Good morning, and welcome to the Glanbia plc Q1 2022 interim management statement with Siobhán Talbot, Group Managing Director, and Mark Garvey, Group Finance Director. Today's conference is being recorded, and at this time, I'd like to turn the conference over to Liam Hennigan, Group Secretary and Head of Investor Relations. Please go ahead, sir.
Thank you. Good morning, and welcome to the Glanbia Q1 2022 interim management statement call. During today's call, the directors may make forward-looking statements. These statements have been made by the directors in good faith, based upon the information available to them up to the time of their approval of the interim management statement. 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 made on today's call, whether as a result of new information, future events, or otherwise. I'm now handing the call over to Siobhán Talbot, Group Managing Director, Glanbia plc.
Good morning, and thank you all for joining our call today and for your interest in Glanbia. On the call, I'll outline a summary of our financial performance and strategic execution during Q1 . I'll speak to our focus areas for the remainder of the year and our outlook. Mark will cover the finances, after which we'll be very happy to take your questions. We're very pleased that our Q1 performance, which I will discuss shortly, has given us the confidence to raise our guidance for the full year. Absent any major changes in the political landscape, we plan to deliver growth and adjusted earnings per share on a constant currency basis of between 5% and 10% for 2022.
With the continued strength of the U.S. dollar, if it stays where it is today, that would translate into reported growth for the group of 15%-20% for full year 2022. As you know, Glanbia plc is very much a purpose-led international nutrition business. Our purpose is clear and possibly has never been as relevant to consumers as it is today, given our focus on delivering better nutrition for every step of life's journey. Our company is grounded in a long history of expertise in dairy nutrition, and over many years, we've honed and evolved that expertise to become a business today that has really strong core capabilities and depth in nutrition across all areas of the value chain. We've reshaped our group, including in this quarter, the finalization of the disposal of our Irish dairy business to Glanbia Co-op.
On that journey, Glanbia has evolved through organic growth and acquisition to now be so much more broader than dairy nutrition, spanning true ingredient solutions capability across a variety of consumer motivations and sectors. We have a leading global portfolio of sports and lifestyle brands across many consumer usage occasions. We've progressed our ESG agenda and are committed to becoming more sustainable across all of our operations with science-based targets in place and a wider commitment to net zero by 2050 at the latest. Our growth strategy is very much on track, and we will continue to leverage our strengths through a focus on sustainably evolving our global capabilities in nutritional solutions across a range of growing sectors and extending our brand reach into wider consumer nutrition needs and occasions.
With our full year 2021 results, we noted that we had started 2022 well, with good revenue growth in both GPN and GNS, and the belief that the actions we've taken in simplifying and transforming our business and investing for long-term sustainable growth, would position us extremely well as we move beyond the current inflationary cycle. Q1 reaffirms that view, as we've seen continued good demand and consumption trends across our core solutions and brand of propositions, and the significant mitigating actions that we've taken to counter unprecedented inflation is delivering momentum across the group and allowing us to upgrade our guidance. Turning to the performance for the first quarter. As noted, the group has started 2022 strongly, particularly in the context of a strong prior year comparison. In the first quarter, we delivered 23.9% like-for-like revenue growth on a constant currency basis.
Through COVID and into 2022, we've been very focused on and invested behind driving demand. We've seen that deliver good top-line momentum, both in 2021 and 2022 to date. As we saw inflation accelerate through 2021, we started our mitigating actions. Pricing has been the primary mitigation, and this drove the 17% period. We're pleased that the investment in our brands and ingredient solution capabilities underpinned good volume growth in the period, in a period of such significant pricing action. We had 3.3% branded like-for-like volume growth in GPN and 4.2% volume growth in Nutritional Solutions. I'll speak a little bit more later on the drivers of GPN and NS. In terms of focus areas for 2022, we have a series of exciting priorities in place.
In GPN, we are focused on sustaining the really good momentum we have developed in our largest brand, Optimum Nutrition, a brand that continues to go from strength to strength across all geographies. Likewise, supported by continued investment, our portfolio of lifestyle brands gained strongly in 2021 and into 2022. Our consumer research in the U.S. and the U.K. has uncovered emerging attitude and usage towards weight loss post-COVID. We've spoken about this previously. In H2 of the year, we will be unveiling details of an evolution of the SlimFast brands that I'll speak more to later. Innovation remains an important part of our consumer engagement, and we have a very active pipeline across formats and usage occasions. Areas such as ready-to-drink, healthy snacking, plant, and energy are all areas where we're developing new products for the GPN portfolio.
