Good day, and thank you for standing by. Welcome to the Glanbia Q1 2024 Interim Management Statement webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I will now hand over to Liam Hennigan, Group Secretary and Head of Investor Relations, to open the presentation. Please go ahead, sir.
Thank you, Operator. Good morning and welcome to the Glanbia Q1 2024 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 on the information available to them up to their time of their approval of the interim management statement. Due to 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 those 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 over to the CEO of Glanbia plc, Hugh McGuire.
Thank you, Liam. Good morning, everybody, and welcome to our results call. On today's call, I will provide an overview of our performance for the first three months of the year, and I'm joined by my colleague, Mark Garvey, who will cover the financials and outlook. At the end of the presentation, we'll be happy to take your questions. I'm pleased to say that the Q1 performance for the group was in line with our expectations, with the core consumer trends such as the demand for protein, immunity enhancement, and overall health and wellness continuing to underpin consumer and customer demand for our better nutrition brands and ingredients. This drove positive volume at the group level of 1.5%. Pricing was negative by 6.9%, but this was expected and was primarily as a result of lower year-on-year dairy prices.
In GPN, Optimum Nutrition continues to strengthen its leadership position and delivered strong volume growth in the quarter, building on a strong performance in the Q4 of 2023. Our healthy lifestyle portfolio also delivered strong volume growth driven by the continuing demand for the protein growth brands of Isopure and Pink. In Nutrition Solutions, we continue to see volume trends improve, with volume growth of 3.8% in the quarter driven by a strong performance in our premix solutions business, which was somewhat offset by reduced volumes in dairy solutions due to the timing of customer offtakes. We continue to evolve our strategic agenda with the acquisition of Flavor Producers, which closed last Friday.
This acquisition represents a strong addition to the Glanbia portfolio, building on our existing flavors' capability and expertise, positioned as well to capture long-term growth opportunities in the organic and natural flavor segments, and I will speak more on that shortly. Based on the current market environment and expectations for the remainder of the year, we reiterate our full-year guidance of 5% to 8% growth in adjusted earnings per share, which will be driven by a strong operating performance across both GPN and Nutrition Solutions. Turning to GPN, we are pleased with the volume growth of 1.4% driven by our performance in healthy lifestyle nutrition brands, offsetting a headwind from SlimFast. Like-for-like revenue was down 1.9% with a pricing decline of 3.3%, which was largely driven by our planned promotional activity and some tactical pricing initiatives.
From a regional perspective, Americas is down 5.1% and International grew 4.7%, but worth noting, the SlimFast drag is entirely impacting the Americas' performance. Our international business delivered broad-based growth in the quarter, supported by marketing investment and the continued development of in-market capabilities. Optimum Nutrition, at over 60% of GPN revenues, continues its strong momentum, delivering like-for-like growth of 5.6% and strong volume growth. The brand continues to strengthen its leadership position, supported by increased brand investment and marketing activation, including the Unlock More Youth campaign in March and new brand partnerships such as the recent announcements from McLaren Formula One, Spartan, and Sky Sports. From a consumption perspective, while consumption is in line with the prior year, this was a very strong comparative period, which delivered consumption of over 30% last year.
As highlighted in our full-year 2023 results call, we're seeing some softness in the specialty channel but good performance in the other channels, with good consumption growth underpinned by increased velocities, distribution gains, and marketing activation. Our healthy lifestyle portfolio of Isopure, Pink, and Amazing Grass brands delivered strong like-for-like revenue growth of 11.1% and consumption growth of 7.5%. Our newest innovations from Pink, Pink Minis, are shipping this month, the perfect size for snacking: 100 calorie bars with 6 g of protein, 3 g of fiber, and 7 flavors, including three co-branded with Girl Scout cookie-inspired flavors, s'mores, chocolate peanut butter, and Adventuref uls. SlimFast in the diet category continues to be challenged as underlying consumer diet behavior remains depressed, and retailers have reduced shelf space, but it's now only 7% of our business.
As a result, we maintain our expectations for GPN in 2024 to deliver 4% to 7% revenue growth. Turning then to our second growth platform of Nutritional Solutions, revenue declined by 2.3% in the period on a pro forma basis. This was driven by a 3.8% increase in volume, a 5.5% decrease in price, and a decrease of 0.6% from the net impact of acquisitions and disposals. The strong volume performance in the quarter was driven by good growth in the premix solutions business, which was somewhat offset by Protein Solutions. The trends in the premix business continue to improve, supported by the continued customer demand for vitamin and mineral fortification. While the underlying consumer demand for Protein Solutions also remains strong, the performance in the quarter was impacted by the timing of customer offtake in the Q4 of 2023.
