
4.30
4.70
4.63
2011
–
160,000
100,000
805,000
50,000
118,000
50,000
20,000
20,000
20,000
90,000
55,000
45,000
20,000
2010
577,000
160,000
100,000
925,000
50,000
118,000
50,000
–
–
–
–
–
–
–
1,553,000
1,980,000
Total options of 1,553,000 (2010: 1,980,000) ordinary shares were outstanding at 31 December 2011 under the 2002 Long
Term Incentive Plan (‘the 2002 LTIP’), at prices ranging between €1.90 and €4.70. In accordance with the terms of the
2002 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
32,900 (2010: 90,600) ordinary shares. The cost of the 2002 LTIP charged in the Group income statement was €80,613
(2010: credit of €15,761).
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 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 granted of €2.00 per share has been calculated using the Binomial Model. Options over
1,233,000 (2010: 1,930,000) ordinary shares were exercisable at 31 December 2011 at a weighted average price of €2.73
(2010: €2.38). The weighted average share price at the date of exercise for share options exercised was €4.65. The
weighted average life for share options outstanding is four years.
2007 Long Term Incentive Plan (‘the 2007 LTIP’) and 2008 Long Term Incentive Plan (‘the 2008 LTIP’)
Arising from a review of the Group’s compensation arrangements for senior managers and executive Directors, the
Directors approved the introduction of the 2007 LTIP for selected senior managers and the shareholders approved the
introduction of the 2008 LTIP for selected senior managers and executive Directors. Awards outstanding under the 2007
LTIP and the 2008 LTIP at 31 December 2011 amounted to nil (2010: nil) and 2,476,500 ordinary shares (2010: 2,283,000)
respectively.
The performance criteria for the LTIP schemes are tied 50% to achievement of targeted EPS growth and 50% to Total
Shareholder Return (TSR).
Glanbia plc Annual Report 2011
Financial statements
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The TSR element is assessed against a group of leading peer companies and the EPS element is measured against pre-set
targeted adjusted EPS growth criteria for the Group. The maximum award under the 2007 LTIP scheme was 115% of base
salary per annum in the form of conditional shares and the vesting period was three years. With regard to the 2008 LTIP, an
award shall not vest unless the Remuneration Committee is satisfied that the Company’s underlying financial performance
has shown a sustained improvement in the period since the date of grant.
Shares awarded under the Group’s LTIP schemes are equity settled share based payments as defined in IFRS 2 – Share
Based Payments. The IFRS requires that a recognised valuation methodology be employed to determine the fair value of
shares awarded and stipulates that this methodology should be consistent with methodologies used for pricing of financial
instruments. The combined expense of €2,307,328 (2008 LTIP: €2,307,328, 2007 LTIP: nil ) charged in the Group income
statement has been arrived at through applying a Monte Carlo simulation technique to model the combination of market and
non-market based performance conditions of the plan.
The 2007 LTIP
The total expense in the Group income statement is analysed as follows:
Share
price at
date
of award
€
Period to
earliest
release
date
Number
of
shares
Expense in
Group income
statement
2011
€'000
Expense in
Group income
statement
2010
€'000
Fair
value
€
2007 Long Term Incentive Plan
4.03
–
169,500
3.85
–
129
Shares awarded under the 2007 LTIP are equity settled share-based payments as defined in IFRS 2-Share Based Payment.
On 25 May 2010, 50% of the share options above vested and the balance has lapsed.
The fair value of the shares awarded was determined using a Monte Carlo simulation technique taking account of peer
group total share return volatilities and correlations together with the following assumptions:
Risk-free interest rate
Expected volatility
Dividend yield
4%
25%
2%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over a period
equivalent to the expected life of the option.
The 2008 LTIP
Movement in the 2008 LTIP for the year 31 December 2011 and 1 January 2011 is as follows:
At the beginning of the year
Granted
Vested
Expired
At the end of the year
Expiry date in
2011
2012
2013
2014
At the end of the year
2011
Number of
options
2,283,000
776,500
(244,728)
(338,272)
2010
Number of
options
1,201,000
1,082,000
–
–
2,476,500
2,283,000
2011
–
618,000
2010
583,000
618,000
1,082,000
1,082,000
776,500
–
2,476,500
2,283,000
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
The total expense in the Group income statement is analysed as follows:
Share
price at
date
of award
€
Period to
earliest
vesting
date
Number
of shares
Expense in
Group income
statement
2011
€'000
Expense in
Group income
statement
2010
€'000
Fair
value
€
Granted in 2008
2008 Long Term Incentive Plan
4.45
–
583,000
3.54
25
1,332
Granted in 2009
2008 Long Term Incentive Plan
2.72
1 years
618,000
2.22
520
659
Granted in 2010
2008 Long Term Incentive Plan
2.82
2 years
1,082,000
2.31
833
833
Granted in 2011
2008 Long Term Incentive Plan
4.35
3 years
776,500
3.59
929
–
Shares awarded under the 2008 LTIP are equity settled share-based payments as defined in IFRS 2 - Share Based
Payment. On the 30 August 2011, 244,728 of the share options granted in 2008 vested and the balance has lapsed.
The fair value of the shares awarded was determined using a Monte Carlo simulation technique taking account of peer group
total share return volatilities and correlations together with the following assumptions:
Risk-free interest rate
Expected volatility
Dividend yield
Granted in
2011
Granted in
2010
Granted in
2009
Granted in
2008
2%
45%
2%
1%
47%
1%
2%
35%
2%
4%
29%
1%
Expected volatility was determined by calculating the historical volatility of the Company’s share price over a period
equivalent to the expected life of the option.
23. Share capital and share premium
Company
At 1 January 2011
Shares issued
Number of
shares
(thousands)
293,836
697
Ordinary
shares
€'000
17,630
42
Share
premium
€'000
437,379
1,179
Total
€'000
455,009
1,221
At 31 December 2011
294,533
17,672
438,558
456,230
Group
At 1 January 2011
Shares issued
Number of
shares
(thousands)
293,836
697
Ordinary
shares
€'000
17,630
42
Share
premium
€'000
82,111
1,179
Total
€'000
99,741
1,221
At 31 December 2011
294,533
17,672
83,290
100,962
The total authorised number of ordinary shares is 306 million shares (2010: 306 million shares) with a par value of €0.06 per
share (2010: €0.06 per share). All issued shares are fully paid.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
24. Retained earnings
Company
retained
earnings
€'000
Group
retained
earnings
€'000
Group
goodwill
write-off
€'000
Notes
Group
Total
€'000
Balance at 2 January 2010
59,913
175,965
(92,961)
83,004
Profit for the year
745
108,047
Other comprehensive income/(expense)
Actuarial gain – defined benefit schemes
Deferred tax on actuarial gain
Share of actuarial gain – Joint Ventures &
Associates
28
27
–
–
–
13,379
(1,250)
2,444
Total comprehensive income for the year
745
122,620
Dividends paid during the year
(20,453)
(20,453)
Transfer on exercise, vesting or expiry of share
based payments
22
373
373
–
–
–
–
–
–
–
108,047
13,379
(1,250)
2,444
122,620
(20,453)
373
Balance at 1 January 2011
40,578
278,505
(92,961)
185,544
Profit for the year
59,114
112,178
Other comprehensive income/(expense)
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures &
Associates
28
27
–
–
–
(17,029)
2,615
(115)
Total comprehensive income for the year
59,114
97,649
Dividends paid during the year
(22,942)
(22,942)
Transfer on exercise, vesting or expiry of share
based payments
22
1,057
1,057
–
–
–
–
–
–
–
112,178
(17,029)
2,615
(115)
97,649
(22,942)
1,057
Balance at 31 December 2011
77,807
354,269
(92,961)
261,308
25. Non-controlling interests
At the beginning of the year
Share of profit for the year
Dividends paid to non-controlling interests during the year
2011
€'000
6,892
630
(387)
2010
€'000
6,493
586
(187)
At the end of the year
7,135
6,892
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
26. Borrowings
Current
Bank overdrafts/borrowings
Finance lease liabilities
Non-current
Bank borrowings
Private debt placement
Cumulative redeemable preference shares
Finance lease liabilities
Total borrowings
Bank borrowings are secured by cross-guarantees from Group companies.
