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Glanbia PLC
Earnings Call Analysis
Q2-2023 Analysis
Glanbia PLC
The company exceeded its own expectations in the first half of '23, boasting a growth of 6.6% in constant currency and adjusted earnings per share. Optimism surrounding the performance has led to an upward revision of the full-year adjusted earnings per share, previously forecasted to increase by 7-11%, now expected to rise by 12-15%. This promising development has also facilitated a 10% hike in the interim dividend, signaling confidence in the financial stability and future earnings.
Margins are on the upswing, with the company announcing an enhancement to their GPN (Glanbia Performance Nutrition) margin guidance for the year '23, now anticipated to be between 13.5% and 14.5%, a full 100 basis points higher than previous estimates. This margin improvement parallels a robust projection of operating cash flow conversion, expected to exceed 80% for the full year, suggesting efficient management of the company's liquidity and profit conversion.
The SlimFast brand, representing 11% of GPN global revenue, has faced struggles, with like-for-like revenue plunging by 31% in the quarter due to broader headwinds in the diet category. Despite efforts to reinvigorate the brand, the reduction of shelf space by key U.S. retailers has been a setback, forecasting distributional downsizing into the next year. Overall revenue has declined by 15.2%, impacted by a 4.8% dip in pricing and a 10.4% fall in volumes, although the latter shows signs of improvement compared to Q1 figures. With an emphasis on gaining momentum in customer relationship strength and consumer demand, the Nutritional Solutions division is projected to normalize volumes throughout the remainder of the year.
Wholly-owned revenues hit $2.8 billion, marking a 10% downturn in constant currency, as growth in GPN revenue was countered by a decline in Glanbia Nutritionals. Nonetheless, wholly-owned EBITA before exceptional gains grew by 6.1% in constant currency, and adjusted earnings per share for continuing operations improved by 6.6%. The decrease in group share of joint ventures profit after tax reflected strategic dispositions, and the effective tax rate hovered between 13.5% and 14.5%. These figures elucidate the company's ability to manage costs and extract value amidst revenue pressures.
The company is streamlining its reporting strata post-COVID-19 by adjusting commercial agreements within its joint venture, coming into effect from '24. This administrative reshuffle wouldn't materially sway group or Glanbia Nutritionals EBITA but is set to enhance the clarity of group financials by significantly reducing gross revenues—by approximately $2 billion—and raising group EBITA margins by over 300 basis points. These revamps exhibit the company's willingness to better align with market comparables and enhance investor intelligibility.
ON, one of the company's key brands, continues to solidify its market position across key global regions such as Oceania, Europe, and Asia. Despite facing dynamic pricing challenges, the brand maintains a strong volume and pricing strategy internationally, setting a positive trajectory for its future outlook.
The company has shown prudence in the procurement of dairy commodities, securing price stability for the current period and is already turning its focus to future procurement. The current market indicates that dairy commodity costs will remain stable, and this assurance of cost predictability is a boon for future planning and cost management.
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Good morning, and welcome to the Glanbia Half Year 2023 Analyst Results Call, which is hosted by Siobhan Talbot, Group Managing Director; and Mark Garvey, Group Finance Director.
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 2023 interim financial statements and analyst presentation.
Due to inherent uncertainties, including both economic and business risk factors underlying such statements, 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 Siobhan Talbot, Group Managing Director, Glanbia plc.
Good morning, everyone, and welcome to the Glanbia half year 23 results call and presentation. On today's call, I'll provide a summary of our performance for the first half of the year. I'm joined by my colleague, Mark Garvey, who will cover the financial results. And at the end of the presentation, we'll turn the call over to yourselves for questions.
Overall, I'm pleased to report that half year '23 performance for the group was ahead of our expectations, delivering 6.6% growth constant currency and adjusted earnings per share for the period.
And this result, together with an improved outlook for the second half of the year is resulting in an upgrade in full year adjusted earnings per share guidance from the prior 7% to 11% growth to 12% to 15% growth, all constant currency. This is facilitating also a 10% increase in our interim dividend. The driver of the half year ended full year '23 results outlook is a stronger-than-expected margin progression in GPN, and I'll speak further to that shortly.
The overall financial position of the group remains very strong with over 100% cash conversion in the rolling 12-month period to June and a debt-to-EBITDA ratio at the end of the period of less than 1x. We've used our strong financial position to return over 64 million to shareholders in the period via buybacks.
