Glanbia’s Volumes Turn Sour in Q3 Amid Continuing Price Hikes

No-moat Glanbia's third-quarter update saw volume growth turn negative in the quarter. The reported year-to-date like-for-like sales figure still leaped nearly 22%, given continued price hikes to pass through raw material cost inflation, but this marked a slowdown when compared with the 25.4% growth reported at half year. The relative softness in volumes signals to deteriorating price elasticity, especially for the performance nutrition and nutritional solutions segments. Despite the slowdown in the quarter, management narrowed guidance for the full year constant-currency-adjusted EPS growth to 10%-13% from 9%-13% previously. Our updated forecast is roughly in line with guidance, with 18% adjusted EPS growth on a reported basis (up from 15%), also reflecting the strong positive contribution so far this year of the appreciating U.S. dollar (Glanbia generates 80% of its revenue in the United States). But this change has little bearing on our valuation. We retain our fair value estimate of EUR 12 and view shares as relatively fairly valued.