2011
Group
€'000
51,781
1,027
52,808
342,034
251,179
63,487
2,196
2010
Group
€'000
–
972
972
569,545
–
63,487
3,219
658,896
636,251
711,704
637,223
The cumulative redeemable preference shares carry the right to such fixed cumulative annual dividend as was last
determined by the Directors in July 2007. All 50 million of the €1.2697 cumulative redeemable preference shares currently
carry the right to a fixed cumulative annual dividend of 8.6977 cents per share. In July 2014 all shares still in issue will be
redeemed at the issue price.
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
During the year, the Group completed the issuance of a USD 325 million private debt placement with a maturity date of 15
June 2021 and with a fixed coupon of 5.4%. The USD 325 million was primarily used for the repayment of short-term debt
drawn under existing banking facilities.
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
2011
€'000
343,108
64,609
251,179
2010
€'000
205,853
430,398
–
658,896
636,251
The exposure of the Group’s total borrowings to interest rate changes taking account of the contractual repricing
dates at the reporting date are as follows:
6 months or less
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
2011
€'000
203,815
190,000
66,710
251,179
2010
€'000
379,545
–
257,678
–
711,704
637,223
The effective interest rates at the reporting date were as follows:
Bank overdrafts
Bank borrowings
EUR
USD
CAD
2011
2010
2011
2010
2011
2010
1.80% 1.65%
5.25% 5.25%
4.00% 4.00%
4.05% 3.54%
4.39% 1.15%
2.03% 2.05%
Glanbia plc Annual Report 2011
Financial statements
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The carrying amounts and fair values of non-current borrowings are as follows:
Carrying
amount
2011
€'000
Carrying
amount
2010
€'000
Fair
value
2011
€'000
Fair
value
2010
€'000
Non-current borrowings
658,896
636,251
699,835
632,008
The carrying value of current borrowings approximates to their fair value.
The carrying amounts of the Group’s total borrowings are denominated in the following currencies:
Euro
US dollar
Canadian dollar
The Group has the following undrawn borrowing facilities:
Expiring within 1 year
Expiring beyond 1 year
All of the undrawn borrowing facilities are floating rate facilities.
Finance lease liabilities – minimum lease payments:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
Future finance charges on finance leases
2011
€'000
2010
€'000
368,635
327,641
15,428
445,620
179,527
12,076
711,704
637,223
2011
€'000
2010
€'000
128,111
167,966
16,646
101,178
296,077
117,824
2011
€'000
1,172
1,172
1,173
3,517
(294)
2010
€'000
1,181
1,181
2,362
4,724
(533)
Present value of finance lease liabilities
3,223
4,191
The present value of finance lease liabilities is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
2011
€'000
1,027
1,074
1,122
3,223
2010
€'000
972
1,021
2,198
4,191
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
27. Deferred income taxes
The following amounts, determined after appropriate offsetting (note 2 (l)) are shown in the consolidated statement of
financial position:
Deferred income tax assets
Deferred income tax liabilities
Net deferred income tax liability
The gross movement on the deferred income tax account is as follows:
At the beginning of the year
Income statement – pre exceptional charge
Income statement – exceptional charge
Deferred income tax (credit) to other comprehensive income
Deferred income tax (credit)/charge on actuarial loss/gain
Deferred income tax on acquisition of intellectual property
Exchange differences
At the end of the year
2011
€'000
2010
€'000
(11,255)
(7,388)
93,459
75,966
82,204
68,578
2011
€'000
68,578
11,007
–
(1,214)
(2,615)
4,590
1,858
2010
€'000
54,315
10,994
558
(2,267)
1,250
–
3,728
82,204
68,578
Notes
11
22
24
36
The movement in deferred income tax liabilities and assets during the year, without taking into consideration the
offsetting of balances within the same tax jurisdiction, is as follows:
Deferred income tax liabilities
Notes
At 2 January 2010
Charged/(credited) to income statement
Accelerated
tax
depreciation
€'000
34,170
2,163
Fair
value
gain/
(loss)
€'000
3,472
–
(Credited) to other comprehensive income
22
Exchange differences
–
(2,267)
1,822
–
IP and
deferred
developm
ent costs
€'000
22,184
(1,336)
–
1,657
Other
€'000
6,511
7,172
–
418
Total
€'000
66,337
7,999
(2,267)
3,897
At 1 January 2011
38,155
1,205
22,505
14,101
75,966
Charged/(credited) to income statement
(Credited) to other comprehensive income
Acquisition of intellectual property
Exchange differences
Reclassification to deferred income tax assets
22
36
At 31 December 2011
2,690
–
–
1,130
–
41,975
–
(1,214)
–
–
9
–
(964)
4,252
–
4,590
794
–
–
(47)
–
6,253
5,978
(1,214)
4,590
1,877
6,262
26,925
24,559
93,459
Glanbia plc Annual Report 2011
Financial statements
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Deferred income tax assets
Notes
At 2 January 2010
Charged to income statement
Charged to other comprehensive income
24
Exchange differences
At 1 January 2011
Charged to income statement
(Credited) to other comprehensive income
24
Exchange differences
Reclassification from deferred income tax liabilities
At 31 December 2011
Retirement
obligations
€'000
Fair
value
loss
€'000
(6,087)
1,300
1,250
2
(3,535)
2,582
(2,615)
(1)
–
(3,569)
–
–
–
–
–
–
–
–
(9)
(9)
Tax
losses
€'000
(5,935)
2,253
–
(171)
(3,853)
2,447
–
(18)
–
Other
€'000
Total
€'000
–
–
–
–
–
–
–
–
(12,022)
3,553
1,250
(169)
(7,388)
5,029
(2,615)
(19)
(6,253)
(6,262)
(1,424)
(6,253)
(11,255)
A deferred income tax asset has been recognised on the basis that the realisation of the related tax benefit through future
taxable profits is probable.
Deferred income tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax
benefit through future taxable profits is probable. The Group has tax losses of €100.8 million (2010: €72.6 million) to carry
forward against future taxable income on which a deferred income tax asset has not been recognised. Deferred income 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.
The deferred income tax credited to other comprehensive income during the year is as follows:
Available for sale financial asset reserve
Hedging reserve
Impact of (increase)/decrease in retirement benefit obligations due to actuarial loss/gain
Notes
22
22
24
2011
€'000
2010
€'000
(286)
(928)
(2,615)
(1,345)
(922)
1,250
(3,829)
(1,017)
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
28. Retirement benefit obligations
Pension benefits
The Group operates a number of defined benefit and defined contribution schemes which provide retirement and death
benefits for some of its employees. The schemes are funded through separate trustee controlled funds.
The contributions paid to the defined benefit schemes are in accordance with the advice of professionally qualified
actuaries. The latest actuarial valuation reports for these schemes, which are not available for public inspection, are dated
between 1 January 2008 and 1 January 2010. The contributions paid to the schemes in 2011 are in accordance with the
contribution rates recommended in the actuarial valuation reports.