Our GN Nutritional Solutions business, as you know, plays across a wide range of growth segments, and we continue to develop new ways to increase our relevance to our customers. In 2022, we will continue to invest in building out our solutions as an ingredient player across healthy snacking, micronutrients, as well as emerging platforms of flavors, plant-based, immunity, and bioactive ingredients. Building on the core strength of nutritional solutions to acquire and integrate complementary businesses, the acquisition of Sterling Technology offers a natural complement to our existing business in immunity solutions. As noted at our full year 2021 results, we have, since the latter part of 2021, seen the emergence of significant cost inflation, particularly in dairy. As I said earlier, we commenced our mitigating actions in GPN in 2021 and executed further price increases in Q1 , and are planning more for the latter part of 2022.
In addition, we've increased our cost focus and are further leveraging the GPN transformation program, which is delivering significant savings. In Nutritional Solutions, inflation is also a headwind, particularly in dairy ingredients. In that business, we are proactively passing through pricing and also driving cost improvement projects across the business. As a group, we continue to focus on leverage and over-leveraging our overall capabilities to drive group performance. In 2022, the benefits of the portfolio really came to the fore as we leveraged our expertise in whey to the benefit of both our ingredients and our branded portfolio business. With, as we said previously, significant element of our whey requirements for 2022 now secured. A position informed by the insights and supply chain expertise of our Glanbia Nutritionals team. Cash generation and continued balance sheet strength is understandably a priority for us.
Our working capital in Q1 has increased, driven by pricing and strategic sourcing of ingredients, where we plan to deliver on our cash conversion target of over 80% for the full year, and judiciously deploy our capital on internal opportunities, acquisitions, and shareholder returns as we move through the year. As outlined at our recent 2021 results, our ESG agenda is central to our strategy, and we have a number of programs with clearer targets across all aspects of Environmental, Social, and Governance. On the environmental agenda, we are progressing our roadmap to the delivery of our science-based SBTi-validated targets under our Pure Food plus Pure Planet sustainability strategy. Our near-term focus is assembling a series of projects to deliver our targets on emissions, packaging, and energy. I'll speak more to those later.
On the social agenda, we've made great progress across the group on progressing our DE & I agenda, with 2022 focused on training and development, talent acquisition to really embed and drive the necessary change. Finally, on our governance agenda, the chairman is leading a board subcommittee driving the evolution of the board as we execute our plans to increase our board diversity and skill set. Glanbia's successfully growing revenue year-to-date, despite a number of significant risks, including inflation, geopolitical tensions, and, of course, continued COVID-related supply chain disruptions, particularly in Asia. In the absence of any further major market disruption, the strong start to 2022 does give us increasing confidence in our ability to stay close to the nutrition needs of our consumers and to navigate these external challenges. We're now confident to raise our full-year outlook.
For the full year 2022, GPN expects to deliver double-digit revenue growth, while Glanbia Nutritionals expects strong double-digit revenue growth. Revenue growth on both platforms will be primarily driven by pricing, as we've noted previously. EBITA growth is now expected to be delivered in both GPN and Nutritionals for full year 2022, with expectations for our U.S. Cheese and our joint ventures largely unchanged from the prior views we've expressed. As we've noted previously, we do expect some full-year margin contraction in GPN due to the lag effect of inflation on our pricing mitigating action. In Nutritionals, some full-year margin contraction will be driven by the mathematical dilution of significant top-line pricing changes, particularly in dairy ingredients. From a group perspective, as I've referenced, a strong cash generation is expected to deliver an operating cash flow conversion of over 80%.
Also, as I've referenced, we now expect to deliver between 5% and 10% growth in adjusted EPS on a constant currency basis, with earnings growth weighted to the second half, given the strong prior year first half comp. As I've said, our reported number will be approximately 10% higher than that if the dollar stays strong as it is today. Turning to GPN. GPN delivered a good Q1 with like-for-like branded revenue growing by 16.7%. We saw good growth across both the Americas and the international regions. This was delivered by the Optimum Nutrition brand globally and by our Healthy Lifestyle brands in North America. We've taken pricing actions across the entire portfolio in Q1 , and total pricing in the branded portfolio was up 13.3% in the period. We've engaged strongly with our consumers and sustained volume momentum.
