Good day. Thank you for standing by. Welcome to Glanbia half year 2026 results conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be 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'd now like to hand the conference over to Mr. Liam Hennigan, Group Secretary and Head of Investor Relations. Please go ahead.
Thank you. Good morning. Welcome to the Glanbia 2026 half year results 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 the time of their approval of the Glanbia half year 2026 results announcement.
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 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 Hugh McGuire, CEO, Glanbia plc.
Thank you, Liam. Good morning, everyone. Welcome to the Glanbia half year 2026 results call and presentation. I'm joined on today's call by Mark Garvey. I will provide an overview of our performance for first half. Mark will then cover the financials and outlook. At the end of our prepared remarks, we will be happy to take your questions. Overall, we delivered a strong performance in the first half of the year with adjusted earnings per share of $ 0.8124, representing constant currency growth of 30% versus the prior year. This was driven by strong growth across all three of our operating segments with very good demand for our better nutrition brands and ingredients.
The group delivered revenues of EUR 2.1 billion, representing an increase of 7% on a constant currency basis. In Performance Nutrition, we saw continued momentum across our protein portfolio with like-for-like revenue growth of 16.9%, driven primarily by our number one sports nutrition brand, Optimum Nutrition, which delivered double-digit volumes and strong pricing growth. In Health & Nutrition, we also continue to see good momentum driven by demand in our core end-use markets and saw like-for-like revenue growth of 12% in the period.
In Dairy Nutrition, we also saw strong growth in Protein Solutions translating to EBITDA of $ 92.3 million within DN, an increase of 28.2% on the prior year. The group delivered pre-exceptional EBITDA of $ 275.4 million, representing an increase of 14.1% and EBITDA margins of 13.2%, representing an increase of 80 basis points with margin expansion across Health & Nutrition and Dairy Nutrition while margins and Performance Nutrition were broadly in line with the prior year as we continue to navigate record whey protein costs.
We continue to progress our strategic agenda and have made good progress on our groupwide transformation program. As a result, we're increasing our target annual savings from $ 60 million-$ 70 million by 2027. We expect to deliver approximately 40% of savings by the end of this year. This improvement has been driven primarily through the implementation of our new global supply chain structure and our digital transformation.
We continue to identify significant opportunity across the group to optimize our capacity across our blending footprint for both our B2B and B2C businesses and deliver above expected savings through operational efficiency, procurement effectiveness, and supply planning. Our digital transformation is progressing well with the implementation of our new IT operating model, laying the foundation for greater automation, AI-enabled support, and enhanced service delivery.
In addition, we have a focused set of AI deployments and agentic solutions working across innovation, planning, and consumer and customer journey as we continue to expand AI usage. We continued our strong track record of delivering returns to shareholders by raising the interim dividend by 10% and returning approximately EUR 100 million to shareholders via our share buyback programs. As a result of the strong performance across all three segments, we are today pleased to upgrade our full-year adjusted earnings per share guidance to 17%-20% constant currency growth. Mark will provide a detailed update on changes to segmental guidance.
For Performance Nutrition, like-for-like revenue increased by 16.9%, driven by a 9.3% increase in volume and a 7.6% increase in price. The volume growth was driven by strong category and velocity growth, coupled with increased distribution innovation and some shipment timing in quarter two and lapping of a weaker comparative in the prior year. We implemented double-digit price increases in quarter two globally. We started to see some early signs of elasticity concentrated in specific channels and pack sizes.
Due to underlying consumer demand, the higher income skew of our shopper and Optimum Nutrition's brand strength, consumption remains strong. In a recent survey we conducted in the U.S., Optimum Nutrition demonstrated the highest resilience to pricing out of all brands tested. We'll continue to monitor the situation closely, particularly as we implement further price increases in quarter three on our protein brands, which is supported by promotional efficiency, product mix and price back architecture.
From a regional perspective, PN Americas, which represents 58% of revenue, grew like-for-like revenue by 9.2% versus last year due to strong growth in Optimum Nutrition, somewhat offset by declines in other portfolio brands. Our global brand footprint continues to be a key strength. Our international business, which represents 42% of revenue, delivered like-for-like revenue growth of 29.6%, with strong volume and pricing growth in the Optimum Nutrition brand across priority markets, particularly in the U.K., Oceania, China and India.
For Isopure, we continue to see double-digit U.S. consumption growth in online and FDM channels as we grow household penetration. We continue to gain market share in the protein powder category, growing ahead of the category. This was somewhat offset by declines in the club channel. Isopure is our premium high protein, low carb brand grounded in purity. This brand allows us to target an incremental consumer from Optimum Nutrition with the consumer affluent and predominantly female that values high quality and great tasting solutions that they can incorporate into their daily nutrition regime.
EBITDA in the first half of the year increased by 7.4%, with an EBITDA margin of 12.6%, which is broadly in line with the prior year. While elevated whey input costs continued to create headwinds for margins during the period, we were able to partially offset this by a range of decisive actions, including revenue growth management initiatives, marketing spend effectiveness, and our group-wide transformation program. We carefully manage our cost base to ensure we're efficient and adjust our marketing investment appropriately to ensure we prioritize spend on brand-building initiatives.