The amounts recognised in the Group statement of financial position are determined as follows:
Present value of funded obligations
Fair value of plan assets
Liability in the Group statement of financial position
The amounts recognised in the Group income statement are as follows:
Defined benefit pension schemes
– Service costs – current
– Interest costs
– Expected return on plan assets
Total expense pre curtailment gains and negative past service cost
Exceptional item – curtailment gains and negative past service cost
Total (expense)/gain
Defined contribution pension schemes
Notes
8
7
8
2011
€'000
2010
€'000
(448,447)
400,022
(437,911)
389,351
(48,425)
(48,560)
2011
€'000
(4,317)
(22,949)
24,036
(3,230)
–
2010
€'000
(4,803)
(24,153)
21,888
(7,068)
10,238
(3,230)
3,170
(3,020)
(2,750)
The actual return on plan assets was a profit of €7.3 million (2010: €29.8 million).
The movement in the liability recognised in the Group statement of financial position over the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Total expense pre curtailment gains and negative past service costs
Curtailment gains and negative past service costs
Actuarial (loss)/gain - defined benefit schemes
Contributions paid by employer
2011
€'000
2010
€'000
(48,560)
(85,765)
(542)
–
(3,230)
–
(17,029)
20,936
(972)
(38)
(7,068)
10,238
13,379
21,666
At the end of the year
(48,425)
(48,560)
Glanbia plc Annual Report 2011
Financial statements
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The movement in obligations during the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Current service costs
Reclassification to plan assets
Interest costs
Actuarial gains/(losses)
– Experience gains
– Change in assumptions
Contributions by plan participants
Curtailment gains and negative past service costs
Benefits paid
At the end of the year
The movement in the fair value of plan assets over the year is as follows:
At the beginning of the year
Exchange differences
Reclassification to obligations
Expected return on plan assets
Actuarial (loss)/gain
Contributions by plan participants
Contributions paid by employer
Benefits paid
At the end of the year
The principal actuarial assumptions used are as follows:
2011
€'000
2010
€'000
(437,911)
(435,010)
(2,291)
–
(4,317)
4,437
(22,949)
2,248
(2,545)
(3,162)
–
18,043
(2,431)
(38)
(4,803)
–
(24,153)
8,442
(2,992)
(2,963)
10,238
15,799
(448,447)
(437,911)
2011
€'000
389,351
1,749
(4,437)
24,036
(16,732)
3,162
20,936
(18,043)
2010
€'000
349,245
1,459
–
21,888
7,929
2,963
21,666
(15,799)
400,022
389,351
Discount rate
Expected return on plan assets
– Equities
– Corporate bonds
– Government bonds and gilts
– Cash
– Property
– Other assets
Inflation rate
Future salary increases
Future pension increases**
2011
IRL
2011
UK
2010
IRL
2010
UK
5.60% 4.80%-5.00%
5.40% 5.45%–5.50%
7.50%
4.50%
4.30%
2.00%
6.25%
5.40%
6.80%
4.70%
2.80%
2.70%
6.30%
6.30%
7.70%
4.90%
4.40%
2.00%
6.50%
7.70%
8.20%
5.45%
4.20%
3.70%
7.70%
n/a
2.00% 2.00%-3.00%
2.00% 2.75%-3.45%
3.00%
0.50%
3.75%
2.80%
3.00%
0%-5%
4.20%
3.25%
**
The future pension increases on the Irish pension schemes have been calculated on a weighted average basis.
Cumulative actuarial losses:
Actuarial loss/(gain) for the year
Cumulative actuarial losses
2011
€'000
2010
€'000
17,029
(13,379)
158,856
141,827
Glanbia plc Annual Report 2011
Financial statements
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Plan assets are comprised as follows:
Equities
Corporate bonds
Government bonds and gilts
Property
Cash
Other
2011
€'000
163,281
36,269
141,457
20,799
11,711
26,505
2011
%
41
9
35
5
3
7
2010
€'000
218,484
33,664
90,341
20,456
26,406
–
2010
%
56
9
23
5
7
–
400,022
100
389,351
100
The expected return on plan assets was determined by considering the expected returns available on the assets underlying
the current investment policies. Expected yields on fixed interest investments are based on gross redemption yields at the
reporting date. Expected returns on equity and property investments reflect long-term real rates of return experienced in the
respective markets.
Following a detailed review of the Group’s schedule of contributions during the year, contributions to post-employment
defined benefit pension schemes are expected to be €20.9 million in 2012.
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 an active member on retiring at age 65, 20 years
from now:
Male
Female
2011
Irish
mortality
rates
2011
UK
mortality
rates
2010
Irish
mortality
rates
2010
UK
mortality
rates
24.3
27.1
22.2
24.7
21.5
24.2
23.9
27.0
The mortality assumptions imply the following life expectancies in years of an active member, aged 65, retiring now:
2011
Irish
mortality
rates
2011
UK
mortality
rates
2010
Irish
mortality
rates
2010
UK
mortality
rates
20.8
23.6
20.8
23.1
19.2
21.9
21.8
24.9
Male
Female
Five year summary
2011
€'000
2010
€'000
2009
€'000
2008
€'000
2007
€'000
At the end of the year
Fair value of plan assets
Present value of funded obligations
400,022
(448,447)
389,351
(437,911)
349,245
(435,010)
301,499
(465,909)
382,521
(496,769)
Deficit
(48,425)
(48,560)
(85,765)
(164,410)
(114,248)
Experience adjustments on plan liabilities
2,248
8,442
5,366
(3,175)
(7,160)
Experience adjustments on plan assets
(16,732)
7,929
12,314
(104,229)
(32,542)
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Sensitivity analysis for principal assumptions used to measure scheme liabilities
There are inherent uncertainties surrounding the financial assumptions adopted in calculating the actuarial valuation of the
Group’s defined benefit pension schemes. The following table analyses, for the Group’s Irish and UK pension schemes, the
estimated impact on the plan liabilities resulting from changes to key actuarial assumptions, all other assumptions remaining
constant.
2011
Assumption
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Discount rate
Increase/decrease 0.25%
Decrease/increase by 3.9%
Decrease/increase by (3.9%)/4.2%
Price inflation
Increase/decrease 0.25%
Increase/decrease by 1.8%
Increase/decrease by 2.9%/(2.8%)
Mortality
Increase/decrease by one year
Increase/decrease by 2.1%
Increase/decrease by 3.2%
2010
Assumption
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Discount rate
Increase/decrease 0.25%
Decrease/increase by 3.7%
Decrease/increase by (4.1%)/4.4%
Price inflation
Increase/decrease 0.25%
Increase/decrease by 1.6%
Increase/decrease by 3.0%/(2.9%)
Mortality
Increase/decrease by one year
Increase/decrease by 2.2%
Increase/decrease by 3.1%
29. Provisions for other liabilities and charges
Restructuring
€'000
UK pension
€'000
Legal claims
€'000
Property &
lease
commitments
€'000
Operational
€'000
Total
€'000
note (a)
note (b)
note (c)
note (d)
note (e)
At 1 January 2011
10,471
19,720
5,182
2,283
5,841
43,497
Provided in the year
Acquisition of subsidiary
Utilised in the year
Exchange differences
Unwinding of discounts
8,723
–
(10,025)
–
–
–
–
313
–
(1,452)
(1,914)
602
113
95
–
–
–
(594)
16
37
919
2,181
(2,596)
141
(60)
9,955
2,181
(16,581)
854
90
At 31 December 2011
9,169
18,983
3,676
1,742
6,426
39,996
Non-current
Current
–
9,169
17,308
1,675
–
3,676
1,540
202
3,272
3,154
22,120
17,876
9,169
18,983
3,676
1,742
6,426
39,996
(a) The restructuring provision relates to the rationalisation programme Glanbia is currently undertaking. The provision,
which relates mainly to redundancy, is expected to be fully utilised during 2012. The provision provided in the year is
recognised in the income statement as an exceptional item. See note 7 - exceptional items for further details.