Our volume momentum was particularly strong in the sports portfolio, and despite some headwinds in the weight management category, we delivered overall branded volume up 3.3%, which was better than our earlier expectations. We've continued to invest behind our brands, and I believe that this is crucial and has been crucial to supporting our consumer demand through a period of double-digit price increases. Turning then to speak a little about the key brands within our portfolio. In recent years, we've evolved the GPN portfolio to participate in the growth categories of performance nutrition, healthy lifestyle, and weight management, complemented by the development of a whole new skill set in the direct-to-consumer space. Performance nutrition, as you will know, is the core category from which we've developed our business. ON remains our biggest single brand and is the only true global brand in the category.
In Q1 , ON represented just over 51% of GPN-branded sales. It had an excellent first quarter, growing sales globally by 23%. In its key U.S. market, consumption increased by almost 16% in the 12 weeks to 20 March. Our strategy for ON is to continue to target performance-driven consumers by driving awareness and distribution globally. We bring the brand to life through the PROVEN campaign, which is now executed in over 30 countries. We continue to innovate around new consumer opportunities, and we're expanding that in 2022, where we'll expand our presence in plant protein, dairy ready-to-drink, and hydration as consumers embrace flexible protein and energy offerings. Our healthy lifestyle portfolio is based in North America and includes the think!, Amazing Grass, and Isopure brands. In the first quarter, this portfolio represented over 17% of GPN-branded revenue and delivered 30% growth.
Consumption grew by 14% as consumers seek out brands that resonate with their requirements for healthy, convenient nutrition. Each of our brands in the healthy lifestyle space offer unique propositions to consumers. With think!, targeting consumers seeking high protein, low sugar, convenient snacking. Amazing Grass, aimed at health-conscious consumers who want to incorporate more greens into their diet. Isopure, serving active consumers who value high quality, clean products in a range of zero, low-carb protein powders and drinks. SlimFast was over 17% of GPN-branded sales in the first quarter, but revenue declined by over 8% in the period. In recent periods, category headwinds have impacted the brand performance. We are in the process of broadening our brand appeal for SlimFast, from dieting to the broader weight management category.
Informed by extensive research with consumers in the U.S. and the U.K. over the last 18 months, we have a very clear idea on the consumer barriers that we'll be addressing for the SlimFast brand. It is a really strong brand, and we plan to expand the target audience for SlimFast to include consumers interested both in diet, but also in broader weight management. In the U.S., this will come to life through new brand and pack design, new creative, and new innovation, all due in the fall of this year. We've done similar work to this in the U.K. in 2021, which has strongly delivered in terms of consumer engagement and market share growth. Our direct-to-consumer brands have been an exciting addition in recent times to the GPN capability, and we had strong growth in the quarter in our Body & Fit brand.
As previously outlined, e-commerce is a key channel for us across our branded portfolio, and leveraging our direct-to-consumer brands is a clear part of our overall e-commerce strategy and very complementary to our overall brand growth ambition. Turning now to our other growth platform of Nutritional Solutions. Nutritional Solutions continued to have an excellent performance in Q1 , delivering over 22% growth. Customer demands remain very robust, driven by continued health and wellness trends across all of our key sectors. We delivered volume growth of over 4% and saw particularly strong performance for micronutrients in the period. Maintaining availability for our customers has been a key element of our growth, and the team continues to very successfully navigate any supply chain challenges.
Nutritional Solutions has a really robust business model, and in response to inflation headwinds, has also taken really significant pricing action in the passing through of raw material cost inflation. This drove an almost 15% increase in price in the period. The PacMoore acquisition that we completed last year is performing very well and increases our capability in the healthy snacking space. Acquisitions continue to be a core part of the evolution of Nutritional Solutions, and in the period we closed on the acquisition of Sterling Technology, a U.S. bioactive ingredients business. In March, we acquired this business for $60 million plus deferred consideration. Sterling is a leading producer of bioactive solutions in key markets in the U.S. and Asia Pacific.
It fits really nicely with our acquisition strategy of adding complementary assets and capabilities to our core platform in Nutritional Solutions. It builds out Nutritional Solutions immunity offering, which has performed very strongly in recent times, and builds it out across pediatric, medical, dietary and sports nutrition categories. It had 2021 revenues of EUR 24 million and will be marginally accretive to our full year 2022 earnings. With that, I'll now hand over to Mark.
Thanks Siobhán, and good morning to everyone on the call. I will walk through some of the key balance sheet movements in the quarter. On April 1, the group completed the sale of its 40% interest in Glanbia Ireland, Glanbia Co-op, for EUR 307 million. The group expects an exceptional gain net of transaction costs of approximately EUR 55 million related to this transaction. 2022 to date, the group has spent EUR 123 million in share buyback activity, EUR 95 million of which was during Q1 , purchasing 10.6 million shares at an average price of EUR 11.67. This included participation in the Co-op share placing in January and just last week concluding the EUR 50 million program announced last March.