Strategically, Glanbia is very much on track. Our Better Nutrition brands and Ingredient Solutions increasingly resonate with customers and consumers. Our largest brand, Optimum Nutrition reached the annualized $1 billion milestone in the period and continues to see strong consumption growth globally.
I'll speak again to it shortly, but in the U.S., the most recent 12-week consumption growth was 14.3% and the last 52-week consumption growth over 30%. In GN Nutritional Solutions, we continue to broaden our technologies across our core protein and premix solutions and across the whole group, investment continues in key strategic enablers: talent, marketing, IT investment and innovation. We have previously spoken to a desire to continue to simplify and focus our overall business portfolio. In Glanbia, we now have 4 clear engines for growth. In GPN, there is a very clear focus on the ON brand. There's a growing position in the Lifestyle Nutrition categories. And then in Nutritional Solutions, we will continue to leverage and build our global leadership positions in premix vits and mins and protein solutions. We have further simplified our joint venture model. In Europe, we completed the sale of our interest in the mozarella cheese business, Glanbia Cheese to our partner Leprino Foods.
Our only remaining joint venture interest now is in U.S. cheese and whey. We're very much aligned with the 4 growth pillars I've just noted, we have a really unique and very robust business model. Effective for full year '24, we will further simplify the reporting of this business through a change in our commercial arrangements with our partners. And that will essentially simplify our group reporting and better clarify the underlying margin structure of both Glanbia Nutritionals and indeed the group, and that will lift group margins by over 300 basis points on a full year basis.
So turning then to revenue for the half, very much broadly in line with our expectations. In terms of volume within GPN, ON, our largest brand, continued its positive volume momentum in the period, and we did see a significantly improving volume trajectory in Nutritional Solutions in Q2 over Q1. I'll speak more to that later.
On pricing, the higher pricing sustained in GPN in the period is delivering double-digit pricing growth and actually, the pricing decline that you're seeing in Glanbia Nutritionals in both Nutritional Solutions and Cheese was all a function of lower dairy market pricing. As we will speak to later, despite the lower revenue in the first half, we had really good margin progression across all of the group, a trend that we expect to sustain over the full year.
Turning then to GPN. Strong first half results with branded like-for-like revenues growing 3.7% and year-on-year earnings up over 20%. As I said earlier, pricing was a key driver of growth. We have sustained the pricing benefits of the '22 pricing actions and delivered pricing growth of almost 11%. We have increased our brand investment in the period, and this has supported volume progression of the key brands despite that pricing action.
Consumption continues to be good in the Performance Nutrition and Healthy Lifestyle portfolios. And while we have seen some elasticity, this continues to be below our earlier expectations. As I referenced earlier, Global ON continues the growth momentum growing over 16% in the first half. Volume was up 2.6% and pricing 13.6%. And in fact, we expect the volume momentum of ON to improve further as we go through the second half of the year.
So in terms of the branded volume decline of 7.2%, that was largely driven by SlimFast, and I'll come back to that again shortly. We're particularly pleased with the margin progression in GPN, where we delivered 12.1% margin in the first half, and that was despite higher year-on-year cost of goods sold and post increased brand investments.
The structural margin in GPN continues to be underpinned by the transformation program completed over the past number of years and a strong focus on both revenue growth management initiatives and operating initiatives is delivering results. With a solid base now in half 1, we expect in half 2 to build on the work we've been doing so far with an improving cost of goods position, particularly for dairy. Ultimately, the focus in GPN on margin enhancement is enabling both further increased brand investments and higher net margin delivery for full year '23.
As a result of our increasing confidence in sustaining that margin progression, we are today upgrading our GPN margin guidance for full year '23 by a further 100 basis points from 12.5% -- from between 12.5% and 13.5% to now between 13.5% and 14.5%. Parsing the 3.7% branded revenue growth into various segments a little, revenue in Americas was broadly in line with the prior year. This arose as we had growth in the Performance and Lifestyle that was offset by the continued decline of SlimFast. We had good growth across key international regions driven by that global momentum of ON. Our brand portfolio continues to grow across all key channels.