(b) The UK pension provision relates to administration and certain costs associated with pension schemes attached to
businesses disposed of in prior years. This provision is expected to be fully utilised over the next 32 years.
(c) The legal claims provision represents legal claims brought against the Group. The provision provided in the year is
recognised in the income statement within administration expenses. The balance at 31 December 2011 is expected to
be utilised during 2012. In the opinion of the Directors, after taking appropriate legal advice, the outcome of these legal
claims will not give rise to any significant loss beyond the amounts provided at 31 December 2011.
(d) The property and lease commitments provision relates to onerous leases in respect of two properties where the Group
has present and future obligations to make lease payments. It is expected that €0.2 million will be utilised during 2012
and the balance will be fully utilised over the next 6 years.
(e) The operational provision represents deferred payments in respect of recent acquisitions and other operational related
provisions. It is expected that €3.2 million of this provision will be utilised during 2012. Due to the nature of these items,
there is some uncertainty around the amount and timing of payments.
Glanbia plc Annual Report 2011
Financial statements
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30. Capital grants
At 1 January 2011
Receivable for the year
Exchange differences
Released to income statement
At 31 December 2011
31. Trade and other payables
Trade payables
Amounts due to Joint Ventures & Associates
Amounts due to other related parties
Amounts due to other Group companies
Social security costs
Accrued expenses
Other payables
2011
€'000
18,609
–
(8)
(1,440)
2010
€'000
18,582
1,440
6
(1,419)
17,161
18,609
Notes
37
37
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
5
–
–
63,528
–
167,362
47,228
176
–
3,605
66
–
–
104,682
–
2010
Group
€'000
128,645
30,059
235
–
3,262
2,704
173,787
2,522
176,372
–
8,692
–
27,673
66,237
400,850
107,270
366,246
The carrying value of payables is a reasonable approximation of fair value.
32. Derivative financial instruments
Non-hedging instruments
Interest rate swaps – cash flow hedges
Interest rate swaps – fair value hedges
Foreign exchange contracts – cash flow hedges
Commodity futures – cash flow hedges
Commodity futures – fair value hedges
2011
Assets
€'000
2011
Liabilities
€'000
2010
Assets
€'000
2010
Liabilities
€'000
1,873
–
1,638
717
772
1,161
–
(3,174)
–
–
–
3,975
(2,028)
(613)
(1,161)
590
267
723
(77)
(8,076)
–
(600)
(326)
(723)
Total
6,161
(6,976)
5,555
(9,802)
Less non-current portion:
Interest rate swaps – cash flow hedges
Interest rate swaps – fair value hedges
Non-current
Current
–
–
–
(1,319)
–
(1,319)
6,161
(5,657)
–
1,643
1,643
3,912
(3,315)
–
(3,315)
(6,487)
Glanbia plc Annual Report 2011
Financial statements
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Group
Bank guarantees amounting to €3.4
million (2010: €7.1 million) are
outstanding as at 31 December 2011,
mainly in respect of payment of EU
subsidies. The Group does not expect
any material loss to arise from these
guarantees.
The Group has contingent liabilities in
respect of legal claims arising in the
ordinary course of business. It is not
anticipated that any material liability will
arise from these contingent liabilities
other than those provided for.
Interest rate swaps
The notional principal amounts of the
outstanding interest rate swap
contracts, qualifying as cash flow
hedges at 31 December 2011, were
€55.0 million (2010: €148.5 million).
The notional principal amounts of the
outstanding interest rate swap
contracts, qualifying as fair value
hedges at 31 December 2011, were
€100.0 million (2010: €100.0 million).
At 31 December 2011, the fixed
interest rates vary from 3.79% to
4.94% (2010: 3.79% to 4.94%) and the
main floating rates are set in advance
by reference to inter-bank interest rates
1.83% EURIBOR (2010: 1.14%
EURIBOR).
Gains and losses recognised in
the hedging reserve in other
comprehensive income on interest rate
swap contracts at 31 December 2011
will be continuously recycled to the
income statement until repayment of
the bank borrowings.
Foreign exchange contracts
The notional principal amounts of
the outstanding foreign exchange
contracts at 31 December 2011 were
€80.7 million (2010 €51.7 million).
Gains and losses recognised in the
hedging reserve in other
comprehensive income on foreign
exchange contracts at 31 December
2011 will be released to the income
statement at various dates within one
year from the reporting date.
Commodity futures
The notional principal amounts of the
outstanding commodity (milk, gas, oil
and propane) futures, qualifying as cash
flow hedges and fair value hedges at 31
December 2011 were €8.3 million and
€49.1 million respectively (2010: €4.2
million and €61.4 million). Gains and
losses recognised in the hedging
reserve in other comprehensive income
on these futures as at 31 December
2011 will be released to the income
statement at various dates within one
year from the reporting date.
Net investment hedge
A portion of the Group’s US dollar
denominated borrowing amounting to
USD 98.5 million (2010: nil) is
designated as a hedge of the net
investment in the Group’s US dollar net
assets. The fair value of the borrowing
was €76.1 million (2010: nil). The
foreign exchange loss of €0.2 million
(2010: nil) arising on translation of the
borrowing into euro at 31 December
2011 is recognised in other
comprehensive income.
Financial guarantee contracts
In accordance with Group accounting
policy, management has reviewed the
fair values associated with financial
guarantee contracts, as defined within
IAS 39 – Financial Instruments:
Recognition and Measurement, issued
in the name of Glanbia plc and has
determined that their value is not
significant. No adjustment has been
made to the Glanbia plc company
statement of financial position to reflect
fair value of the financial guarantee
contracts issued in its name.
33. Contingent liabilities
Company
The Company has guaranteed the
liabilities of certain subsidiaries in
Ireland in respect of any losses or
liabilities (as defined in section 5(c) of
the Companies (Amendment) Act,
1986) for the year ended 31 December
2011 and the Directors are of the
opinion that no losses will arise thereon.
These subsidiaries avail of the
exemption from the filing of audited
financial statements, as permitted by
section 17 of the Companies
(Amendment) Act, 1986.