This activity will result in an adjusted EPS accretion of approximately 3.5% in 2022. We are proposing to renew the group's authority to engage in share buyback activity at the group's annual general meeting today. Following the AGM, the board will keep the option for further share buyback authority under consideration as a capital allocation tool. As Siobhán mentioned, in March, the group acquired Sterling Technology, a U.S.-based bioactive ingredient company, for $60 million, plus deferred consideration of up to $27.5 million. This business will be integrated into Nutritional Solutions. It provides bioactive ingredients, which are mainly used in the growing immunity and gut health categories as well as pet nutrition. Revenues for 2021 were approximately $24 million, and the acquisition is expected to be marginally EPS accretive in 2022.
Net debt at the end of the quarter was EUR 552 million, and net debt EBITDA was 1.52 times. Operating cash flow was impacted by an increase in working capital during the quarter and compared to last year. This working capital increase was primarily driven by increased inventory valuations and business activity, as well as strategic sourcing of key ingredients to ensure availability throughout the year and to manage input prices. Working capital levels are expected to reduce during the remainder of the year, and the group is confident of delivering its 80%+ operating cash conversion target. For the full year, we expect a working capital outflow of approximately EUR 50 million-EUR 70 million. Capital expenditure is expected to be in a range of EUR 75 million-EUR 85 million for the year.
The group has EUR 1.2 billion of committed debt facilities, and as such, considerable resources from unutilized debt facilities for further investment activity in the GPN and NS businesses. To conclude then, we are pleased with a strong start to 2021, reporting a 23.9% increase in group like-for-like revenues with good top-line momentum across all wholly owned businesses. We've taken significant pricing actions across the group to mitigate the impacts of inflation, and we continue to drive our strategic agenda. We are pleased to also note that the positive trends we saw in quarter one are to date continuing into Q2 . As a result, we are raising our guidance of expected adjusted earnings per share growth on a constant currency basis for the year from 2%-8% to a new range of 5%-10%.
I would note that the average euro dollar rate for 2021 was $1.18 to the euro. As of today, the exchange rate is approximately $1.05 to the euro. Should the rate stay at a similar level to this for the year, our reported adjusted earnings per share growth would be up to 10% higher than the constant currency result. With that, I would like to hand back to the operator. We'd be happy to take your questions.
Thank you. If you would like to ask a question, you can do so now by pressing star one on your telephone. That's star one if you'd like to ask a question. We will now take our first question from James Targett from Berenberg. Please go ahead. Your line is open.
Hello. Good morning, Siobhán. Good morning, Mark. A few questions from me. Firstly, yeah, just on SlimFast. I guess I know you're gonna talk about this, you know, later in the year, but I would just you know, what really kind of gives you the confidence that this brand still has relevance, you know, with the consumer? You mentioned you've done some research in the U.K. Maybe if you could say what the performance in the U.K. was in, you know, in Q1 versus the U.S. It looks like you're obviously outperforming the category if you look at consumption, but still, you know, this is quite a significant decline in what is a material part of your GPN business.
Some more color there would be really helpful. Just secondly on, you know, on ON, you know, you talk about stepping up your activities in ready-to-drink and plant-based products. You know, this is something you've been focusing on for, you know, for a while, sorry, talking about for a while. How big are these areas now of ON? Is this really a, you know, a step up in areas like ready-to-drink, or is it just a, you know, ongoing, you know, evolution of the portfolio? Finally, you know, obviously I'm sure you're very aware that you have, you know, sort of an activist making some comments, y ou know, be curious for your thoughts as to any merit for a spin-out of the GPN division or reduction in the Irish dairy JVs in Europe. Thank you.
Thanks, James, for all those questions. Firstly, on SlimFast. SlimFast is a really strong brand and a brand that has 95% awareness, a brand that in fact is now for us 45% bigger than it was when we acquired it. It has been a great brand to be part of the portfolio. I think as we've spoken before, James, there's probably two category related reasons I would comment on in relation to the performance of SlimFast. Firstly, I think the COVID Omicron wave definitely peaked in the U.S. through Q1 , and no doubt that was a bit of an impediment to the category, and we didn't see the normal Q1 seasonal uplift that we would have and the fact that the category had seen as other years.