We also continue to look to broaden our product mix from whey protein to include other protein sources such as collagen, milk, and plant protein, while also driving non-whey innovation, such as within our energy category, primarily driven by creating innovation and distribution gains globally. EBITDA margins are expected to increase in the second half of 2026 as the full impact of price increases flows through. Whey protein has remained elevated due to continued strong demand, and the group has contracted substantial supply through early quarter two 2027. We have seen new supply of high-end whey come on stream as expected, which has been taken up by demand.
We continue to engage with our suppliers for longer term supply investment and supply continues to increase. As we mentioned previously, we're also investing in our own WPI capacity within our joint venture, which will come on stream in early 2027. In terms of brand performance, Optimum Nutrition, our largest brand at 79% of Performance Nutrition revenue, delivered like-for-like revenue growth of 25.2%, with strong volume growth and increasing pricing growth following recent pricing actions. Optimum Nutrition U.S. consumption grew by 23.5% in the 13 weeks to July 14th, 2026, with double-digit growth across FDMC and online channels, growing ahead of the category and gaining market share.
The protein powder category is growing strongly, part of the general shift in consumers seeking health and wellness solutions with the value proposition resonating well with consumers. We also continue to see new consumers enter the category as they see powders as an attractive and clean source of protein, where Optimum Nutrition is the number one driver of category growth across protein. I'm pleased to see ON deliver double-digit growth in household penetration and TDP in the U.S., with distribution gains across FDMC in particular.
We are also seeing strong consumption growth across international regions, with double-digit measured sell-out in our priority growth markets, and we continue to increase our retail distribution, with distribution gains for Optimum Nutrition across major food drug mass retailers in the U.K. and continental Europe, continued success in e-commerce channels across multiple markets, and continued market share gains. We have a world-leading portfolio of high-quality products within the Optimum Nutrition brand, and we continue to focus on innovation, in particular by expanding our usage occasions.
We've launched a number of products in the first half of the year across our protein and energy offerings, including expansion of our creatine range, Clear Whey, Electrolyte hydration powder, and additional small pack sizes addressing affordability through opening price point. We are particularly pleased with the performance of ON Creatine, which is delivering very strong growth globally, with continued expansion of flavored offerings, new pack sizes, as well as the launch in creatine gummies and creatine stick packs in the U.S. earlier this year.
We continue to invest behind Optimum Nutrition, and our focus is on driving recruitment and conversion and broadening the brand's appeal through increased campaign reach and education. During the first half of the year, we launched our global Optimum Advantage campaign, which reinforces the brand's premium position and deep connection with elite athletes such as McLaren Formula 1 star Lando Norris and U.S. WNBA star Cameron Brink. Early results from the campaign show ads rank in the top 2% of ads in the category, and we're seeing growth in both aided awareness and consideration across our top four markets.
In India, for example, we launched the Optimum Advantage of Champions through our partnership with the RCB cricket team, with ON positioned as the team's official sports nutrition partner for the 2026 Premier League season. Our sports partnership in the U.S. is anchored in football, leveraging our longstanding partnership with [NFL] Flag and high impact activations such as our successful activations with NFL standout Cooper DeJean, which together strengthens Optimum Nutrition's credibility, cultural relevance, and connection to the next generation of athletes.
This year, Optimum Nutrition celebrates its 40th anniversary, making four decades of trusted quality, innovation, and category leadership in nutrition. As protein and energy consumption continues to become more mainstream, our continued investment in brand building, innovation, and consumer engagement is helping us strengthen category leadership and capture the accelerating growth in performance and active nutrition.
Turning to our Health & Nutrition segment, which comprises the premix solutions and flavor platforms and focuses on priority high-growth end-use markets such as active nutrition, functional beverages, and vitamin mineral supplements. This segment delivered a very strong performance in the first half, delivering like-for-like revenue growth of 12%. This was driven by a 14.3% increase in volume and a 2.3% decrease in price.
Total revenue increased by 15.6% as a result of a 3.6% increase from the acquisition of Sweetmix and Scicore, which we completed in August 2025 and January 2026, respectively. The integration of both acquisitions is on track. We're very pleased with the strong performance in the quarter, which was driven by good growth across our end-use markets, supported by strong underlying category momentum in protein and broader health and wellness trends.
A key driver of growth has been customer-led innovation, and we're collaborating closely with customers to support innovation pipeline with the co-development translating into incremental growth. We saw some benefit to revenues in quarter two pipeline fill as some of our customers expanded into new regions. Regionally, we saw strong growth, particularly in EMEA and Asia- Pacific. Pricing was -2.3%, primarily as a result of tariff refunds provided to customers in the second quarter. This was a one-time effect, and we expect pricing to revert to broadly neutral in the second half of the year. Health & Nutrition EBITDA was $ 67.9 million, up 9.5% constant currency.