The Group recognises a defined benefit
liability and incurs administration and
certain other costs in relation to its UK
pension schemes for businesses
disposed of in prior years, as outlined in
note 28 and note 29. In addition, the
Company has guaranteed the payment
of a proportion of employer
contributions in respect of these UK
pension schemes. The Company
considers these guarantees to be
insurance contracts and accounts for
them as such. The Company treats the
guarantee contract as a contingent
liability until such time as it becomes
probable that the Company will be
required to make a payment under the
guarantee.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
34. Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised in the financial statements is as follows:
Property, plant and equipment
2011
€'000
1,210
2010
€'000
4,980
Operating lease commitments – where the Group is the lessee
The Group leases various assets. Generally, operating leases are short-term 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
35. Cash generated from operations
2011
€'000
9,118
25,259
19,702
2010
€'000
7,868
20,171
15,331
54,079
43,370
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
2010
Group
€'000
Notes
Profit before taxation
59,114
138,693
745
134,718
Development costs capitalised
Write-off of intangibles
Non-cash exceptional loss/(gain)
Share of results of Joint Ventures & Associates
Depreciation
Amortisation
Cost of share based payments
Difference between pension charge and cash
contributions
Loss on disposal of property, plant and equipment
Interest income
Interest expense
Non-cash movement on investments
Amortisation of government grants received
15
15
7
14
15
22
6
10
10
30
Cash generated from operations before
changes in working capital
Change in net working capital:
– (Increase) in inventory
– Decrease/(increase) in short term receivables
– (Decrease)/increase in short term liabilities
– (Decrease) in provisions
–
–
–
–
–
–
2,388
–
–
–
–
(761)
–
(4,042)
1,195
8,723
(14,331)
34,140
18,472
2,388
(17,706)
363
(3,056)
30,997
–
(1,440)
–
–
–
–
–
–
2,937
–
–
–
–
–
–
(2,821)
1,372
(10,238)
(10,103)
32,569
15,111
2,937
(14,598)
957
(3,290)
25,420
–
(1,419)
60,741
194,396
3,682
170,615
–
103
(40,829)
(204)
(19,087)
(29,122)
11,219
(12,020)
–
66,449
(36,693)
(246)
(97,009)
(28,065)
66,048
(4,375)
Cash generated from operations
19,811
145,386
33,192
107,214
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
36. Business combinations
On 19 January 2011 the Group acquired the business and assets of a US based performance nutrition business - Bio-
Engineered Supplements and Nutrition (BSN®). BSN® is a leading developer, provider and distributor of nutritional products
designed for health, physique development and training.
Details of net assets acquired and goodwill arising from the acquisition are as follows:
Purchase consideration – cash paid
Less: Fair value of assets acquired
Goodwill
€'000
103,369
85,853
17,516
The acquisition of BSN® significantly enhances the Group’s Performance Nutrition portfolio and delivers further growth
opportunities in this area. In particular, the acquisition builds on the Group’s scale position in the sports nutrition sector,A10
broadens Performance Nutrition’s product portfolio into new categories and channels, and represents a further step change
in international growth opportunities for Performance Nutrition. The goodwill is attributable to the profitability and
development opportunities through combined R&D and the benefits associated with the extension of Glanbia's scale and
specific capabilities to the acquired business.
The fair value of assets and liabilities arising from the acquisition are as follows:
Property, plant and equipment
Intangible assets - brands/know-how
Intangible assets - customer relationships
Inventories
Trade and other receivables
Trade and other payables
Provisions for other liabilities and charges
Deferred tax liabilities
Fair value of assets acquired
Fair
value
€'000
1,700
47,641
36,721
9,433
7,419
(10,290)
(2,181)
(4,590)
85,853
The revenue included in the Group income statement from 19 January 2011 to 31 December 2011 contributed by BSN®
was €105.0 million. BSN® also contributed profit before interest, tax and amortisation of €12.4 million over the same period.
On 1 April 2011, the Group also acquired the business and assets of Kerry Group plc’s Limerick based liquid milk business
for €10.3 million. This consisted of €6.0 million intellectual property, €0.7 million working capital and property, plant &
equipment and €3.6 million goodwill.
The revenue and profit of the Group determined in accordance with IFRS for the year ended 31 December 2011 would not
have been materially different than that reported above if the acquisition date for all business combinations completed during
the period had been at the beginning of the year.
Acquisition related costs included in administration expenses in the Group income statement for the year ended
31 December 2011 amounted to €0.4 million (2010: €0.6 million).
No contingent liabilities were recognised on the acquisitions completed during the year. The gross contractual value and fair
value of trade and other receivables at the respective dates of acquisition amounted to €7.4m. No allowance for doubtful
debts is included as the full amount is expected to be recoverable.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
37. Related party transactions
The Group is controlled by Glanbia Co-operative Society Limited, which holds 54.4% 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 management1
Sales of services:
– Glanbia Co-operative Society Limited
– Associates
– Joint ventures
– Subsidiaries
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
–
–
–
–
–
–
–
62,124
3,576
95,563
1,185
100,324
336
17
15,297
–
–
–
–
–
–
–
–
16,068
2010
Group
€'000
2,498
64,077
791
67,366
336
17
11,977
–
62,124
15,650
16,068
12,330
Sales to related parties were carried out under normal commercial terms and conditions.
(b) Purchases of goods and services
Purchases of goods:
– Associates
– Joint ventures
– Key management1
Purchases of services:
– Glanbia Co-operative Society Limited
– Associates
– Joint ventures
– Subsidiaries
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
–
–
–
–
–
–
–
2,305
2,305
9,115
3,825
3,029
15,969
791
1,488
81
–
2,360
–
–
–
–
–
–
–
2,086
2,086
2010
Group
€'000
9,721
3,090
2,083
14,894
290
2,174
8
–
2,472
Purchases from related parties were carried out under normal commercial terms and conditions.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
(c) Year-end balances arising from sales/purchases of goods/services
Receivables from related parties:
– Glanbia Co-operative Society Limited
– Associates
– Joint ventures
– Key management¹
Payables to related parties:
– Glanbia Co-operative Society Limited
– Associates
– Joint ventures
– Key management¹
– Subsidiaries
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
–
–
–
–
–
–
–
–
–
60,216
19
–
3,987
284
4,290
–
1,581
45,647
176
–
–
–
–
–
–
–
–
–
–
101,249
2010
Group
€'000
682
118
6,764
207
7,771
31
1,972
28,087
204
–
The receivables from related parties arise mainly from sale transactions and are due two months after the date of sale. The
receivables are unsecured in nature and only bear interest when receivables are due more than three months after the date
of sale. The payables to related parties arise mainly from purchase transactions and are due one month after the date of
purchase. The payables bear no interest.
60,216
47,404
101,249
30,294
1
Purchases, sales and related year-end balances involving key management refer to trading balances with Directors who are engaged
in farming activities. No loans were made to key management or associates during the year (2010: nil).
(d) Key management compensation2
Salaries and other short-term employee benefits
Post-employment benefits
Share based payments
Non-executive Directors fees
2011
Company
€'000
–
–
–
684
684
2011
Group
€'000
3,357
456
1,368
684
5,865
2010
Company
€'000
–
–
–
591
591
2010
Group
€'000
3,671
354
2,004
591
6,620
2 Key management compensation includes Directors (executive and non-executive) and members of the Group Operating Executive
Committee, including the Group Secretary. In November 2010, the Group revised its Group leadership structure to include a Group
Operating Executive and a Group Management Committee.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
(e) Loans to joint ventures
Loans receivable
At the beginning of the year
Foreign exchange difference on opening balance
Loans advanced
Loans repaid
At the end of the year
Interest on loans receivable
At the beginning of the year
Foreign exchange difference on opening balance
Interest charged
Interest received
At the end of the year
Total loans and interest receivable at the end of the year
2011
Company
€'000
2011
Group
€'000
2010
Company
€'000
2010
Group
€'000
–
–
–
–
–
–
–
–
–
–
–
13,060
415
–
–
13,475
392
13
542
(841)
106
13,581
–
–
–
–
–
–
–
–
–
–
–
33,718
2,384
3,742
(26,784)
13,060
391
30
1,229
(1,258)
392
13,452
The USD 10.0 million loan to Southwest Cheese Company, LLC is due on 31 July 2012. The GBP 4.8 million loan to
Nutricima Limited is due on 30 April 2012. It is expected both loans will roll over on the repayment dates.