The decline you're seeing in the distributor channel here is very much a conscious decision to service some international markets more directly through other channels. Our largest format powders continues to grow strongly. The product and value proposition of powders continues to resonate very strongly with consumers. And the growth of brands such as Optimum Nutrition and Isopure, will, we believe, continue to drive sustained growth for the group. As you might expect, the decline in ready-to-eat and ready-to-drink arose because of SlimFast.
So for full year '23, we currently expect GPN revenue growth to be in the lower end of the previously guided range of 5% to 7% as that strength that we're seeing in Performance and Healthy life size -- Healthy Lifestyle will be offset by the decline in weight management.
Turning then to our largest brand. As you would expect, given its scale and most importantly, its potential, Optimum Nutrition is a clear priority brand. It is the brand that has and will receive the greatest proportion of resources and investments. It's 60% of our portfolio. It grew by 45% in the 3 years to '22, and we've built on that again in the first half of this year with a further 16% growth.
Our U.S. consumption continues to be strong, as I referenced earlier, with the last 12 weeks over 14%. We're progressing all aspects of the brand's playbook that we spoke to you about at our recent investor event in London with our focused approach across broadening our consumer reach, developing our inspiring creation with the More of You in You campaign, innovating across products and formats and increasing our marketing investments. And all of that is driving incremental distribution and velocities. As you know, Optimum Nutrition is anchored both in protein and energy and the powder format has a really strong value proposition and no doubt that is resonating with consumers and will continue to drive our brand momentum.
Representing 18% of our GPN portfolio, our Healthy Lifestyle brands continue to gain momentum, and that is our brand of Isopure, think! and Amazing Grass. We had strong growth in Q2, in particular, for Isopure, where increased investment and the strength of the pure positioning of that brand is driving distribution gains. We have further innovation across flavors planned for a number of our brands in the second half of the year, and we expect good momentum to continue for the rest of '23. Our recent U.S.
consumption for the last 12 weeks, again, continuing momentum at 11.7%. The SlimFast brand is now 11% of the GPN global revenue, and it continues to be challenged by the headwinds in the overall diet category. The brand saw a like-for-like revenue decline of 31% in the quarter, with our consumption in the 12 weeks to July declining by 33%. Despite brand investment and indeed, retailer support for the brand refresh, the diet category and the SlimFast brand has not regained the anticipated momentum.
As a result, some key U.S. retailers are reducing category shelf space in the short term, and this will reduce distribution for SlimFast into next year. Undoubtedly, weight management remains a key focus for consumers in the U.S. And given this, we will navigate the current category dynamics by refocusing our efforts and rebasing our investment back to those core meal replacement ready-to-drinks and powder shakes.
Turning then to Glanbia Nutritionals. The performance of Glanbia Nutritionals across both Nutritional Solutions and US Cheese, again, was as expected for the first half. Lower revenue was a function of lower market pricing in US Cheese and lower volumes in Nutritional Solutions, a trend that improved on volumes as we move through the period. Earnings were back 7% overall, with good margin focus, driving the year-on-year margin improvement. As I noted earlier, we plan to simplify our reporting for the joint ventures from 2024.
From that date, Glanbia Nutritionals will reflect only commission and sales on behalf of the joint ventures. There's no material change to our EBITA, and this is expected to increase Nutritional Solutions EBITA margins by in around 150 to 200 basis points and our U.S. Cheese margins probably around 200 to 300 basis points higher than we currently report. We believe again that this '24 change will better reflect the underlying margin structure of Glanbia Nutritionals and the group. In terms of Nutritional Solutions then.
Looking at that part of the business, revenue decreased by 15.2%. Pricing was down 4.8%, with positive pricing and premix, offset by the declining dairy protein market pricing.
Volumes were down 10.4% as while the trend of customers rebalancing their supply chains continued in Q2, this was substantially improved over Q1. Consistent with our comments noted with our Q1 results, this trend was mainly a feature for us -- our premix business with the protein business quite stable in the period. Our margins grew 70 basis points.
And for the full year, we expect margins to improve from '22 levels to be between 12% and 13%. This is going to be driven by the improved mix of value-added solutions, operating efficiencies and indeed the mathematical accretion that arises from that lower dairy market pricing. As I said, with our Q1 results, we saw customers in our protein business, reduce inventory in the second half of '22. And in Q1, this trend really emerged in our premix business. A key strength of Nutritional Solutions continues to be a strong relationship with our customers, and there's been no change to our customer base in the first half.
