John Moloney June 1007

The Glanbia Story

GIC Conference Dublin 2007

Page 1

The Glanbia Story

Ireland – the food island Ireland a small domestic market

export orientation

The food and drinks sector: • Largest net wealth generator in the Irish economy • Exporting 80% of output to over 120 countries • Exporting €7.5 billion worth of food and drink products • Equivalent to 35-40% of value added in manufacturing sector • Employing 230,000 people

Page 2

The Glanbia Story

Challenges and opportunities • Global dairy market dynamics shifting • Consumer mega trends (convenience, health and wellness) • Competitiveness in Ireland - high cost economy (energy costs + 80% since 2001-2006) - growth in retail concentration/buying power - ever increasing compliance/regulatory costs

• EU and global dairy markets in transition after years of relative stability: - changing EU Policy - WTO trade liberalisation •

Scale - increased scale at manufacturer/supplier level

Page 3

The Glanbia Story

Shifting market supply and demand dynamics Dairy demand:

• Recent forecasts see global demand for dairy growing at 2.8% • OECD/FAPRI/USDA/EU all forecasting prices to rise significantly to 2017 Main growth factors are:

• Population growth • Westernisation of eating habits & growing per capita GDP in emerging markets i.e. Asia • Favourable economic conditions - low interest rates, currency stability - low inflation despite rising oil prices

• • • • • •

Purchasing power of oil producing countries Increased demand for dairy ingredients/functional foods and infant formula Increased demand in developed markets for convenience and health/wellness products Consistent growth in cheese consumption in EU and USA Drought in key producing countries i.e. Australia High oil prices (double edged sword) v growth in demand for biofuels

Page 4

The Glanbia Story

Dairy supply Global milk supply will slow down in the next five years:

• NZ growth potential impacted by land prices/alternative land uses, costs etc • Australia growth subject to climatic limitations • EU production potentially capped until 2015, playing a reduced role in global trade • Ireland lowest cost milk producer in the EU with appetite for growth post abolition of quotas • USA supply strong with global impact • LATAM to remain strong regional player, but limited global impact • Eastern Europe/India, domestic growth will limit exports

Glanbia well positioned to meet market challenges

Page 5

The Glanbia Story

World Dairy Demand Growth – CAGR Forecast 2.8% million tonnes milk equivalent

Demand Volumes

0.6%

125 100

0.8%

75

3.3%

50

12.8%

4.4%

25

4.5%

0 25 EU

rt o N

h

Am

ic er

a

tin a L

Am

ic er

a

in h C

M

dl id

e

a

s Ea

t/

N

ri c f A Ru

a

i ss

a

/

Uk

r

d In

n ai

e

7.2%

*

n ta s / ki n a P pa / a J ia

2.1% ea r Ko

SE

5.3%

A

a si O

1.0%

ce

a

b Su

a ni

n ra a h Sa

4.0% A

ic fr

a

* India/Pakistan formalized part of the market only Source: ZMP Rabobank 2006

Page 6

The Glanbia Story

Energy impact on dairy markets •

Global Warming - impact on dairy output

• GDP growth in oil exporting countries - increased dairy purchasing power

• Growth of biofuels - driving up agricultural feedstock prices - milk price to feed ratio - alternate land use

Page 7

The Glanbia Story

OPEC: Crude oil output and price 1990 – 2005 Output and Price growth since 2002 driving GDP Crude Oil Production (Mbbl/d) OPEC Countries

32,000

$50

Thousand Barrels per Day

30,000

$40

Invasion of Kuwait

28,000

$30 26,000 $20

24,000

$10

22,000

$0

20,000 90

91

92

93

94

95

96

97

98

99

00

January 1990 – February 2005 Oil Production

Oil Price

01

02

03

04

05 WTRG Economics 2005 www.wtrg.com 479-293-4081

Page 8

The Glanbia Story

Dairy product imports of major oil exporters 1998 - 2005 700000 600000 500000 400000 300000 200000 100000 0 1998

Cheese 1999

WMP 2000

2001

Butter 2002

2003

SMP 2004

2005

Page 9

The Glanbia Story

Growth of renewable energy alternatives Domestic Renewable energy sources

• US and EU commitment to develop - ecological - economic - geo-political

• Policy / Regulatory • Other economic powers following suit Biofuels: Energy security versus food security