38. Events after the reporting period
There were no significant events, outside the ordinary course of business, affecting the Group since 31 December 2011.
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
39. Principal subsidiary and associated undertakings
(a) Subsidiaries
Incorporated and operating in
Principal place of business Principal activities
Group interest %
Ireland
Glanbia Foods Ireland 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 Farm Fresh Dairy Products
Limited
Glanbia Ingredients (Ballyragget)
Limited
Citywest, Dublin 24
Fresh dairy products
Ballyragget, Co. Kilkenny
Milk products
Glanbia Ingredients (Virginia) Limited Virginia, Co. Cavan
Milk products
Glanbia Nutritionals (Ireland) Limited Kilkenny
Glanbia Nutritionals (Europe) Limited Kilkenny
Nutritional products
Nutritional products
Glanbia Nutritionals (Research)
Limited
Glanbia Feeds Limited
Kilkenny
Research and development
Enniscorthy, Co. Wexford and
Portlaoise, Co. Laois
Manufacture of animal feed
products
Glanbia Estates Limited
Avonmore Proteins Limited
Glanbia Financial Services
Kilkenny
Kilkenny
Kilkenny
Property and land dealing
Financing
Financing
Glanbia Investments (Ireland) Limited Kilkenny
Investment company
Glassonby
Waterford Foods plc
Kilkenny
Kilkenny
Holding company
Holding company
Grassland Fertilisers (Kilkenny) Limited Palmerstown, Co. Kilkenny
Fertilisers
D. Walsh & Sons Limited
Palmerstown, Co. Kilkenny
Grain and fertilisers
United States
Glanbia, Inc.
Delaware
Holding company
Glanbia Foods, Inc.
Twin Falls, Idaho
Milk products
Optimum Nutrition, Inc.
Illinois, South Carolina, Florida Sports nutrition products
Bio-Engineered Supplements and
Nutrition, Inc.
Boca Raton, Florida
Sports nutrition products
Glanbia Nutritionals (NA), Inc.
Carlsbad, California
Nutrient delivery systems
Glanbia Nutritionals, Inc.
Madison, Wisconsin
Nutritional distribution
Glanbia Ingredients, Inc.
Madison, Wisconsin
Dairy products distribution
Britain and Northern Ireland
Glanbia (UK) Limited
Victoria Square, Birmingham Holding company
Glanbia Holdings Limited
Victoria Square, Birmingham Holding company
Glanbia Investments (UK) Limited
Victoria Square, Birmingham Holding company
Optimum Nutrition EMEA Limited
London, England
Sports nutrition products
Glanbia Nutritionals (UK) Limited
Middlesbrough
Sports nutrition products
Glanbia Foods (NI) Limited
Portadown, Co. Armagh
Consumer food products
Glanbia Feedstuffs Limited
Victoria Square, Birmingham Supply of animal feeds
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
73.00
60.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Incorporated and operating in
Principal place of business Principal activities
Group
Interest %
Canada
Glanbia Nutritionals (Canada) Inc.
Angusville, Manitoba
Nutrient delivery systems
100.00
Germany
Glanbia Nutritionals Deutschland GmbH
Orsingen-Nenzingen,
Germany
Nutrient delivery systems
100.00
Netherlands
Glanbia Foods B.V.
Moergestel, Netherlands
Holding company
Asia
Glanbia Nutritionals (Suzhou)
Company Limited
Suzhou, China
Nutrient delivery systems
GN Life Science (Shanghai) Co. Limited
Shanghai, China
Nutrient ingredients
Glanbia Nutritionals Singapore Pte Limited
Singapore
Customer Service Office
100.00
100.00
100.00
100.00
(b) Associates and joint ventures
Incorporated and operating in
Ireland
Date to which
results
included
Principal place of business
Principal
activities
Group
interest %
Co-operative Animal Health Limited *
31–Dec–10
Tullow, Co. Carlow
South Eastern Cattle Breeding
Society Limited *
31–Dec–10
Thurles, Co. Tipperary
Agri chemicals
Cattle breeding
Malting Company of Ireland Limited *
30–Sept–11 Togher, Cork
Malting
South East Port Services Limited *
31–Dec–11 Kilkenny
Greenfield Dairy Partners Limited *
31–Dec–11 Dunbell, Co. Kilkenny
Port services
Dairy production
and development
Corman Miloko Ireland Limited **
31–Dec–11 Carrick-on-Suir, Co. Tipperary
Dairy spreads
Garristown Properties Limited **
31–Dec–11
Garristown, Co. Dublin
Property
development
50.00
57.00
33.33
49.00
33.33
45.00
50.00
United States
Southwest Cheese Company, LLC **
31–Dec–11 Clovis, New Mexico
Milk products
50.00
Britain and Northern Ireland
Glanbia Cheese Limited **
31–Dec–11
Magheralin and Llangefni
Cheese products
Milk Ventures (UK) Limited **
30–Nov–11
Stockport, England
Holding company
Nigeria
Nutricima Limited **
30–Nov–11
Nigeria
Evaporated and
powdered milk
51.00
50.00
50.00
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 filed in the Companies Registration Office in Ireland.
*
**
Associate
Joint venture
Glanbia plc Annual Report 2011
Financial statements
www.glanbia.com
Five year financial summary
Summary income statement
2011
2010
2009
2008
2007
Revenue
€2,671.2m
€2,166.7m
€1,830.3m
€2,232.2m
€2,206.6m
Operating profit pre exceptional
€161.0m
€136.5m
€111.2m
€134.1m
€115.8m
Operating margin pre exceptional
6.0%
6.3%
6.1%
6.0%
5.2%
Net financing costs
(€27.9m)
(€22.1m)
(€24.0m)
(€21.1m)
(€17.3m)
Share of results of Joint Ventures &
Associates*
Profit before tax pre exceptional
Taxation pre exceptional
Profit after tax pre exceptional
Net exceptional items (post tax)
Basic earnings per share
Adjusted earnings per share
Dividend per share in respect
of the full year
€14.3m
€10.1m
€10.2m
€7.3m
€1.0m
€147.4m
(€27.0m)
€120.4m
(€7.6m)
38.22c
46.32c
€124.5m
(€25.5m)
€99.0m
€9.7m
36.86c
38.07c
€97.4m
(€19.1m)
€78.3m
€34.9m
38.46c
30.68c
€120.3m
(€21.5m)
€98.8m
(€19.4m)
26.76c
35.86c
€99.5m
(€16.4m)
€83.1m
(€22.8m)
20.42c
30.25c
8.27c
7.52c
6.84c
6.51c
6.08c
* Share of results in Joint Ventures & Associates is an after interest and tax amount.
Adjusted earnings per share
Profit attributable to the equity holders
of the Parent
Amortisation of intangible assets
(net of related tax)
Net exceptional items
2011
€'000
2010
€'000
2009
€'000
2008
€'000
2007
€'000
112,178
108,047
112,676
78,399
59,833
16,163
13,222
12,126
7,312
5,964
7,633
(9,680)
(34,905)
19,358
22,846
Adjusted net income
135,974
111,589
89,897
105,069
88,643
Weighted average number of ordinary
shares in issue
Adjusted earnings per share
(cents per share)
293,536,350
293,105,068
292,985,630
293,018,610
293,012,540
46.32
38.07
30.68
35.86
30.25
Glanbia plc Annual Report 2011
Other information
www.glanbia.com
Shareholders’ information
Stock exchange listings
The Company’s shares are listed on the main market of the
Irish Stock Exchange as well as having a premium listing on
the main market of the London Stock Exchange.