EBITDA margins were 18.4%, a decrease of 110 basis points versus the prior year as a result of increased raw material costs, which are expected to persist into the second half of the year. Sweetmix and Scicore integrations are progressing well. We opened our new Customer Collaboration Center in Montreal in the first half of the year, and our capacity expansions in the U.S., Europe, and China are well underway and progressing well, with new capacity expected by early 2027.
Dairy Nutrition combines our U.S. cheese and dairy proteins portfolios and is largely one integrated manufacturing footprint, and is also the route to market for our joint venture supply of whey and cheese ingredients. This business provides a leadership position in dairy as a leading producer of whey protein isolate and American-style cheddar cheese in the U.S. We continue to see sustained demand for our high-quality whey and non-whey protein solutions, driven by global trends in active nutrition and everyday wellness.
Our differentiated capabilities in protein science and manufacturing, combined with a proven track record to deliver consistent quality, functionality, and taste, position us as a trusted partner for customers' growing demand for premium protein solutions. In the first half of the year, Dairy Nutrition delivered like-for-like revenue growth of 3.8%, driven by a 4.6% increase in volume and a 0.8% decrease in pricing.
Our Protein Solutions business had double-digit volume and pricing growth, supported by favorable consumer trends and strong demand, particularly within the active nutrition end-use market of high protein, ready-to-eat, and healthy snacking categories. The overall pricing decline was due to negative cheese markets, as cheese revenue represents approximately 2/3 of the revenue within Dairy Nutrition.
We continue to optimize our product mix towards higher-value protein solutions, leveraging the group's manufacturing expertise, customer relationships, and innovation capability, and saw good growth in existing and new customer wins in the first half of 2026. With that, I will hand over to Mark to take you through the financials.
Thanks, Hugh, good morning to everyone on the call. Group revenue for the half year was $2.1 billion, up 7% on a constant currency basis. On a like-for-like basis, reported revenues were up 10.7%, with volumes up 8.2%, driven by a strong performance across all three segments. Price was up 2.5%, driven by strong pricing in Performance Nutrition, somewhat offset by negative pricing in Health & Nutrition and Dairy Nutrition.
The acquisitions of Sweetmix and Scicore added 0.6% to revenue growth, while the disposals of non-core brands reduced group revenues by 4.3%. Group EBITDA, pre-exceptional charges in the first half was $275.4 million, up 14.1% constant currency, driven by strong EBITDA growth across all three segments. Dairy Nutrition EBITDA growth was particularly strong, up 28.2% in the half, driven by Protein Solutions growth. Performance Nutrition EBITDA was up 7.4%, and Health & Nutrition EBITDA was up 9.5%.
Group EBITDA margin was 13.2% compared to 12.5% in the prior year, primarily due to stronger EBITDA margins in Dairy Nutrition. Adjusted earnings per share for the half year was $ 0.8124, an increase of 30% on the prior year as a result of strong segment EBITDA growth, higher joint venture profit after tax, and some accretion resulting from share buyback activity. Operating cash flow conversion for the 12 months ending July 4th was 95.1%, with operating cash flow of $507 million generated during the trailing 12-month period.
The group had net debt of approximately $731 million at the end of the half and has $1.35 billion in committed debt facilities with a weighted average maturity of two point two years, with no facility due for renewal prior to late 2027. Net debt to adjusted EBITDA was 1.4x , marginally higher than prior year. At year-end, following another year of strong operating cash conversion, we expect net debt to EBITDA will be approximately 1x subject to M&A activity. Investment in capital expenditure for the first half was $50 million, of which $32 million was invested in strategic capital projects with investments in ongoing capacity enhancements, business integrations, and IT investments to drive further efficiencies.
For the full year, capital expenditure, both strategic and sustaining, is expected to be between $100 million-$110 million, which will include spend related to the expansion of our Health & Nutrition facilities in the U.S., Asia, and Europe, as Hugh has mentioned. We continue to focus on a consistent approach to shareholder returns. The board have approved a 10% increase to the group's interim dividend from EUR 0.172- EUR 0.1892. We are committed to a progressive annual dividend with a target payout ratio range of 30%-40% of adjusted earnings per share. In February, we announced authorization for a EUR 100 million share buyback program.
This program was completed in two EUR 50 million tranches. The first EUR 50 million by way of our regular share buyback program, which completed in July, and the second EUR 50 million in June through a directed share buyback with Tirlán, our largest shareholder. In total, the group repurchased and canceled approximately 4.9 million shares at an average price of EUR 20.49. This completes our share buyback program for this year. As Hugh mentioned, we've upgraded our savings target for our groupwide transformation program from $60 million- $70 million of annual savings by 2027.
The upgraded savings are primarily as a result of initiatives in our global supply chain related to optimization of lending capacity and procurement effectiveness. We expect 40% of savings from this transformation program to be achieved by the end of this year, and at least 50% of the savings will be reinvested to drive future growth. We expect total charges related to this program will be approximately $110 million, previously $100 million, and to date, we have incurred approximately $85 million of those charges. The group incurred exceptional items net of tax of $21.6 million in the first half of the year.