Secondly, as we referenced, I think at our full-year results, through COVID, consumers in the category have evolved and are focusing more on ongoing weight management than necessarily strict diet plans. We saw that progressing, and as you rightly referenced, we made some changes to the brand in the U.K. that have actually done really well. The brand grew in the U.K. in the Q1 . We've increased our market share significantly. In fact, our market share in the U.K. now is the strongest it has ever been. We've seen that growth. We engaged significantly with consumers. Consumers said to us, they really like the brand, they like the heritage, they have a strong recognition of the brand. Really, they said that the brand would benefit from a refresh, and that's what we're going to do.
We have a dedicated team now in place since 2021, informed by the consumer research. We have a very clear idea of what we need to do. We're going to make the brand more accessible to consumers who want support on that broader weight management piece. We have a very nice new pack and brand design, new creative, as I said, and new innovation. We have had great conversations with our retail partners, and it will be in market in the fall of this year. The fact that we've done it in the U.K. gives us great confidence because we've effectively done this early, earlier. We've modernized the design, we've done new creative, and we've actually seen it grow.
We are really confident in SlimFast as we go forward because consumers have told us very clearly that the brand has the license to go into that broader weight management space. We will, James, it is important to stay true to the consumers that have been very loyal to the brand on that journey of growth that we've had over significant time. We'll continue to evolve, but very, very confident about the brand opportunity as we go forward. Optimum Nutrition, as I've said, a superb brand, really growing very strongly in 2021, and you're seeing continued very strong growth in 2022.
I think in Optimum Nutrition, we're seeing the benefits of that marketing investment that we did all through COVID, and indeed that I referenced as we were moving through 2021, where we stayed very close to our consumers, invested in marketing. We were very conscious of the pricing, and we've stayed very close, and that is delivering performance results for us. Innovation is always part of our agenda, and yes, we have had a number of propositions in ready to drink, but our prior offering was very much more a niche play. We're very excited about the new offering in the ready to drink for Optimum Nutrition that will be coming into market now very shortly. Again, great conversations with our retail partners.
As you know, Optimum Nutrition in recent times has extended its channel reach, so we've had really good conversations with those retail partners about the new product that we're bringing, which really will leverage that gold standard Optimum Nutrition, authenticity, trust, all the things that I think make Optimum Nutrition so strong. Again, in the plant space, you're right, James, we have had an offering, but we have looked at the formulation of that, looked at the positioning, and we believe we'll have further opportunity to drive that. They are step changes. I think they will really leverage what is the ever-increasing brand equity that Optimum Nutrition has, and we'll be excited to talk to you more about that as the year progresses.
In terms of recent engagements with shareholders, clearly as a public company, we're very happy to engage with all of our shareholders, and we do that on a very regular basis. As a public company, we're always open-minded to value creation. That's evidenced, I think, by the significant evolution of Glanbia over many years, in fact, decades. We do believe that the group is currently on the right strategic journey. As you know, we are very purpose-led, and we are very performance driven. We have great businesses that are highly complementary in the areas of nutrition. We have great expertise across the branded side of GPN, Glanbia Nutritionals, and JVs, and we have a core capability in dairy protein. The Glanbia of today, as you know, is so much more than that.
We've invested and grown the business organically, made a series of strong acquisitions, and we now have a really strong complementary portfolio. Of course, as a group, we bring that all together. We centrally manage and leverage scale and expertise. I think you really saw that this year. As we've referenced, we were ahead of the inflation and supply challenges that others in the space had in whey protein in particular, and that was because we could bring the insights of our Glanbia Nutritionals team to the procurement requirements of GPN. As I said at the outset, always very happy to engage with all shareholders.
Thanks very much.
Thank you. We will now take our next question from Alex Sloane from Barclays. Please go ahead.
Yeah. Hi. Morning, Siobhán, Mark Garvey, and Liam Hennigan. Congrats on the strong start. Just a couple of questions from me. Just firstly, could you maybe update on customer inventory levels for your key GPN brands? Are you still comfortable these are at healthy levels that don't you know give risk of destocking through the year? Just note in your slides, it looks like the U.S. consumption was maybe slightly below your Q1 constant FX growth, although I appreciate that's a global number, so it's not necessarily apples for apples. But yeah, any comment on the inventory levels would be helpful. Then just second one, a kind of, I guess, a broader one and maybe coming back to James Targett's final question there. Yeah, you have had a strong performance now for the last sort of 12 months.
I think this is your third or fourth earnings guidance increase over that time. Yet, you know, the valuation of Glanbia is still at a pretty big discount to sort of pure play peers for GPN and Nutritional Solutions. I just wondered if, you know, there might be any plans maybe for a capital markets day over the next, you know, six to 12 months maybe that could really kind of, you know, flesh out to the broader market, you know, your strategy and business model.