Essentially, our customers are telling us that easing supply chain constraints are allowing them to be more comfortable with reduced inventories with an expectation that their offtakes from ourselves will normalize as we move through this year. With our customers, we continue to monitor the underlying consumer demand trends, which are largely robust across our key categories. We've seen this trend play out firstly in our proteins business, where we return to volume growth in the second quarter.
It is, of course, impossible to be absolutely prescriptive on the timing of volume offtakes, where we have seen a significantly improving year-on-year volume trend in Q2 at minus 3.8% relative to the Q1 minus 17.4%. We expect this to continue into the second half of the year, particularly for proteins, driving our current full year outlook for Nutritional Solutions of a mid-single-digit decline.
As you know, our U.S. Cheese business operates a very robust pass-through model on pricing, which really protects our earnings from changes in market pricing. And so our main focus on this business is cash earnings and that focus delivered a strong performance in the period, which -- with an 18.6% increase in EBITA. The decline in revenue is, as you would expect, just reflecting lower U.S. cheese market pricing over the half year.
With that, I'll hand to Mark for the financials.
Thanks, Siobhan, and good morning to everyone on the call. Here you can see the group's income statement for the half year, and I'd like to remind everyone, we are now presenting our financial statements in U.S. dollars. Wholly-owned revenues were $2.8 billion, down 10% constant currency as growth in GPN revenue was offset by a revenue decline in Glanbia Nutritionals, our customer supply chain rebalancing and lower dairy market pricing led to reduced revenues. Wholly-owned EBITA before exceptional gains was $198.6 million, up 6.1% constant currency last year as a result of EBITDA growth in Performance Nutrition and U.S.
Cheese being somewhat offset by a decline in Nutritional Solutions and supply chain rebalancing was a factor during the first half, albeit with improving trends in the second quarter. Wholly-owned margins were 7.2%, an increase of 110 basis points as margins progressed in both GPN and GN. Performance attrition margins improved by 12.1% primarily as a result of pricing taken during 2022. Net finance costs were $7 million compared to $10.6 million in the prior year, reflecting strong cash flow and lower average debt during the period compared to prior year. For the full year, net finance costs are expected to be in the range of $16 million to $18 million.
The group share of joint ventures profit after tax for continuing operations was $6.5 million compared to $12.5 million for the same period last year, in line with our expectations and reduced primarily due to the sale of the group's interest in the U.K. and Ireland Glanbia Cheese joint ventures during the period. The effective tax rate for the half year was 14%. And for the full year, the effective tax rate is expected to be 13.5% and 14.5%. Adjusted earnings per share for continuing operations was $0.678, up 6.6% on a constant currency basis compared to the same period in 2022.
Basic earnings per share post exceptional items for continuing operations was $0.719 compared to $0.504 last year, reflecting operating performance and the net exceptional gain on the disposal of our interest in the Glanbia Cheese joint ventures. There were no discontinued operations in the period. During the first half, the group completed the sale that Glanbia Cheese joint ventures for initial proceeds of €178.9 million, which include the repayment of shareholder loans. These joint ventures were classified as held for sale in February, so the results of these businesses have not been included in the group's results for most of the first half. Aseptic Solutions was also divested with proceeds of $11.2 million received for the transaction.
These transactions net-related costs resulted in a net exceptional gain of $57.8 million in the period. The group had strong operating cash flow during the period as the working capital headwinds experienced in the first half last year have now mostly reversed. The rolling 12-month EBITDA cash converted is strong at 100% to the end of June, and we are confident in the conversion of over 80% for the full year.
Net debt at the end of the half year was $451 million compared to $676 million last year. The net debt to adjusted EBITDA ratio was approximately 1x compared to 1.7x at half year '22 and was well within confident levels. The group has significant borrowing capacity and currency is $1.3 billion in committed facilities with a weighted average maturity of 5.2 years.
During the first half, the group incurred $27 million of strategic capital expenditure, primarily on additional manufacturing, automation and GPN, protein extrusion capacity in Nutritional Solutions and IT implementations across the group. For the full year, we expect strategic and maintenance capital expenditure to be between $75 million and $85 million. Turning to shareholder returns. Today, we announced that the interim dividend is to be increased by 10% to €14.22 a share.
For the full year, the group will continue to target a dividend payout ratio of between 25% and 35% of adjusted earnings per share. The group continues to execute the €100 million share buyback program announced in March and extended in May.