It's primarily related to the groupwide transformation program. In addition, there was a remeasurement of contingent consideration as a result of the strong performance of the Sweetmix business post-acquisition. The joint venture performance increased by $9.3 million versus prior year, primarily related to improved dairy market dynamics and some benefit from the Federal Milk Marketing Order change in the U.S. in June last year.
Net finance costs were $15.9 million, up approximately $2.3 million compared to prior year, primarily due to higher average net debt. For the first half of the year, the effective tax rate was 15%, in line with the prior year. For the full year, we expect the effective tax rate to be between 14% and 16%. I will walk through the components of our updated guidance for the full year. We are ambitious for growth, and we outlined our medium-term growth algorithm through 2028 at our Capital Markets Day last November.
Given the strength we are currently seeing in the categories in which we operate, expectations for 2026 are now above our medium-term guidance algorithm. Following the strong performance in half one, Performance Nutrition like-for-like revenue growth is now expected to be in the range of 12%-14% for the year, which assumes some volume elasticity in the second half following Q2 and Q3 pricing actions. The revenue growth of Performance Nutrition during the first half of the year was strong due to our category leadership, accelerating consumer demand, increased distribution and innovation, and the lapping of a weaker comparative.
There was also a benefit from some shipment and promotional timing. Pricing sequentially increased, resulting from the Q4 2025 and Q2 2026 pricing implementations. Although volumes in the first half have remained resilient following these recently introduced price increases, we are now seeing initial signs of limited elasticity in some markets, which we are monitoring closely. We are executing further price increases in Q3, given continued whey inflation, and while we are confident that underlying consumer demand will continue and the Opti Nutrition brand will perform well, we are pragmatic in expecting some volume elasticity as the second half progresses as consumers adapt to higher prices on shelf.
As a result, half two revenue growth is expected to be pricing-led with assumed elasticity impacting volumes, coupled with a tougher comparable due to the lapping of some distribution gains in Q3 of last year. We continue to manage whey costs through forward procurement, and at this point, we have procured all of our whey needs for 2026 and our anticipated needs to early Q2 2027. Based on procurement to date, we are seeing higher costs in 2027 over 2026, consequently, we expect to increase prices further in late 2026 or early 2027. We expect Performance Nutrition EBITDA margins will be higher in the second half compared to the first half as a result of executed pricing actions, and for the full year, we expect some margin progression over the 2025 13% EBITDA margin.
We continue to offset higher whey costs with revenue growth management initiatives, marketing spend effectiveness, transformation program, as well as the benefit of the sale of non-core brands last year. Should volume trends in half two prove to be significantly better than our current expectations, this would utilize additional higher cost whey to meet demand, and as a result, have some short-term impact on EBITDA margins until future pricing actions take full effect.
Health & Nutrition delivered a strong performance in the first half of the year with some benefit from timing of orders from certain customers in the second quarter. As a result of the strong first half performance, we now expect like-for-like revenue growth of 8%-10% for the full year, volume led. Growth is expected to be good across both premix and flavor solutions businesses, as we are seeing strong category momentum in our end markets. Half one benefited from some pipeline fill by certain customers as they expanded into new regions, we therefore expect half two revenue to moderate to more normalized levels, albeit still at the upper end of our medium-term guidance range.
We continue to expect Health & Nutrition EBITDA margins to be in a range of 17%-19%, with increased costs in the second half resulting from supply chain disruption ongoing from the conflict in the Middle East. The strong performance in Dairy Nutrition in the first half of the year was driven by pricing and volume growth in Protein Solutions, serving the high protein ready-to-eat and healthy snacking categories. Following the strong first half, we now expect Dairy Nutrition EBITDA to be in a range of $170 million-$180 million for the full year. We also expect profitability growth in the joint venture and now expect profit after tax to be approximately $20 million for the full year.
Operating cash flow conversion is expected to exceed our 85% target for the year. As a result of the strong top-line performance in Performance Nutrition and Health & Nutrition and continued strength in Dairy Nutrition EBITDA and joint venture profit after tax, we are pleased to upgrade our expectations for 2026 adjusted earnings per share growth to a range of 17%-20% constant currency. With that, I will hand it back to Hugh.
Thank you, Mark. Just to close, today's results reinforce our confidence in Glanbia's growth opportunity. Our purpose is delivering better nutrition, we're operating in exciting high growth categories supported by powerful consumer trends. As we outlined at our Capital Markets Day, we have a focused strategy for the next stage of growth. We've made strong progress in the first half of 2026.
We strengthened our business through our transformation program and sharpened our focus on our key growth engines of Performance Nutrition and Health & Nutrition. We are pleased to upgrade our guidance today, reflecting the momentum across all three segments and the continued strong consumer demand for our better nutrition brands and ingredients. With that, I would like to hand it over to the operator for questions.
Thank you. We will now begin the question- and- answer session. As a reminder, to ask a question, please 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. A moment for our first question. We will now take our first question from the line of Patrick Higgins from Goodbody. Please ask your question. Patrick, your line is open.