The integration of the dairy bioactives business continues to progress well, with strong customer demand for our portfolio. The price decline in Nutrition Solutions was largely driven by the year-over-year decline in dairy market pricing. In terms of guidance, we are also reiterating our guidance of 3% to 5% volume growth in 2024. I'm delighted to welcome Flavor Producers to the Glanbia portfolio. Flavor producers is a leading flavor platform in the US, providing flavors and extracts to the food and beverage industries. The business focuses on organic and natural ingredients and has a strong track record of innovation and proprietary ingredients with best-in-class formulation capabilities. The business has a diverse customer base, ranging from large corporates to high-growth emerging brands. In terms of strategic rationale, the business is a really strong fit and consistent with our strategy of acquiring complementary businesses to grow our better nutrition platforms.
It is a unique opportunity to acquire complementary capabilities and significantly expand in our flavors, offering focus on natural and organic flavors. We believe this is an attractive segment of the $20 billion global flavor market, growing at approximately mid-single digits and aligned with long-term consumer trends. The business will ultimately be integrated with Fooda rom, and together, our flavors platform will have an excess of $120 million of revenue, largely from the North American markets. This gives us real scale in flavor technologies with a strong innovation capability. The combined businesses have more than 20% of employees working in research and development. Having successfully integrated a number of acquisitions in Nutritional Solutions in recent years, we see a clear path to integration with identified synergies.
The acquisition provides us with a far more extensive flavor library and additional capabilities, and there's very little customer overlap between Flavor Producers and our existing businesses, so we see a good opportunity to not only drive cost synergies but see good customer opportunities also. From a margin perspective, the business will be margin accretive to Nutrition Solutions EBITDA margins. Overall, I'm very pleased to have acquired such a high-quality business, and I look forward to welcoming the Flavor Producers' team into the Glanbia organization. With that, I will hand over to Mark.
Thanks, Hugh, and good morning to everyone on the call. At the end of the quarter, the group's net debt was $289 million. As Hugh mentioned, subsequent to quarter end, we completed the acquisition of Flavor Producers for an initial consideration of $300 million. There's also potential deferred consideration of up to $55 million, contingent on outperformance of the business in calendar year 2024, which if due would be payable in the first half next year. We continue to expect good cash flow performance this year, and at year end, we expect our net debt to EBITDA ratio be below 1x. The group has committed debt facilities of over $1.3 billion. Capital expenditure for the year will be in the range of $75 to 85 million, of which approximately $25 million will be business-sustaining expenditure.
As we announced last February, the group intends to return EUR 100 million to shareholders via share buyback programs this year. We are currently executing an initial EUR 50 million program, and as of last Friday, 1.7 million shares have been bought back and cancelled at an average price of EUR 17.64 for a total of EUR 29.8 million. Now turning to our guidance for the year. Having performed in line with our expectations for the Q1, we continue to expect adjusted earnings per share growth of 5% to 8% for the year. The addition of Flavor Producers for the remaining eight months of the year will be broadly neutral to adjusted earnings per share in this fiscal year. In 2025, we expect this acquisition will be accretive to adjusted earnings per share.
In GPN, we continue to expect revenue growth for the year to be between 4% and 7%, including the 53rd week. As indicated previously, we expect the growth will be volume-led with some negative price, likely in the range of 2% to 3%, primarily due to planned promotional activity during the year. In GNNS, volumes were somewhat better than anticipated in the Q1, particularly in premix, and we expect volume growth for the half-year will be broadly in line with the Q1. For the full year, we expect GNNS to report volume growth between 3% and 5%. Turning to EBITDA margins, we expect GPN and GNNS EBITDA margins to be at least at the level achieved in 2023 on a pro forma basis.
In GPN, first-half EBITDA margins will be higher than the second-half, primarily due to lower input costs, albeit there will be some offset from increased marketing spend in the first half this year. In GNNS, we expect first-half EBITDA margins to be broadly in line with last year and second-half margins somewhat benefiting from higher whey prices as well as the addition of Flavor Producers. As I noted earlier, we expect good cash flow generation this year, and we're on track to convert 80%+ of EBITDA into operating cash flow. With that, I would like to hand it back to the operator, and we'll be happy to take your questions.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A roster. Thank you. We will now go to our first question. One moment, please. Your first question comes from the line of Patrick Higgins from Goodbody. Please go ahead.