During the first half, €64.5 million have been utilized for this buyback program, purchasing 4.76 million shares at an average price of €13.55. Group continues to look at acquisition opportunities, focused primarily in the Nutritional Solutions business, the most recent acquisition of Sterling Technology in the dairy bioactive space has performed well. And in recent weeks, the group paid an additional $27 million earnout payment as a result of this strong performance, bringing total proceeds for Sterling Technology to $87 million.
The group is a strong joint venture model in the U.S. with large cheese and whey operations in New Mexico and Michigan. Following the most recent commissioning of the Michigan facility on time and on budget during the COVID pandemic, we have with our joint venture partners decided to amend our commercial agreements, which will simplify group reporting from 2024. As a result of this change from '24, Glanbia Nutritionals will act as agents for the joint venture and consequently recognize only the commissions earned on the sale of joint venture products. We will no longer gross up revenues and corresponding cost of sales of the joint venture products.
There will be no change in day-to-day operations, and there will be no material change in the group on Glanbia Nutritionals EBITA. Detailed pro forma information for 2023 will be provided with the 2023 results.
And for illustrative purposes, depending in dairy markets, this change will result in group and Glanbia Nutritionals revenues being lower by approximately $2 billion, and group EBITA margins consequently will be higher by over 300 basis points from current levels. There will be no material change to Glanbia Nutritionals dollar EBITA with, again, subject to dairy market pricing, Nutritional Solutions EBITA margins expected to be between 150 to 200 basis points higher and U.S. Cheese EBITA margins expected to be 200 to 300 basis points higher than currently reported. We believe that this change will be -- which will be effective from '24, will simplify the presentation and underlying performance of the group and facilitate easier comparators with our peers.
Now I would like to update you on the elements of guidance for the full year. Firstly, for GPN, we now expect like-for-like revenue growth to be at the lower end of the 5% to 7% range for the year. While we expect good revenue growth of Sports, Nutrition and Lifestyle, we expect this to be somewhat offset by lower revenues in weight management. On Nutritional Solutions, we have discussed the supply chain rebalancing trends we have seen, and you can see the sequential improvement made in the second quarter. We expect this improvement to continue in the second half.
And for the full year, volumes are expected to be mid-single digits lower than prior year.
Turning to GPN EBITA margins. We now have good visibility on whey costs for the remainder of the year, which, as we've said previously, will lead to improved margins in the second half. As a result, we are now able to upgrade our expected GPN EBITA margin expectations to be between 13.5% and 14.5% for the full year.
On GN Nutritional Solutions, our EBITA margin guidance is unchanged, and we expect margins to be between 12% and 13% for the full year. Based on the performance year-to-date, we expect to have strong cash flow for the year and operating cash flow conversion is expected to be over 80% for the full year and return on capital employed will be within our target range of between 10% and 13% for the year.
Therefore, we are pleased to upgrade our adjusted earnings per share growth guidance from 7% to 11% to 12% to 15% for the full year, primarily based on GPN expected performance for the remainder of the year.
And with that, let me hand it back to Siobhan.
Thanks, Mark. So overall, our category trends for Glanbia remain very positive. As I said earlier, our strategy and structure is now simplified and very much aligned to maximize our growth opportunities. Our better nutrition agenda across 4 complementary growth pillars is really clear. In GPN, we will drive the global scale and reach of Optimum Nutrition, driving beyond the $1 billion investing in that global reach and consumer connectivity of the brand.
We will broaden and deepen the availability of our Lifestyle Nutrition brands in North America, and we will stabilize them fast.
Similarly, in Nutritional Solutions, we will build on the core strengths and increasing capabilities of our 2 growth pillars of custom premix and protein solutions. We will continue to extend our capability, both organically and through M&A, and we will leverage our scalable operating models. Of course, we will continue to drive financial performance. And as Mark just outlined, in 2023, we'll improve our margins across the group and deliver that upgraded guidance of between 12% and 15% adjusted EPS growth. We'll deliver strong cash conversion, and that strong balance sheet will set us up well for sustained growth momentum into the future.