Thanks. Morning, everyone. A couple of questions from me on Performance Nutrition, if that's okay. Firstly, just on the Q2 print, I guess, incredible volume momentum in the quarter despite the price increases you took. I know you've mentioned some elasticities have crept in already, but maybe you could just elaborate on where you're seeing those elasticities and, in terms of the consumer reaction to the price increases, have you seen any shifts in buying patterns during the quarter or so far in Q3?
My second question is just around, I guess, the moving parts of Optimum Nutrition growth, during H1 and Q2. Maybe you just want to pin how much that's driven by category growth versus distribution gains. You mentioned increased shipments. Maybe you could just give a little bit more color there, I guess, how much are you benefiting from some of your competitors, I guess, not being able to source supply as consistently as you guys can? Thanks.
Morning, Patrick. How are you? Maybe I'll start with the first question. In terms of very happy with, obviously, quarter two and half one performance. Very strong growth. I think what we're seeing, generally, what I would say is very strong category growth. We're clearly benefiting from the positive trends generally in health and wellness, whether that be just interest in protein, interest in additional fortification, or interest in energy. Definitely a positive category trend that we're benefiting from. When I look at elasticity, no. Look, we've seen some limited elasticity to date. It's in certain markets and certain channels on certain SKUs.
Some of them will be where competitors haven't quite moved yet on some of the pricing. But certainly in half one, as you can see from our numbers, we've seen continued very strong consumer demand. We continue to see that demand as well as we look out into half two. I suppose what we're just being very pragmatic on is the cumulative effect of pricing, post price increase late last year, price increase in quarter two and additional price increase in quarter three.
That's obviously being prudent as we look ahead. In terms of ON growth, look, very happy. I'd say, a lot of it will be velocity. I said, we're clearly benefiting from general category growth in all markets, not just in the U.S., in all of our international markets as well. Also, I think we're showing clear category leadership as well in terms of our investment behind the brand. Our marketing now is more effective, better creative, more efficient, better consumer targeting.
I think the cautiousness we've taken or the pragmatic approach to pricing strategy in RGM, being very thoughtful on opening price points, making sure we give value to the consumer, whether that be a single serve, a 10 serve or an 80 serve product offering. We certainly see the benefit of that in terms of bringing in new consumers to our brand franchise, new consumers into the category. That's a clear benefit. Lastly, in the digital world, we're benefiting from, it's always been a key focus for us. We are the most viewed, most awarded, most recommended brand. As the world increasingly moves digital and AI and search, we're benefiting from that.
We do regular audits, we continue to see Optimum Nutrition as the number 1 recommended brand, that's a key focus for us. If I sum it all up, we're seeing very good category growth in health and wellness demand, we're seeing very good performance from our protein brands, Optimum Nutrition and Isopure, although particularly driven by Optimum Nutrition. In terms of shipments, very small. Look, that's primarily Middle East. As we navigate the conflict in the Middle East, obviously our inventory levels are higher there and getting product into our market there takes a little bit longer. There was a little bit of quarter three into quarter two with Amazon Prime as well.
Lastly, look, you had the competitive question you asked. Not really. We're competing against scaled players now. I don't think supply is necessarily an issue there. Maybe for some of our smaller suppliers. We've certainly seen that within our Dairy Nutrition business. Worth remembering that within the protein category, we're not only competing against dairy proteins, we're competing against a broader protein category, which is into plant protein, collagen proteins, et c. Very pleasing to see our brand do well across the broader protein category.
Very clear. Thank you.
Thank you. We will now take our next question from the line of David Roux from Morgan Stanley. Please ask your question, David, your line is open.
Yeah. Good morning, Hugh and Mark, and congratulations on a very strong set of results. Just got three questions. Firstly, on reformulation, which you mentioned, how do you see reformulation to other sort of protein sources playing out across your portfolio? In particular, given your flagship product is whey on the front, so I'd be interested to know how you see that working across your offering. The second one is also on Performance Nutrition and notably the healthy lifestyle brands portfolio. Back in the start, this was still down quite a bit in the quarter, similar to last quarter.
Maybe you can give us some color there. Also we note that RTE and RTD, like for like, was down for PN overall, in the half, so any color there would be appreciated. Just lastly on the PN margin, is it still the ambition to target the 50 basis points that was mentioned at the beginning of the year in terms of margin expansion? Or when you're thinking about pricing, is it still really about maintaining margin or protecting absolute profits, just given there's this immense top line tailwind from price? Thanks very much.
Good morning, David, and thank you. I'll answer the first two questions, David, Mark will address the margin point of the PN. When we talk about reformulation, it's primarily around new innovation. In reality, look, you said it rightly, Gold Standard Whey is a big brand for us. Whey is a brand name. We won't be changing that. We won't be changing the quality. We won't be changing the formulation. We don't believe that there is any supply issue for that brand long term. Formulation is really around ensuring that we give the consumer choice, whether that be in a broader mix of proteins or a different price point. We have a number of innovation.