Thanks. Morning, everyone. A couple of questions on my side, please. Firstly, just on GPN volumes, I guess I'm just trying to get to the underlying number. Obviously, there's the number of headwinds during the quarter, whether that's SlimFast but also phasing of orders into Q4 from Q1, I guess, or yeah. Could you just try and, I guess, give us a sense of what the underlying number is, maybe the exit run rate on volumes in March or current trading in Q2 to date? That's the first question. Second question's just around pricing dynamics more generally in the market. How intense has promotional activity been? Have you seen that kind of ease off into Q2? Thanks.
Morning, Patrick. How are you? In terms of the volumes that you're asking about, I mean, if you think about after nutrition, we really look at that as being mid to high single digits in terms of the trajectory we're seeing on a continuous basis. Healthy lifestyle also doing very well. You saw in the numbers that Hugh talked about there too were seeing pretty consistent volume growth there as well. We did talk about SlimFast being a headwind for us for the quarter, about 5%. It'll be about 3.5% for the first half and about 2.5% for the full year. So you're going to see that as a headwind as you go through it.
On the pricing side, we are seeing some promotional activity very much in line with what we had expected with some tactical pricing where we're seeing some commodities and some of our smaller brands, like Creatine as an example there, that we have to take. But that is something we keep an eye on market by market, and we think about 2% to 3% negative for the year on the pricing side.
Great. That's great. Thank you.
Thank you. We will now go to our next question. Your next question comes from the line of Alex Sloane from Barclays. Please go ahead.
Yeah. Hi. Morning, all. Thanks for taking the questions. So first one on GPN, international growth looks strong in the quarter. As far as you can see it, has the strong like-for-like growth been matched by consumption there and any markets in particular that you call out as behind that international strength? And the second one, just on inventory levels, customers actually be interested at both GPN and NS, how that's looking across core customers and different channels as we enter Q2. Thanks very much.
Yeah. Good morning, Alex. Just to the GPN question first. Good. Happy with the international performance as you saw the growth in quarter one. It's broad-based. It's across many different markets. There's always ups and downs in different markets depending on promotional cadence, depending on competitors, depending on just various cycle of marketing activation as well. But I wouldn't call out a specific market. Generally happy with international performance and we're seeing that continue into quarter two as well. In terms of inventory, no. On both sides of the business, happy with inventory levels. We've seen inventories normalize in GPN in quarter one as we expected, and we're happy with inventory levels in Nutritional Solutions also.
Thanks very much.
Thank you. We will now take the next question. Your next question comes from the line of Rashad Kawan from Morgan Stanley. Please go ahead.
Hey. Good morning, Hugh, Mark, and Liam. Thanks for taking my questions. A couple from me, please. One on GPN. So you've called out the specialty channel as weak again. I think you also called that out at the full year. Can you talk through the dynamics you're seeing there? Are you retaining those customers in other channels, or are they going elsewhere? And then second question around the Flavor Producers' deal. So obviously, it's closed maybe a little earlier than expected. So why not upgrade your EPS guide?
I may have missed it, but are you implying that there's no earnings impact from the deal this year, or is there an element of conservatism within the guide? And then just another on the deal, if I may. In terms of integrating the company into the business, is there a scenario where you leverage some of the capabilities into your GPN business as well, or is it purely going to be a B2B within Nutritional Solutions? Thank you.
Yeah. Maybe I'll answer the specialty question and the integration question. I'll let Mark answer the EPS question, Rashad. In terms of specialty, yeah. Look, we called it out at full year results in late February because it was a surprise to see the impact that declined in specialty. That continued in quarter one. And if we were to look at our consumption numbers, which we've called they're flat in quarter one. Now, as we called out, that's versus a very high comp, over 30% in quarter one in 2023. There's also a degree of pricing promo in there as well because you look at very little promo activity in quarter one of 2023, which obviously, consumption is in dollars, so that'll have impacted. But the third is specialty.
And if specialty was to be taken out of those consumption numbers, we'd actually be seeing a mid- to high-single-digit consumption growth in quarter one, which we're very happy with. In terms of specialty itself, look, the specialty channel has always been an important channel in terms of driving innovation, in terms of creating awareness around a lot of the products in this category. So it's a channel we continue to support. I think what we're seeing is we are seeing some shifting to other channels. And I think part of the challenge for specialty is their pricing. Shoppers are shrewd. They'll price match. And I think some of the pricing and margin strategies that the specialty retailers have has been a challenge, but we continue to work with them. But it has had an impact, obviously, in quarter one.