Finally, it would, of course, be quite remiss of me not to comment on some other announcements made today. It is, as you can imagine, somewhat a bitter sweet occasion for myself as I plan my retirement at the end of the year. It's been an enormous honor and privilege for me to be part of this incredible Glanbia team for over 30 years, CEO for the last 10. It has been such an exciting journey to date, and I believe that the group is in great shape to capture the opportunities that lie ahead. We have massive depth of experience and passion for Glanbia across my own executive team and indeed all the Glanbia team and I'm truly delighted that we have a very strong internal successor to the CEO role in Hugh, who will take over in January.
No doubt, you will hear from me again before the end of the year as we close out 2023 and move to the transition phase. So for now, as always, many thanks for your time.
And Mark and I will take any questions you have.
[Operator Instructions] The first question comes from Cathal Kenny from Davy Research.
Siobhan, congrats on a great career. I just want to wish you and your family the best as you embark on the next chapter. So 2 questions for me. Firstly, on ON. Siobhan, in your prepared remarks, you flagged an expectation of improving volume growth through the second half.
I guess, what gives you that confidence as we sit at the start of Q3 this morning? And secondly, in light of falling COGS, and this is a question in relation to the Performance Nutrition category, how are you thinking about promotional intensity around the category and absolute pricing as we look into the next 6 months?
Thanks, Cathal, and thanks for your best wishes. On ON, I suppose the first thing to say is that we're really, really pleased with the momentum of the brand. It is really -- it is our flagship brand, as you know. We've hit that milestone of the $1 billion. And as Hugh and the team outlined so well at the recent investor event in London, we're very positive about the future opportunity.
There can sometimes be ebbs and flows and shipments 1 quarter to the other. So as we look at the trajectory for the rest of the year and the distribution gains that we're getting, we're quite confident at this point in time that we would hit that mid-single-digit volume growth for the full year overall for the Optimum Nutrition volume as we close out 2023. Obviously, the pricing dynamic will move. We'll start to lap the pricing as we move forward, but we would expect to see a really good continued momentum for that brand. Your question on promotion, very valid, not seeing anything dramatically different to the normal.
There will always be some promotional activity, as you know. And obviously, clouds are coming down, as you rightly say. So at this point in time, I think it is steady as she goes, being the normal rhythms apply. And obviously, that is leading to a very nice margin progression for us as we move through the second half. I guess the great thing to say to all of you on the call is that the brands that are doing really well, like Optimum and Isopure are our best performing from a margin perspective brands, which gives us confidence for '23.
And just a quick follow-up, Siobhan. Just in terms of your guide on margin, are you factoring in an increase in marketing investments or promotional intensity into that margin guide, GPN?
Yes. yes. Probably for the full year could be up to 200 bps. Yes, we are.
The next question comes from Rashad Kawan from Morgan Stanley.
Siobhan, congrats on fantastic career again. I wish you all the best going forward. A couple for me, please. On GPN, so you upgraded your guide for margins, which I think implies second half margins in the 15% to 17% range. I guess how should we think about the longer-term margin profile or kind of the right run rate for GPN margins going forward from here?
And how much does that promotional environment matter as you think about the longer-term range?
And then my second question, you talked about redirecting promotional spend away from SlimFast given the challenges in the category, what are your expectations now for the brand as you sit here today for the rest of the year? And to the extent the category continues to be challenging, would you consider divesting that brand?
I'll take the margin question. Look, we're very pleased at where -- the progression we're seeing this year on margin. And you are right, that does apply to the second half. We'll have a strong margin. Obviously, that is helped by the fact that we've got some lower COGS in there, as Siobhan said, we're also investing behind marketing.
So the exit rate for the year actually on our margin will look quite good. I would say to you and back to Cathal's question too, we all have to keep a close eye in terms of how market will develop in terms of promotional activity as we get towards the end of the year and into next year. We're very pleased with the [ace streak] we're having in terms of margin. And I think as we come back to the beginning of next year, we can update you in terms of where we believe structurally we are. But clearly, the direction is positive right now.
Thanks, Rashad indeed for your comments. In relation to SlimFast, there's no doubt that there is some disappointment across all of us as a team in terms of where SlimFast is sitting. I think it's fair to say that the refresh was well executed by the team, while supporters frankly just hasn't got the traction we would have hoped and happened maybe in the weight management sometimes, I think, particularly with the category going through the current challenges. I think if you stand over all, where we see '23 ending in truth is probably what you're seeing in the first half being repeated for the second half. So you're probably going to be in that 30% decline for the full year.