We've already started that. We're launching products that contain Clear Whey and collagen. We're launching milk protein innovation as well. It's just a broader push towards having a broader selection of protein availability within our brands. It's actually one of the drivers as well of our Dairy Nutrition business, where it's not just dairy protein. We provide proteins as great tasting, high quality protein solutions that work functionally.
That's a mix also of whey, milk and plant protein solutions as well. It's an increasing area of focus for the group, which as a protein powerhouse, just to ensure we have a broad base of protein solutions. In terms of healthy lifestyle, if I look at healthy lifestyle, we've spoken about Optimum Nutrition, Isopure, very happy with performance in Isopure. We're lapping a very strong performance in Serious Mass. You can see that in our [IRI] data. We're just lapping a club channel delisting, which was margin dilutive. We lapped that as we head into Q4.
Then the other primary driver of that decline will be think!, which we've spoken about as well. That's just lost distribution from the tail end of last year, and we do innovation, a complete relaunch of the think! bar high protein bar proposition at the end of this year, which we're excited about. We should see that trend change as we go into 2027.
Hi, David. On the margin point, we are still forecasting margin progression for this year. Moderated a little bit from what I might have said earlier, primarily because we're seeing more volumes come through. Demand is very strong, as you can see, and that's demand driven, that's causing whey prices to increase, and we are seeing some extra whey costs coming through in the P&L. We expect to have progression.
You'll see stronger second half margin to the first half margin pricing, which will lap basically into the second half, will more than offset the cost increases. Also the transformation savings that we're seeing come through, they'll come through more in the second half as well. It's just the level of progression. It's hard to fully predict right now, but we expect progression and see that's our goal as we sort of look to 2028 to continue to see margin progression.
Very clear. Thank you.
Thank you. We will now take our next question. The next question comes from Nicola Tang from BNP Paribas. Please go ahead, Nicola. Your line is open.
Hi, everyone. Thanks for taking the questions. First, just around PN pricing, I wanted to clarify sort of your planned price increases from here. Is it right to still assume a double-digit price increase in Q3, I think I picked up from your commentary. Then Mark, I think you also mentioned potentially further pricing in late 2026 or early 2027. I was just checking if that was an incremental wave of pricing. I suppose, how are you thinking about that, or how will you assess the magnitude of that relative to elasticity?
What are you seeing competitors doing around pricing or planned pricing and promotional activity? Then just maybe another one on the PN margins. I understand in terms of the whey cost headwinds and sort of how much you've procured, I was wondering why, given the strong demand, you didn't see in H1 or you don't expect to see better operating leverage associated with that. I heard you mention sort of marketing spend adjustments. What are your expectations in terms of spend for marketing this year? Thanks.
Good morning, Nicola. I might quickly answer the marketing question, I'll go to the first question on pricing, Mark, you might answer the question on leverage margin. Look, marketing, what we said is we're more effective in terms of marketing spend, we still continue to invest substantially behind the brand. There's no pullback in marketing spend. It's just more focused, particularly given the growth in the category, it's really focused on recruitment of new consumers, driving brand awareness. That's a key focus, particularly for us internationally. If I talk about pricing, look, you can imagine we are very considered and careful and lots of debate internally on ensure we navigate, as we call the tightrope in terms of significant record protein price inflation.
We want a very good category growth, and we want to make sure we maintain our category leadership. Lots of debate and discussion. You might remember we price increased at the back end of last year as we came into 2026. Price increased in quarter two, that's in market now. Price increase recent quarter two, that's implemented with customers. We start to see that hit shelf probably late August, early September. It depends on how customers decide to put it through.
Then depending on, we watch elasticity carefully. As I said, it's been limited to date. I think category trends are very strong. We'll watch that carefully, we are planning for price increase in the back end of this year and early into 2027 as well. That's always something we would keep under review as we watch raw material costs, as we watch elasticity, as we watch demand. In terms of competitors, look, everybody is moving in price.
Given the scale of price increases in Europe, you know that competitors move. What we will often see is we are first to move, there may be a lag that will sometimes cause a little bit of elasticity, as soon as the competitor decides to move their price, we tend to see that elasticity wane. A key focus for the business, Nicola, and lots of debate as we navigate this record inflation carefully.
Yeah. Hi, Nicola. On the margin front, we are seeing operating leverage. We have transformation savings coming through. We obviously have pricing as well coming through. We've got some benefit from the sale of non-core brands. Currently, they're offsetting the COGS increase we've seen in the first half. You'll see those more than offset in the second half.
It's rolled that through into the second half. In terms of my comments around procurement for 2027, yes, we would expect to see more price increases come through towards the end of this year as we look to margin progression for next year. I think overall, once we see stabilization of the whey dynamic with the pricing dynamic, we're going to see upside, obviously, in the margin progression as we would expect.
Great, thank you. We will now take our next question from Setu Sharda from Barclays. Please ask your question, Setu, your line is open.
Yeah, thanks for taking my question. First of all, congratulations on good set of numbers. Just to get some more color lying on the pricing power of the categories. Like historically, whey inflation has been seen as a headwind for sports nutrition. This cycle, however, demand has remained strong despite higher pricing. Has this changed your view on the structural resilience and the pricing power of the category? My second question around the Dairy Nutrition dynamics versus Performance Nutrition, where can you help us think about the group's earnings bridge?