Hi, Alex. Mark, I'll take that question and hand back to Siobhán for the second question. We're very comfortable, in fact, with where our customers' inventory levels are. You might recall we talked about this at the fourth quarter in terms of our comfort around the actual trajectory of revenues and into the first quarter as well. You're right, that is a U.S. number versus the total sales like-for-like numbers that you're seeing. In fact, ordering has been good, and we believe ordering is very much in line with what our customers are seeing in terms of consumption by their consumers as well, and that's continued into the second quarter. Very comfortable. I'll hand back to Siobhán for the second.
Yes. No, I acknowledge your comment, Alex, in terms of the valuation. You know, as I said, we have a very strong group, and we're very optimistic about our future growth journey. We've had great conversations with our shareholders, post our full year results in that context as we lay out our future strategic growth journey. Yes, you know, we are looking at doing a capital market event in the latter part of the year so that we get the opportunity to showcase the team, showcase the brand, showcase indeed the investments and evolution that we've had over recent times, and thank you for acknowledging it, but we have had great evolution.
The portfolio now is really strong, and I feel very confident about our future momentum at this point in time, given all of the work that we've done across the group, and particularly in GPN, where we've done significant transformation over the last number of years, and I think that would really serve us well, particularly as we move through this current inflationary cycle.
Thanks.
Thank you. We will now take our next question from Martin Deboo from Jefferies. Please go ahead.
Yeah, morning, everybody. Martin Deboo at Jefferies. Just one question really that I guess counterpoints Alex's question on inventories on the demand side with inventories on the supply side. Siobhán, because it's important, can we just go over again what you said at Q4 and just reconfirm that your hedged position in whey. I think you're covering for the year 90% of your whey requirements. By inference, that position was built in, I presume, January, February. Can we just go over that again? It's important. Secondly, what is your sense of availability of, in the market generally, of bulk WPC80 and WPI?
What lies behind my question is it looks as if producer stocks are at a low, and I'm wondering whether there might be availability problems in the market that could impact smaller suppliers who might struggle to get raw material inventory. Thank you.
Thank you, Martin. Yes, we are well covered, at least at 90%, maybe even a little bit higher at this point on our way for the full year. That was a really good strategic decision made by Hugh and the GPN team, very early, as you say, and we continue to build that. Obviously, as I said earlier, using the insights of our Glanbia Nutritionals team as well. Indeed, the fact that we are a big producer of WPI and WPC80, particularly within our joint ventures that are U.S.-based. All of those factors came together very nicely for us in terms of positioning our strategic procurement, and we're pleased with that because it reduces the risk, as you rightly say, through the year. The market remains tight.
I think it's fair to say, Martin, that, anecdotally, we would hear that supply definitely has been an issue for some other players, in the, in the category. Again, I think the depth of relationships that we have, and at least our own internal supply was a real advantage for us there. It's probably fair to say the WPI is probably a little bit tighter, even the WPC80 at the moment. We still fundamentally believe, Martin, that the fundamentals will rebalance.
I don't believe they go back to the historical lows that they might have been in 2020, but honestly, as I said before, if they moderate even from where they are today, we'd be very well positioned within our performance nutrition, given what we're seeing in terms of the successful pass-through of pricing, and how we're growing volumes in that context. Feeling good about our procurement piece, always very watchful. We have probably decades of experience in dairy approaching procurement at this point in time. Yes, I think others are seeing a tightening and have seen it through the first quarter. That's been an advantage to us to have it locked in.
Okay, thank you.
Thank you. We will now take our next question from Jason Molins from Goodbody. Please go ahead.
Hi, good morning, Siobhán, Mark, and Liam. A couple of questions around GPN, please. You mentioned sort of pricing that you've put through clearly at the start of this year, but then that you're also gonna do it later on, or you're contemplating it, doing it later on this year. Just wondering what's driving that, given, as you said, you're over 90% hedged already, given sort of price that's getting passed through to the customer. Is it not
Something you're thinking about from the sort of pockets of the consumer that maybe you need to hold prices or maybe just a bit more color around that. Just in terms of guidance for GPN, can you maybe give us a sense of how you think about volume growth for the year given the start that you've already had, and also bearing in mind the comps that you're gonna start facing, particularly in Q2 this year?
Hey, Jason. Look, we're very pleased with our pricing strategy to date. Frankly, you know, we've talked to you around the pricing we took last year, then we took further pricing again in February. We did that obviously in reaction to what we saw as whey costs, particularly whey costs, coming through this year. Those prices have stuck. They've been accepted by our customers, and generally, the elasticity so far has been a little bit less than we would have anticipated. To your question then on further pricing, this will depend, frankly, on how long whey prices stay at this level. To the extent that they continue into 2023, we'll have more visibility on that obviously over the next number of months as we sort of look to procurement into 2023.