Managing your shareholding
Computershare Investor Services (Ireland) Limited
(“Computershare”) maintains the Company’s register of
members. Should a shareholder have any queries in respect
of their shareholding, they should contact Computershare
directly using the contact details provided below:
Computershare Investor Services (Ireland) Limited,
Heron House, Corrig Road, Sandyford Industrial Estate,
Dublin 18, Ireland.
Contact details: telephone number 01 247 5349 (within
Ireland), 00353 1 247 5349 (outside Ireland), or by logging on
to www.investorcentre.com/ie/contactus.
Information on shares
Share price data
Share price as at 31 December 2011
Market capitalisation
Share price movements during the
year:
– high
– low
2011
2010
€
4.63
€
3.68
1,362m 1,081m
5.02
3.55
3.68
2.43
The current share price of Glanbia plc ordinary shares can
be accessed at http://www.glanbia.com/prices-delayed
Share capital
The authorised share capital of the Company at 31
December 2011 was 306,000,000 ordinary shares at
€0.06 each. The issued share capital at 31 December
2011 was 294,532,684 ordinary shares of €0.06 each.
Substantial shareholdings
The table below details the significant holding (3% or more)
in the Company’s ordinary share capital that has been
disclosed to the Company at 28 February 2012 in
accordance with the requirements of Rule 7.1 of the
Transparency Rules issued by the Financial Regulator under
section 22 of the Investment Funds, Companies and
Miscellaneous Provisions Act, 2006.
Shareholder
No. of
ordinary shares
% of issued
share capital
Glanbia
Co-operative Society
Limited
Prudential plc group of
companies
160,277,308
54.4%
11,978,374
4.06%
Employee share schemes
The Company operates a number of employee share
schemes. At 31 December 2011, 740,576 ordinary shares
were held in an employee benefit trust for the purpose of the
Group’s employee share schemes. While any shares in the
Company are held by the Trustees, the Trustees shall refrain
from exercising any voting rights which may attach to the
shares save that if the beneficial interest in any share has
been vested in any beneficiary the Trustees shall seek and
comply with any direction from such beneficiary as to the
exercise of voting rights attaching to such shares.
Dividend payments direct to your bank account
An interim dividend of 3.33 cents per share was paid in
respect of ordinary shares on 14 October 2011.
Subject to shareholders’ approval, a final dividend of 4.94
cents per share will be paid in respect of ordinary shares on
11 May 2012 to shareholders on the register of members on
30 March 2012. If a shareholder’s registered address is in
the UK and a shareholder has not previously provided the
company with a mandate form for an Irish euro account, the
payment will be in GBP. All other payments will be in euro.
Dividend Withholding Tax (DWT) is deductible from dividends
paid by an Irish resident company, unless the shareholder is
entitled to an exemption and has submitted a properly
completed exemption form to the Company's Registrar,
Computershare. DWT applies to dividends paid by way of
cash and is deducted at the standard rate of income tax
(currently 20%). Non-resident shareholders and certain Irish
companies, trusts, pension schemes, investment
undertakings and charities may be entitled to claim
exemption from DWT and are thereby required to send the
relevant form to Computershare. Copies of this form may be
obtained from Computershare.
In order to continue to improve the security of dividend
payments to shareholders and reduce costs, the Company
proposes to pay future dividend payments on its ordinary
shares only by credit transfer into a nominated bank or
building society account.
Shareholders will continue to receive tax vouchers in respect
of dividend payments. The Company takes data security
issues very seriously. Bank account details supplied to the
Company and its Registrar will be used only for dividend
distribution and the information will not be used for any other
purpose or supplied to any third party.
Glanbia plc Annual Report 2011
Other information
www.glanbia.com
www.glanbia.com
Shareholders may visit www.glanbia.com/shareholder-centre
for up-to-date investor information. Electronic copies of
current and past annual and half-yearly reports can be
downloaded from the website. Current and historic share
prices, news, updates and presentations may also be
obtained. Shareholders may also register to receive future
shareholder communications electronically.
Electronic communications
The changes brought about by the Transparency (Directive
2004/109/EC) Regulations 2007 recognises the growing
importance of electronic communications. The Group
therefore provides documentation and communications to all
shareholders via our website unless a shareholder has
specifically elected to receive a hard copy.
Using electronic communications enables fast receipt of
documents, helps the environment by significantly reducing
the amount of paper used to communicate with
shareholders and reduces associated printing, mailing and
distribution costs.
Shareholders can also vote online for the next Annual
General Meeting (“AGM”). This is a quick and easy option,
using the proxy voting service provided by Computershare.
Shareholders may use this facility by visiting
www.eproxyappointment.com.
Financial calendar
Announcement of final results for
2011
Ex-dividend date
Record date for dividend
Date for receipt of proxy forms
Record date for AGM
AGM
Dividend payment date
29 February 2012
28 March 2012
30 March 2012
7 May 2012
7 May 2012
9 May 2012
11 May 2012
AGM
The AGM will be held on 9 May 2012.
The notice of meeting, together with details of the
business to be conducted at the meeting is available
on www.glanbia.com/agm
The voting results for the 2012 AGM, including proxy votes
and votes withheld will be available on our website shortly
after the meeting at the following address:
www.glanbia.com/agm
Conditions for participating in a meeting
Every shareholder, irrespective of how many Glanbia shares
they hold, has the right to attend, speak, ask questions and
vote at the AGM. Completion of a proxy form will not affect a
shareholder’s right to attend, speak, ask questions and/or
vote at the meeting in person.
The quorum for a general meeting of the Company is
constituted by three persons entitled to vote upon the
business of the meeting, each being a shareholder or a
proxy or corporate representative for a shareholder.
The right to participate in the AGM is subject to the
registration of the shares prior to the date of the meeting (the
record date). For the 2012 AGM the record date is 5:00 pm
on 7 May 2012 (or in the case of an adjournment 5:00 pm,
on the day prior to the day before the time fixed for the
adjourned meeting).
Appointment of proxy
Where a shareholder is unable to attend the AGM in person,
a proxy (or proxies) may be appointed to attend, speak, ask
questions and vote on their behalf. For this purpose a form
of proxy is posted to all shareholders. Copies of these
documents may be requested by telephoning the
Company’s Registrar on 01 247 5349 (within Ireland),
00353 1 247 5349 (outside Ireland), or by logging on
to www.investorcentre.com/ie/contactus or by writing to
the Group Secretary at Glanbia plc, Glanbia House,
Kilkenny, Ireland.
Alternatively, a shareholder may appoint a proxy
electronically, by visiting www.eproxyappointment.com and
submitting their proxy details. They will be asked to enter the
Control Number, the Shareholder Reference Number
(“SRN”) and PIN and agree to certain terms and conditions.
The Control Number, the SRN and the PIN can be found on
the top of the form of proxy.
CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the Meeting and any adjournment(s) thereof
by using the procedures described in the CREST manual.
How to exercise shareholders rights
Shareholders have several ways to exercise their right to
vote:
> by attending the AGM in person;
> by appointing the Chairman or another person as a proxy
to vote on their behalf; or
> by appointing a proxy via the CREST system.
The passing of resolutions at a meeting of the Company,
other than special resolutions, requires a simple majority. To
be passed, a special resolution requires at least 75% of the
votes cast to be in favour of the resolution.