Our focus now as we look forward beyond that is very much back to that core. We know we have a strong proposition in that high protein, low carb ready-to-drink and meal replacement shakes. We also know that consumers want help on their weight management journey, and we all know indeed that weight management remains a clear focus for many consumers. So very focused, as I said at the outset. ON is our big brand.
ON is really going to be the one we're driving forward. It's performing very well. As Mark said, the margins as we exit the year will be very good for that brand. Navigating the short term, and I would call it short term in SlimFast in terms of the category challenges but believe that the brand will rebase and drive forward beyond that, but we'll stabilize it first.
And just to clarify, Siobhan, in terms of the lower guide for GPN at the lower end of that 5% to 7%, I think you hinted at that in your opening remarks, but I'm assuming that's entirely SlimFast, right?
It is exactly. Yes, it is indeed. Excluding SlimFast, we would be well as the -- and above indeed the range we're guiding.
The next question comes from Patrick Higgins from Goodbody.
Firstly, Siobhan, huge congrats on a great career and best of luck with your retirement. A couple of questions for me. Firstly, maybe could we just dig into the performance in the international markets in GPN very strong. Could you give us a bit more color on individual markets within that category?
Secondly, could you just speak to the way cost backdrop across 80% concentrated and isolate, how does that look now? Does that look like it's going to start trending higher or kind of stabilize at these levels? And then finally, maybe just could you build on some of the, I guess, trends your underlying demand trends you're seeing within Nutritional Solutions on the premix business. How should we think about the destocking trends between Q3 and Q4, should we anticipate a return to kind of normal levels of growth in Q4? Or how should we think about it at this stage?
I'll let Mark take the whey cost and indeed he'll speak to the Nutritional Solutions. On a way -- on international, what you're really seeing is that global reach of ON. And in fact, actually, we were doing well across all of our key regions. Clearly, Oceania, Europe, Asia, all really driving forward, continue to monitor the pricing dynamics, but our overall volume and pricing piece across international doing well for the ON brand and that sets up well as we would say, for the future. Mark, maybe?
Patrick, on whey costs, as we've talked over the last several quarters, clearly, dairy commodity prices and whey cost as well have come down, have been quite muted. And obviously, that's giving us some benefit in GPN into the second half here. Our current expectation right now is that dairy served commodity costs will stay reasonably stable. There's no indication at this point that they're going to move upwards. So reasonably stable, I would say for now. I think we're very much covered for the rest of the year.
In terms of our procurement, we'll probably start looking at next year pretty soon as well, I would say, but from the perspective of direction seems reasonably stable right now. In terms of Nutritional Solutions, again, really pleased to see the sort of sequential quarter-on-quarter improvement and that rebalancing that we've been talking about -- it's more of an issue on the premix side and the protein side for us this year. But certainly, we did see that improve in the second quarter and our current expectations are that will continue to improve in the third and fourth quarter. We did call our guidance a little bit down on volume, so timing might be a little bit slower than we expected, but not significantly. So from that perspective, the trajectory is what we really expected. And from a customer perspective, again, we feel pretty good in terms of the information they're giving us in end markets also.
Next question comes from Lauren Molyneux from Citi.
Congratulations Siobhan on your retirement as well. Just a couple of questions, please. So maybe on the new CEO firstly, so Hugh. So I know it's quite early days, obviously, but just wondering whether we should see from you, again, as the next CEO, reflecting a continuation of the strategy or whether Hugh has arranged to [indiscernible]. And maybe a bit more detail on potentially when we can expect from you to hear a bit more on [indiscernible] and what to expect on the tenure.
And then also you explained, and apologies if I missed it in the remarks, but have you filled the GPN CEO role that will now be obviously left by Hugh or when can we expect to hear more on the plans for that role? And then my second question is just on the GPN again, the top line guidance. Maybe if you could give a bit more detail in terms of the volume and pricing within that like-for-like guidance? And then also, I know you've talked quite a bit about you've got the distribution gains within underlying channels supporting your growth. But if we strip that out, what is kind of underlying like-for-like volumes actually might be like? And also what's driving this distribution gain? And what visibility do you have that, that could continue to be a supporting factor going forward?
Laura, I hope I got all the questions, and thank you again for your comments. In terms of Hugh, I think I will leave that to Hugh in due course. Clearly, Hugh's been on the executive team for a long time, has been part of the evolution and transformation of Glanbia. We have, as a collective set out a strategy for '23 to '25. And clearly, it is within Hugh's gift to alter or bend that in due course, as he speaks with you, I'm sure, in early '24.