We may take further pricing in the summer or fall, depending on timing there, as to whether we think that's gonna be important to cover us into 2023. A little bit of forecasting still to work through on that, but that's the main sort of rationale in terms of whether we will take further pricing or not, come summer or fall. In terms of guidance for GPN, obviously Q1 has been encouraging for us as we sort of look at the trajectory for the year. I would say at this point, from a volume perspective, we expect to be probably broadly in line for the year at this point. Again, we'll be looking at that as it gets to the second half of our current view.
Thank you.
Thank you. We'll now take our next question from Cathal Kenny from Davy Research. Please go ahead.
Good morning. Three questions from my side, two on GPN and one on the NS acquisition. Firstly, is it possible to get some commentary on your relative price position for ON relative to the category? That's my first question. Secondly, any color on the performance of your energy business, particularly Amino Energy. My final question relates to the acquisition. Just interested in the history, the heritage of that business, how long you have known it, and the strategic fit. Thank you.
Morning, Cathal. Thanks for that. Yes, there has been general pricing movement through the category, as you would expect. In fact, some have moved prices further even than ON because of the spot impact they had on some of their cost of goods. We very much keep that under review. But the pricing. The category has generally moved, but we've moved well at pace with that. We'll continue, as Mark has said, to review that even with potential further moves in the middle of the year. In terms of energy, really pleased. You know, we have a great AMIN.O. Energy proposition. We have some really exciting innovation coming there too. As you know, we have an AMIN.O. Energy powder, we have an AMIN.O. ENERGY Sparkling. Both those products doing really well within the Optimum Nutrition stable.
We have a really nice hydration innovation products coming this year. Again, as I mentioned, I think in my earlier comments, as consumers look to flexible protein and energy for those active consumers. Growing very nicely as part of the overall Optimum Nutrition portfolio. I pass over to Mark, and he'll give some more color on Sterling Technology.
Good morning, Cathal. And again, Sterling, it's a nice additional bolt-on. We've done four bolt-ons now over the last two to three years with Watson, Foodarom, PacMoore, now Sterling. In each case, frankly, a lot of this has been driven by the fact that the Nutritional Solutions team have had contacts, relationships with these businesses going back a number of years, and that's enabled us then to consummate a transaction, which we've done here as well. We've known this business quite a number of years. It does add additional capability for us in the immunity sector. I mean, this business sells quite a bit into Asia Pac as well, which is a market that we see as nicely growing in this area too. We're very pleased with the acquisition.
It's gonna be a very nice add-on to Nutritional Solutions and so we look forward to working with the team there.
Mark, just a quick follow-up. If you look at growth in NS over the last two years, I just wonder, are you coming up against some capacity constraints now or you still have ample capacity to grow into?
No, we're not. In fact, the beauty of Nutritional Solutions is the actual manufacturing footprint that we have across the organization. The acquisitions have in fact added additional capacity. Watson, for example, is a great example of that, as well as PacMoore as well. From a capacity perspective, we have still plenty of scope to grow.
Thank you.
Thank you. As a reminder, if you'd like to ask a question, please press star one. We will now take our next question from Heidi Vesterinen from BNP Paribas. Exane, please go ahead.
Good morning. First of all, just a clarification on your guidance, please. Are you factoring in any price elasticity or down trading in any market in either segment, please? I wondered about the emerging markets, for example. I have two strategic questions. First one on M&A, would you rule out large acquisitions in GPN, please? Secondly, going back to some topics that were addressed earlier, if we look at the history of the sector, most B2B ingredients companies that have a B2C arm have split their business. What is your rationale for having both together? You talked about the advantage you had in managing inflation, but I thought that you sourced most of your inputs from third parties. Yeah, any comments there would be helpful. Thank you.
Morning, Heidi. In terms of our guidance of 5%-10%, we continue to remain somewhat cautious for the second half of the year regarding elasticity. We have factored in more challenging elasticity in the second half than what we're currently seeing in Q1 . I would say that's somewhat in North America as well as international. I take your point, as prices go up internationally, that's something that we will be cautious on as well. We have factored that in in our guidance. I'll hand back to Siobhán on the other points.