If the whey remains high, the Dairy Nutrition clearly benefits from the higher whey prices, but the PN margins face pressure. Net, is high whey still positive for group earnings or does it become more of a constraint over time? My third question is regarding the earnings upgrade. On the guidance upgrade, how much of the improvement should we think of as structural rather than any cyclicality into it? Are we seeing a step up in Glanbia's medium-term earnings power or is this part of simply the benefit of the current whey environment? Yeah.
Good morning, Setu. Thank you for the questions. In your first question, which I'll answer, then Mark will answer the question on earnings. Yeah, I think we are. Look, you can see it in the category growth. Certainly the category, as I said earlier on in terms of demand for health and wellness, demand for protein, demand for energy, demand for fortification is very, very strong. You're firstly seeing a general increase in health and wellness. GLP-1 is certainly a tailwind. The inversion of the food pyramid in the U.S. is also a tailwind for us.
Yeah, I think you are. I think growth rates we have in the category now are strong and are accelerating, and I've certainly not seen any indication that they will come off or decline. That's across all formats as well. It's not just the powder format that we substantially play in. We know ourselves that the consumer benefits to our brand and product are very strong. Consumers tell us it's around the quality, it's around the mixability, it's around the versatility of powder.
I think the usability and the affordability are really important to our consumers as is the taste. I think then the Optimum Nutrition brand, as I said earlier on, is driving the category. It's around we're celebrating 40 years of the brand this year. Our heritage, our quality, our taste, and the most recommended brand plays to the strengths of particularly for new consumers coming into the category. We see that in pricing power. We're about to take our third round of price increases, yes, we are watching carefully for elasticity.
I think there will be some elasticity this time with the cumulative effect, demand remains very, very strong. I think what I'd just say before I hand over to Mark on your question on the earnings bridge, which I'm sure we won't get into too much detail, the business is unique to Glanbia, the strength of our portfolio.
We're playing broadly across all three segments in health and wellness, which is a huge positive. We have trusted, capable businesses. We are the biggest buyer of whey protein, straight ingredients globally, and we work with all suppliers. Then we're one of the biggest in whey protein solutions through our Dairy Nutrition business. Certainly there's a natural hedge across those two businesses, and it is a unique strength of our portfolio given the growth in health and wellness.
Yeah, I would just add to that, look, we have three very strong businesses, as you have said. They stand on their own 2 ft in terms of how they're performing. They're doing very well in terms of the categories that they're selling into. Yes, there's certainly a benefit that Dairy Nutrition is seeing now with high protein markets, Dairy Nutrition, since we set it up as a separate business, has been doing very well operationally in terms of how it's being managed as well.
I see a lot of strength coming through there in addition, frankly, to what we're seeing on the protein side. If you think about the algorithm that we have, we're obviously very confident in the algorithm that we pointed out last November. We're ahead of that this year, and I would say, given the categories that we are currently playing in, momentum seems good to us as we head into next year as well.
Thank you. That's quite helpful. I will back in the queue.
Thank you. We will now take our next question from Karel Zoete from Kepler Cheuvreux. Please ask your question, Karel. Your line is open.
Yes, good morning, gentlemen. Thanks for taking the questions. I have, as expected, a question on pricing, but zooming out a bit, the way prices have been cyclical, supply comes on stream and prices go down. The way you talk about it feels a bit that this time it could be a bit different. Do you think that if you look back in two, three years' time, that this uptick in the waste cycle is really going to reshape your PN industry a bit?
The other thing is regarding marketing spend. I think there's no longer a 10% to sales target with regards to marketing investments, but can you share what you've been investing behind incrementally and how you've changed a bit how you invest? Because effective and more efficient marketing spend is a perpetual goal, I guess. What have you done differently? Thank you.
Morning, Karel. How are you? Maybe on the whey part, yeah. Look, if you look back, it was probably one of the things that changed for us in kind of 2024 into 2025. We've always had a traditional cycle in terms of wage demands. Increasing protein demand drives increasing supply. Prices go up when supply is short, and as new supply comes on, pricing goes down. We've certainly seen a fundamental shift in that, and all driven by demand. Demand is very strong. The additional supply that we forecast and that we work with suppliers to bring on stream across the broader protein market have come on stream, and that's all been soaked up by demand.
We're certainly not seen on either. That's an advantage we can see on both sides of the business, the demand. We're not seen either at the consumer or the customer level, a lessening demand for high-quality protein. Might that change with elasticity volumes come back? Might that change? Certainly, I think the demand generally for protein is very strong, and that looks like it's going to sustain. As we look into next year, we're certainly not planning for a decline in pricing for proteins given the demand we're seeing.
We look at marketing spend, primarily digital, Karel. While we've cut back in percentage terms, and that's as you can expect as we navigate very strong demand and ensure that we meet margin expectations as well. The spend still in dollar terms is substantial, and the primary investment there is consumer recruitment, but also then digital. That's where I think the brand Optimum Nutrition, Isopure do particularly well in terms of investing in search, investing in engaging with consumers online. That's been a key strength of the business now for probably 15 years.