Tabling agenda items
A shareholder, or a group of shareholders acting together,
who hold at least 3% of the issued share capital of the
Company, has the right to put an item on the agenda of the
AGM. In order to exercise this right, written details of the item
to be included on the 2012 AGM agenda together with a
written explanation why the item is to be included on the
agenda and evidence of the shareholding must be received by
the Group Secretary at Glanbia plc, Glanbia House, Kilkenny,
Ireland or by email to ir@glanbia.ie /info@glanbia.ie no later
than 29 March 2012 (i.e. 42 days before the AGM).
An item cannot be included on the AGM agenda unless it is
accompanied by the written explanation and received at either
of these addresses by this deadline.
Tabling draft resolutions
A shareholder, or a group of shareholders acting together,
who hold at least 3% of the issued share capital of the
Company, has the right to table a draft resolution for
Glanbia plc Annual Report 2011
Other information
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inclusion on the agenda of the 2012 AGM subject to any
contrary provision in company law.
In order to exercise this right, the text of the draft resolution
and evidence of shareholding must be received by no later
than 29 March 2012 (i.e. 42 days before the AGM) by post
to the Group Secretary at Glanbia plc, Glanbia House,
Kilkenny, Ireland or by email to ir@glanbia.ie /info@glanbia.ie.
A resolution cannot be included on the 2012 AGM agenda
unless it is received at either of these addresses by this
deadline. Furthermore, shareholders are reminded that there
are provisions in company law which impose other
conditions on the right of shareholders to propose
resolutions at the general meeting of a company.
How to ask a question before or at the meeting
The AGM is an opportunity for shareholders to put a
question to the Chairman during the question and answer
session. Before the 2012 AGM, a shareholder may also
submit a question in writing by sending a letter and evidence
of shareholding at least four business days before the 2012
AGM (i.e. 3 May 2012) to the Group Secretary, Glanbia plc,
Glanbia House, Kilkenny, Ireland or by email to ir@glanbia.ie
/info@glanbia.ie.
Dividend rights
The Company may, by ordinary resolution, declare dividends
in accordance with the respective rights of shareholders, but
no dividend shall exceed the amount recommended by the
Directors. The Directors may also declare and pay interim
dividends if it appears to them that the interim dividends are
justified by the profits of the Company available for
distribution.
Distribution on winding up
If the Company shall be wound up and the assets available
for distribution among shareholders shall be insufficient to
repay the whole of the paid up or credited as paid up share
capital, such assets shall be distributed so that, as nearly as
may be, the losses shall be borne by shareholders in
proportion to the capital paid up or credited as paid up at the
commencement of the winding up on the shares held by
them respectively. Further if, in a winding up, the assets
available for distribution among shareholders shall be more
than sufficient to repay the whole of the share capital paid up
or credited as paid up at the commencement of the winding
up, the excess shall be distributed among shareholders in
proportion to the capital at the commencement of the
winding up paid up or credited as paid up on the said shares
held by them respectively.
Glanbia plc Annual Report 2011
Other information
www.glanbia.com
Contacts
Group Secretary and Registered Office
Michael Horan,
Glanbia plc,
Glanbia House,
Kilkenny,
Ireland.
Stockbrokers
Davy Stockbrokers,
49 Dawson Street,
Dublin 2,
Ireland.
(Joint Broker)
RBS Hoare Govett Limited,
250 Bishops Gate,
London EC2M 4AA,
United Kingdom.
(Joint Broker)
Auditors
PricewaterhouseCoopers,
Ballycar House,
Newtown,
Waterford,
Ireland.
Solicitors
Arthur Cox,
Earlsfort Centre,
Earlsfort Terrace,
Dublin 2,
Ireland.
Pinsent Masons,
3 Colmore Circus,
Birmingham B4 6BH,
United Kingdom.
Principal Bankers
Allied Irish Banks, plc
The Governer and Company of the Bank of Ireland
BNP Paribas S.A.
Barclays Bank Ireland plc
Citibank Europe plc
KBC Bank Ireland plc
Danske Bank A/S
Rabobank Ireland plc
The Royal Bank of Scotland N.V.
Ulster Bank Ireland Limited
Registrar
Computershare Investor Services (Ireland) Limited,
Heron House,
Corrig Road,
Sandyford Industrial Estate,
Dublin 18,
Ireland.
Glanbia plc Annual Report 2011
Other information
www.glanbia.com
Index
A
Applying the principles of the UK
Corporate Governance Code
Audit Committee report
Available for sale financial assets
B
Board of Directors and senior management
Borrowings
Business combinations
C
Capital grants
Cash and cash equivalents
Cash generated from operations
Commitments
Company statement of changes in equity
Company statement of comprehensive income and
statement of cash flows
Company statement of financial position
Contacts
Contingent liabilities
Critical accounting estimates and judgements
D
Dairy Ireland – divisional performance
Dairy Ireland – understanding our business
Deferred income taxes
Derivative financial instruments
Directors’ remuneration
Dividends
Divisional performance
E
Earnings per share
Employee benefit expense
Events after the reporting period
Exceptional items
F
Finance income and costs
Financial risk management
Financial statements contents
Five year financial summary
G
General information
Governance and risk framework
Group Chairman’s introduction to corporate
governance
Group Chairman’s statement
Group Finance Director’s review
Group income statement
Group Managing Director’s review
Group statement of cash flows
Group statement of changes in equity
Group statement of comprehensive income
Group statement of financial position
66
49
122
44
131
142
139
124
141
141
88
89
87
152
140
103
36
14
133
139
112
115
4
114
111
145
111
112
98
79
148
90
43
42
6
16
82
8
86
84
83
85
I
Income taxes
Independent auditors’ report
Intangible assets
Inventories
Investments in associates
Investments in joint ventures
113
80
116
124
120
121
J
Joint Ventures & Associates – divisional performance 40
N
Nomination Committee report
Non-controlling interests
Notes to the financial statements
O
Operating expenses
Other reserves
Other statutory information
Our global footprint
Our responsibilities
P
Performance - 2011
Principal subsidiary and associated undertakings
Property, plant and equipment
Provisions for other liabilities and charges
R
Related party transactions
Remuneration Committee report
Retained earnings
Retirement benefit obligations
Risk management
S
Segment information
Share capital and share premium
Shareholders’ information
Statement of Directors’ responsibilities
Summary of significant accounting policies
T
Trade and other payables
Trade and other receivables
U
Understanding our business
US Cheese & Global Nutritionals –
divisional performance
US Cheese & Global Nutritionals –
understanding our business
51
130
90
110
125
73
34
27
2
146
115
138
143
53
130
135
22
105
129
149
77
90
139
123
14
38
15
Glanbia plc Annual Report 2011
Index
www.glanbia.com
153
Notes
154
Glanbia plc Annual Report 2011
Notes
www.glanbia.com
Notes
Glanbia plc Annual Report 2011
Notes
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155
Notes
156
Glanbia plc Annual Report 2011
Notes
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Cautionary statement
The 2011 Annual Report contains forward-looking
statements. These statements have been made by
the Directors in good faith, based on the information
available to them up to the time of their approval of
this report. Due to the inherent uncertainties, including
both economic and business risk factors, underlying
such forward-looking information, actual results may
differ materially from those expressed or implied by
these forward-looking statements. The Directors
undertake no obligation to update any forward-looking
statements contained in this report, whether as a result
of new information, future events, or otherwise.
4,500+
employees in 14 countries
5.8bn
Litres of milk processed
across Dairy Ireland,
US Cheese & Global
Nutritionals and Joint
Ventures & Associates
Glanbia plc,
Glanbia House,
Kilkenny,
Ireland.
Tel +353 56 777 2200
Fax +353 56 777 2222
www.glanbia.com