Good morning, Heidi, and thanks for the questions. No, we haven't ruled out large acquisitions. In fact, as a team, we're always scanning the horizon for opportunities, and you know, if there are regardless of scale, to be frank, we haven't ruled out large acquisitions at all. In terms of the portfolio, we have a very complementary portfolio in Glanbia, I believe, that has evolved over a period of time. We've seen how the portfolio interacts. Indeed, I would you know, comment on 2020, when COVID hit in the second quarter and GPN, for example, like many branded players, had a challenged second quarter. Our Nutritionals business and the rest of our portfolio performed very well and was very resilient.
You are right that we do, when you go directly into ingredient supply, we do source for GPN the bulk of our requirements externally. As we've always said, we have optionality. We have optionality to have a lot more internal supply should we choose to do that. That gives us an operational hedge should we choose to deploy it. It also gives us significant insight into the space because we have a team in Glanbia Nutritionals that are at the front of supplier movement in terms of milk supply, production capacity, the industry space in terms of knowing what's going on. Also that helps some things like R&D and other areas. I wouldn't diminish the merits of that insight.
You know, what I said in, I think in response to an earlier question, as a group, we're always open-minded to value creation, and we're always looking at how we can best drive shareholder value. We're always looking at all aspects of our group in that context. As we currently believe that we're on the right strategic journey with the complementary portfolio that we have today.
Thank you.
Thank you.
Thank you. We'll now take our next question from Deirdre Mullaney from Citi. Please go ahead.
Hi, Siobhán and Mark. Thanks for taking my questions. Just a couple, please. Firstly on GPN margins. I know previously, I think you quantified about 100 basis points of decline in margins this year. Just wondering, obviously, I don't think you quantified that in today's release, how to think about that. Maybe if you can talk to the moving parts that you see and maybe how that's changed since you last reported. My second question is just around the Sterling acquisition. I think you talked about it adding APAC exposure. I was just wondering if you could clarify what your current geographic exposure is in Nutritional Solutions.
Also, what your goals for next few years in terms of do you think there's much more to go for in your existing markets or is expansion to new geographies really key for this division? Thank you.
Hi, Deirdre. On the margin points for GPN, I think what we had said the last time was that, obviously, with a significant increase in cost of goods sold that we were seeing this year, I think we said 20% versus the prior year, might be a little bit higher than that, but pricing, of course, is now coming through as well as our momentum of savings as well to mitigate that. We sort of feel that the guidance we gave you the last time in terms of exiting 2022 at a 12%+ rate is still valid. We may be a little bit ahead of that based on how some of the operating leverage is working for us now, but I would sort of keep it pretty much similar, as I said, the same, but feeling a bit more confident.
Certainly H2 margins will be stronger than H1 . That's still very much what we told you before, as we sort of see that lag impact of costs and pricing come through overall in the market. Again, I would say feeling good after Q1 for sure in terms of how GPN has evolved. In terms of your question on Sterling Technology, yeah, I mean, the Asia Pac element is important for us in terms of the sales there. Probably less than 20% of our sales overall are in the Asia Pac region right now. We've also seen that as an important growth area for the future.
Obviously, the last two or three years have been quite disruptive generally across macro markets, but we still see Asia Pac as being an important growth area for us there. As we look, whether it's organically or through acquisition, that is something we have an eye to.
Great. Thank you.
Thank you. We'll now take our next question from Karel Zoete from Kepler. Please go ahead.
Yes, good morning. Thanks for taking the questions. I have two small ones on GPN. The first one is on the gap between volume growth for the branded and reported business. Can you remind us how small or how large the non-branded business is at this point? The second question is on AMP. You've said that for the big brands, you know , you want to go back to or want to go to 10% AMP to sales ratios. Just curious to think how you see that evolution this year in the light of cost increases. Thank you.
Hi, Karel. Yeah, the non-branded for us is less than 3% now. It's a very small part of our business, mostly actually in Europe at this point, as we've sort of exited the significant U.S. non-branded side. You know, remind me your second question again. Sorry.
The second question is on AMP to sales. You laid out-
AMP.
Yeah, marketing.
Yes, you're right. We talked about that getting up towards the 10% level. Clearly with the pricing that's going into the market now, there is a mathematical sort of impact here as you sort of look to this year. It will be less than that. Probably the high single digits% is probably what I expect we'll end up at, but it will be less than that. A lot of that is driven by just the mathematical impact of pricing going in at the top line versus the actual nominal dollar amount we're spending on marketing.
Thank you.
Thank you. That was our last question. I will now turn the call back to your host. Thank you.
Again, as always, just thank you all for your interest and your engagement this morning, and we will speak soon. Thank you very much.
Ladies and gentlemen, that will conclude today's conference. You may now all disconnect.