Right. Interesting. Thank you.
Thank you. We will now take our next question from the line of Damian McNeela from Deutsche Bank. Please go ahead, Damian. Your line is open.
Yeah. Thank you. Morning, gents. A few from me, please. Just firstly on the sort of sustained category demand. I was just wondering, in your conversations with customers, particularly in the Performance Nutrition segment, whether you would expect to gain incremental distribution space within retailers over the coming years, given the strength of the backdrop, and if you could give any color on how those conversations are going with retailers, please. The second one is following on from Karel's question around the sort of supply environment.
I think historically you've spoken to sort of incremental 10%-15% of incremental WPI coming into the market. Can you sort of provide any update on whether that's still the right number? Is there any more sort of supply-side investments adding to that? Just to confirm whether your own investment will be completely taken up by your sales, i.e., it's not going to be sold to any third parties when that comes on stream in 2027. The final one is just on, you've completed the buyback. Just wondering, you're obviously talking about retaining balance sheet flexibility for M&A. I'm just wondering if you could give any sense of what that pipeline looks like and whether the focus is still on the H&N part of the business, please.
Thank you, Damian. They're three quite varied questions. If I start with the first one in terms of, I think I've spoken on the category growth, which is very strong. Yes, I think without a doubt we're seeing good distribution, particularly for ON double-digit growth in TDPs, double-digit growth in distribution. We see it in Isopure as well if you exclude the club channel. We do see customers expanding shelf space, both in terms of protein and creatine particularly. We know that our brand and these categories are drivers of foot traffic in store. Retailers know that as well. You will be seeing increase in shelf space. Globally, these categories now and products have become mainstream.
Turning to supply, the 10%-15% we've spoken about is coming on stream. Demand has soaked that up. In fact, it's probably more than that has come on stream over the last 12-18 months. There is more supply coming on stream next year. So demand definitely is, given the pricing we're seeing, all of our suppliers are looking to increase their capacity in high-end whey protein. That's a positive. If I look at our own supply, yes, that will either go to Performance Nutrition in terms of supply and nutrition or secure our go to our Protein Solutions business. So it will remain within Glanbia. Lastly, just an M&A puzzle, yes, very active, actually. Very active and yes, primarily in Health & Nutrition.
Great. Thank you very much, Hugh.
Thank you. We will now take our next question from Cathal Kenny from Davy. Please ask your question. Your line is open. Cathal, can you unmute your line and ask your question, please? Cathal, your line is muted. Can you unmute and ask your question, please? All right. We are not getting a response. We'll move to the next question. Our next question comes from the line of Fatma Agnès Hamdani from Oddo BHF. Please ask your question.
Yes. Good morning to all. So I have two questions. Could you elaborate more on Isopure growth in H1 and how did the rest of the brand portfolio in the same period? How are your expectations for all of them going forward? The second question, could you provide some color on the raw material inflation seen in Health & Nutrition business during H1? What were the main driver behind this inflation, and how do you expect it to evolve over 2027? Should we expect more pricing to compensate next year? Thank you.
Good morning, Fatma. I'll answer the Isopure question, and Mark will answer the raw material question. In terms of very happy with Isopure growth in half one, as I said earlier in our briefing that the main double-digit good, very good double-digit growth in food service and convenience in the U.S. It's primarily Isopure, primarily U.S. business for us. The overall numbers are pulled back a little bit as I lack a club channel business, but strong growth in distribution in food service mass. As I said, double-digit consumption, strong growth in household penetration as well. Very happy with that performance. We will lack that lost distribution in club as we head into quarter four, and certainly into 2027.
As I spoke about the rest of the portfolio, look, the biggest brand there is think!. That's suffering from lost distribution at retail in the last year with a major new relaunch of think! coming back end of this year as we move to 2027. It is one of the top high-protein bars. There's 20 g of great quality protein in a bar, it's a priority for us, and that'll be relaunched at the back end of the year.
Good morning, Fatma . In terms of the cost increase we're seeing in Health & Nutrition, primarily coming through as a result of the Middle East conflict, which is causing some challenges in terms of petrochemical feedstocks feeding into manufacturing over in Asia. That's causing then some increases in costs that are coming through to us. We want to see that in the second half. We will look to offset as much of that as we can with our transformation savings, which obviously feed into Health & Nutrition business as well. We still are very confident in our 17%-19% margin overall for the business.
Okay, thank you. For 2027, next year, do you see some?
Well, for 2027, again, we'll see how long this process continues. Obviously, if the conflict continues, we would expect to see higher costs, but then obviously we look to pass those on in terms of pricing as well next year.
Okay. Thank you. Thank you very much.
That's the end of the question and answer session. Thank you all very much for your questions. I'll now turn the conference back to Mr. Hugh McGuire for his closing comments.
Yes, folks, just to say thank you very much for all your questions. Delighted with half one performance and look forward to sharing more with you over the coming days as we catch up.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.