But overall, very happy with general channel performance. In terms of integration, look, we would see opportunities for the integration of the business. It gives us a scale, as we call out, over EUR 120 million in revenue now in primarily North America business. So there'll be customer opportunities on the B2B and on the B2C side. So we'd see opportunities across the broad-based Nutrition Solutions customers. And also, I suspect there'll be some opportunities within Glanbia Performance Nutrition also.
Yeah. Rashad, in terms of your question on earnings per share impact, yes, we were efficient in closing it, to be fair, a little bit quicker than we may have anticipated a few weeks ago. We're very happy with that. If you think about this in our portfolio for 8/12 of the year, possibly under $20 million of a run rate on EBITDA, interest costs will probably be around $11 million or so. So it'll be very marginal in terms of the impact on earnings per share for the year.
Thank you very much.
Thank you. We will now take the next question. Your next question comes from the line of Cathal Kenny from Davy. Please go ahead.
Good morning, all. Thanks for taking my questions. First question is on input costs within GPN, looking for some commentary on the whey market and your position within that with regard to hedging for this year. That's my first question. Second question relates to just the performance of the Isopure brand. Obviously, very strong performance in the healthy lifestyle segment. Just wondering, could you isolate the performance of Isopure? I know it had a good year last year. My last question just relates to the role of innovation. Again, it's a GPN question. I'm just wondering, are you upgrading the innovation component within GPN in particular, ON? So they're my three questions. Thank you.
Yeah. Maybe start with the last morning call. In terms of innovation, one of the things we called out there this morning was our partnership with Girl Scout Cookies. So after living in the US for many years, Girl Scout Cookies are a huge thing in the spring with well-known flavors, I think. So interesting for us, we've launched our pink minis. That would have been part of the research we got in terms of partly out of our GLP-1 task force as well. Ideal snacking size, 100 calories, 6 g of protein, 3 g of fiber. But we've also stretched our flavor innovation as well. So interested to see how that does. You spoke about Isopure as well. We don't isolate Isopure from Performance Nutrition. Obviously, very happy with Performance Nutrition. And within that, very happy with Isopure performance as well.
And you're going to see some increased innovation around Isopure in the back half of 2024 and as we go into 2025 as well. And in terms of just to answer input costs, we're well covered now. We're kind of 10 months of the year covered. We continue to watch whey inflation. Certainly, whey as we go into half two will be back up towards the highs that we would have seen in 2023. And we are going into a little bit more inflationary environment commodities as well. We're watching cocoa out of interest as well. But that's just part of the ongoing management of COGS within the business. And overall, happy with our margin guidance.
Thanks for that, Hugh.
Thank you. Once again, if you would like to ask a question, please press star one and one on your telephone keypad. That is star one and one if you would like to ask a question. We will now go to our next question. Your next question comes from the line of Damien McNeelah from Deutsche Numis. Please go ahead.
Hi. Morning, everybody. Just a couple of quick ones from me, please. Just in terms of the impact that you're seeing on the specialty channel, I was wondering, how do we think about any potential margin impact if that continues for the rest of the year? And then secondly, just on SlimFast, I know, as you said, it's down to sort of 7% of revenues now. But I was just wondering whether the sort of shelf rationalization has completed or whether you still think there's further sort of degradation of that category to come over the rest of the year. Thanks.
Yeah. Maybe start with SlimFast. Good morning, Damien. Yeah. At this stage, we'll get better clarity on new listings and new distribution as we head into the summer. I think what I'd say is we're looking at that in terms of our overall portfolio and prioritization. I called out some of the new innovation on pink, and we're seeing good growth there. Same on Isopure, same on ON. So we look at the entirety of the portfolio. So it's hard to break down at this stage across the different brands, but I suspect we'll see a little bit more loss of distribution of SlimFast given its performance.
But I'd fully expect that we'd pick up those distribution losses in other parts of our portfolio. In terms of specialty, we are seeing some channel switching within specialty. We've called it out. We're an omnichannel business now, so we're comfortable across all channels. We wouldn't see any margin impact in terms of decline in this channel versus any other channel.
Okay. That's great. Thanks very much.
Thank you. There are currently no further questions. I will hand the call back for closing remarks.
Great. Look, thank you very much. Happy with quarter one performance, and look forward to talking to you all over the next couple of weeks.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.