Again, you will hear from us, I'm sure, very soon about the successor to Hugh within GPN. But suffice to say, we do very good succession planning in Glanbia, and you'll hear about that in due course.
In terms of the top line for GPN, as we spoke indeed at our recent London event, we have quite a mixed across our business, about probably around 23% is in the Do More categories where you see great clarity on things like distribution versus velocities. A lot of our other business, we're looking at total consumption numbers. What I think suffice to say that where we have information across those channels, we can see that we're getting very nice distribution gains in that food, drug and mass. And likewise, across some of the other channels, whether it's club, whether it's online, continuing to gain momentum. What is driving that?
I would say, Lauren, a few things. Firstly, undoubtedly increased marketing investment. We've spoken to you now over a number of quarters where we've been upweighting that investment in the brand, staying very close to consumers, changing our marketing mix so that we can really see the returns that we're getting across the brands. That channel mix itself is very positive for us, too. I think we have a very good mix across the business now.
And we also have that global reach, which is reasonably unique. It's the only brand that has very strong anchored position in the U.S., but also has that global reach and that's going to continue to drive our top line momentum. And then the value proposition is an important. Your powder is resonating very strongly with consumers currently as it should. Even with the pricing that we've put through on a price per serve basis, it remains very competitive versus other offerings.
So I think there's a number of dynamics driving that, and that really is what's giving us the confidence that it will sustain as we go forward. The strength between volume and price, as we said, will move as we go through the year. But fundamentally, we will deliver very good growth, we believe, in ON, and that is a big underpin for the GPN business as we look forward.
[Operator Instructions] The next question comes from Setu Sharda from Barclays.
First of all, congratulations, Siobhan on great career. I have 2 questions. The first one is on Nutritional Solutions volumes, which seems better in Q2, but FY '23 outlook slightly was -- why is that? Is that prudence or you see something in Q3 that is concerning? And the second question on the U.S. Cheese accounting change. Like when might we expect this to be formalized? And why are you able to do this now versus earlier?
Just to take those questions. In terms of the Nutritional Solutions volume trajectory, I think we're being somewhat cautious around that in terms of the markets being quite dynamic right now. We're very happy that we've actually come in a bit ahead in the first half than will be expected we talked to you in the first quarter. But as we look at the markets, I think it's appropriate for us to sort of call that a mid-single-digit decline at this point. But you will see sequential improvement each quarter over the next 2 quarters.
So again, as we head into next year, we will be in pretty good shape there. From the Glanbia Nutritionals and the joint venture arrangements, we have an opportunity here, of course, following the Michigan initially that we did. We started to discuss this with our joint venture partners, given that we now have 2 large factories in the U.S. in our joint venture arrangements, it seems to make sense to us to actually look at this arrangement again.
As a result of this, we're going to be able to change our arrangement for being an agent operating from behalf of the joint ventures effectively, and that allows us to make this change. In terms of information, we'll be getting detailed pro forma information out to everybody in the new year. So you can see how that will impact in '24. As I said, it will be a '24 impact going forward, but not be impacting us this year. But we felt that was important just to let investors know that's the direction we're moving right now.
[Operator Instructions]. We have a question from [John McDonald] from Jefferies.
Congratulations, Siobhan again on the career path. And well done on today's results. Just a quick one on the other cost of goods sold in your business that may have not been mentioned. And thinking about storage, shipping, logistics, airfreight, that [indiscernible] documents the past couple of years about surcharges and such. Are you seeing strong deflation in that area of the business and cost as well?
Yes. Thank you, John. I would say we're seeing stabilization. We are probably seeing outside dairy still some inflationary pressures. So we mentioned that I think in our Q1 results. So there are still some elements of the COGS that are still actually be for '23 on that upward trend. We're taking all that into our guidance of margins for the year. So again, while the dairy is down, yes, you're absolutely right, those areas that are still going up. And then there's areas that are stabilizing as we move through '23. The big move for us is that positive piece of dairy in the second half, but all of the above taken into our upgraded guidance for GPN and Group.
We have no further questions. So I'll hand the call back to the management team for any concluding remarks.
Again, just remains thank you, as always, for your attention, and we'll talk again soon. Thank you.