Page 10

The Glanbia Story

Bio-ethanol production • USA and Brazil the world’s leading producers • US production growing rapidly – circa 8 billion gallons 2007 - maize corn based - benefits from agricultural support programmes - high import tariff protection

• Brazil – current annual output 4.5 billion gallons - sugarcane based - major competitive advantage –v- maize corn - strong competition for alternative land uses - aspires to world export leadership

Page 11

The Glanbia Story

Corn the preferred US feedstock The US corn crop, accounts for 40% of the global harvest and traditionally supplied 70% of world corn exports

• Biofuel will utilise 27% of US corn output in 2007 - 1.6billion gallons in 2000, up to 12 billion gallons in 2010

• 114 US ethanol bio-refineries in operation, 80 more under construction - concerns: ethanol energy balance and water requirement

• 30% of the corn from ethanol production is recovered as distillers grains - this has limited use in animal feed Rising corn prices will affect all food prices

Page 12

The Glanbia Story

Biofuels outlook • Growth of biofuels will impact on all food markets - policy guidelines will be underpinned by legislation

• Fuel will compete with food for land use - higher land prices - higher feed stock prices

• Inflationary impact on dairy and food prices • Will favour pastoral dairy farming • Climate change, if a reality, will have a dramatic sustained effect – dairy market volatility GDP growth will sustain strong demand growth

• Medium term dairy supply / demand outlook is price positive but what impact on demand?

Page 13

Glanbia plc

The Glanbia Story

About us • Origins in Irish dairy co-operative movement (early 1900’s) • Export history and experience - focus on international casein and fat filled powder markets - cheese acquisitions in UK and USA 1980 / 1990’s - USA restructuring – move to the west 1995

• 1997 – merger of Avonmore Foods plc and Waterford Foods plc • 1999 – formation of Glanbia plc

Page 15

The Glanbia Story

Glanbia plc 2007 • Dairy-based food and nutritional ingredients Group • Operations in Ireland, Europe, USA and China • International Joint Ventures in the UK, USA and Nigeria • Listed Irish and London Stock Exchanges (Symbol: GLB) • Circa €900 million market capitalisation • Free float 45%; Co-op ownership 55%

Page 16

The Glanbia Story

Key financials • Top line growth of 8% to €2.1 billion, including joint ventures • Profit after tax pre exceptional up 9% to €66.4 million • Adjusted EPS up 8% to 22.6 cent, in line with market expectations • Dividends up by 5% to 5.79 cent per share • Several milestones achieved including Seltzer acquisition and SWC opening • International operations now represent almost 40% of revenue and profits • 2007: expect strong first half performance & confident of good double digit growth for year

Page 17

The Glanbia Story

Vision and strategy To be the most relevant player in international cheese, nutritional and dairy ingredients and selected consumer foods … ….through a focus on international scale, food technologies and growth markets Our objectives are to:

• Sustain double digit earnings growth • Diversify the Group’s earnings base to reduce volatility • Allocate capital to a mix of higher growth opportunities • Improve operating margins

Page 18

The Glanbia Story

Issues, opportunities and Glanbia responses • Global dairy market

dynamics shifting • Competitiveness

- Ireland : high cost economy - growth in retail concentration / buying power

• Investment in increased productivity / automation • Product diversification into high value dairy

ingredients (whey, lactose, nutraceuticals) • Increased investment in innovation : two

innovation centres (Ireland & USA) • Links to infant formula sector (Ireland largest

European producer) • Scale cheese production • Encourage productivity model for services to

industry (energy & other utilities) and long term Government support for innovation and biofuel industry Strategy based on cost reduction / restructuring and on developing scale with innovation / new product development Page 19

Business review

The Glanbia Story

2007 global operations TOTAL GROUP* Ireland

4,481

UK

employees

Germany Idaho California

5,312

Wisconsin & Chicago

milk suppliers

New Mexico

4.73 billion

Mexico

Nigeria

China

litres of milk processed

370,000 tonnes of cheese produced Brazil

Production Site

Uruguay

Sales Office

* including joint ventures

210,000 tonnes of food ingredients manufactured

Page 21

The Glanbia Story

2006 Footprint [three divisions and international JV’s] • Excluding JVs, €1.85 billion revenue and €85.6 million operating profit

IRELAND

INTERNATIONAL

64% revenue

36% revenue

Consumer Foods

Agribusiness and Property

Food Ingredients and Nutritionals

28% revenue

14% revenue

58% revenue

29% profits

19% profits

52% profits

• Including JVs, €2.1 billion revenue and €91.1 million operating profit

JOINT VENTURES:

€263 million revenue, €5.5 million operating profit

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The Glanbia Story

IRELAND

Consumer Foods • Two different businesses –

dairy-based consumer foods

–

pigmeat processing

28% of Group 2006 Revenue 29% of Group 2006 Operating Profit

• Key segment is consumer foods

Liquid milk and chilled foods: Branded liquid milk, dairy products, cheeses and fresh soups

• Leading brands and market positions

Pigmeat: Fresh pork and bacon products

• Emphasis on nutritious, fresh and natural • Focus on innovation and organic development

• Market with good growth potential

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The Glanbia Story

IRELAND

Agribusiness and Property Agribusiness

14% of Group 2006 Revenue

• Key link to Farmer supply base

19% of Group 2006 Operating Profit

• 61 locations nationally

Agribusiness: Feed milling, fertiliser, full range of farm inputs, Biofuels, & ‘CountryLife’ range

• Good cash flow

Property: Maximising value of Group-wide property

Property

• Maximise value of Group assets • Portfolio of >90 properties • Good predictable medium term profits

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The Glanbia Story

IRELAND and INTERNATIONAL

Food Ingredients & Nutritionals Food Ingredients

58% of 2006 Group Revenue

• Two businesses – Ireland and USA

52% of 2006 Group Operating Profit

• Capital and energy intensive

Food Ingredients: Cheese, butter, casein and whey protein

manufacturing

• Emphasis on efficiency, scale, relevance

Nutritional: Dairy-derived ingredients & Vitamins & minerals

• Ireland dominated by effects of EU MTR • USA steady market, profitable growth

Page 25

The Glanbia Story

INTERNATIONAL Nutritionals Strategy: to be a key global provider of nutritional ingredients and nutritional solutions… ….building a scalable, sustainable business

• Global business • Whey – a valuable source of sugar, proteins, minerals • Customised premixes – entered market in 2004 – large market in the USA; approximate value US$400 million pa – projected to grow 8 to 10% pa 2006 to 2011 (HSC report 2005)

•

Business-to-business revenue and relationships

•

Growth business in a growth market / strong fit with Group strategy – science-based innovation and R&D underpinning the business

• •

Strong organic, acquisitions and NPD opportunities Good performance / current focus on integration of Seltzer, acquired 2006

Page 26

The Glanbia Story

International Joint Ventures 12.5% of 2006 Group Revenue • Key element of growth strategy

6% of 2006 Group Operating Profit

• UK : Glanbia Cheese –

2007 annualised revenue £110 million

Three Joint Ventures located in the UK, USA and Nigeria

• Nigeria : Nutricima –

2007 annualised revenue US$100 million

• USA : Southwest Cheese –

2007 annualised revenue of US$350 million

Page 27

The Glanbia Story

INTERNATIONAL

Glanbia Cheese UK Where: Wales & NI Partner: Leprino Foods

• No.1 Europe mozzarella cheese • Technology driven business • Key customer relationships • Growing market share

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The Glanbia Story

INTERNATIONAL

Southwest Cheese USA Where: Clovis New Mexico Partner: Great South West Milk Agency

• US$190 million investment • Cheese and whey facility • 1.1 billion litres of milk • Full production by mid-2007 delivering annualised sales of US$350 million

• Ramp up ahead of plan

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The Glanbia Story

INTERNATIONAL

Nutricima Nigeria Where: Lagos Partner: PZ Cussons; 100 years in Nigeria

• US$25 million investment • 50:50 Joint Venture • Consumer foods with dairy focus • Population of 140 million • Strong sales growth • 2007 annualised sales US$100 million • Further US$35 million expansion planned

Page 30

Summary

The Glanbia Story

Review • Ireland a small domestic economy strong export tradition / flexibility • Glanbia managing cost /competitive issues in local markets through productivity and cost strategy

• Constant tracking of global dairy dynamics • Opportunities - world milk production growing @ 1.75% pa - world dairy demand forecast @ 2.8% pa - rising corn prices to drive all food and dairy prices - growing demand for health and wellness products

• Scale position developed in US cheese market • Developing Nutritionals business to meet growing market requirement - Seltzer acquisition key / Asian expansion planned 2007/2008

• Outlook for sustained high growth

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The Glanbia Story

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