GLAPY (GLAPY) Q2 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Glanbia Half Year 2026 Results Conference Call. [Operator Instructions] 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, and 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, and 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, and 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 3 of our operating segments with very good demand for our Better Nutrition brands and ingredients. The group delivered revenues of $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 #1 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% in 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 in 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 group-wide transformation program. And as a result, we're increasing our target annual savings from $60 million to $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. And as a result of the strong performance across all 3 segments, we are today pleased to upgrade our full year adjusted earnings per share guidance to 17% to 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 2 and lapping of a weaker comparative in the prior year. We implemented double-digit price increases in quarter 2 globally, and we started to see some early signs of elasticity concentrated in specific channels and pack sizes. But due to underlying consumer demand, the higher-income SKU 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 continue to monitor the situation closely, particularly as we implement further price increases in quarter 3 on our protein brands, which is supported by promotional efficiency, product mix and price pack 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 and 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, and 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 a 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 continue 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 2, 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 investments and supply continues to increase. And 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 the 4th of July 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 #1 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 sellout 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. And 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 points. 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 launching 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. women's NBA 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 4 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 long-standing partnership with [ iFlag ] and high-impact activations such as our successful activations of 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 4 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 acquisitions 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 2 pipeline fill as some of our customers expanded into new regions. Regionally, we saw strong growth, particularly in EMEA and Asia Pacific. Pricing was negative 2.3%, primarily as a result of tariff refunds provided to customers in the second quarter. This was a onetime 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. And with that, I will hand over to Mark to take you through the financials.

Thanks, Hugh, and 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 3 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 noncore 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 3 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 4 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 2.2 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 and $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, and the Board have approved a 10% increase in the group's interim dividend from EUR 0.172 to EUR 0.1892. We are committed to a progressive annual dividend with a targeted payout ratio range of 30% to 40% of adjusted earnings per share. In February, we announced authorization for a EUR 100 million share buyback program. This program was completed in 2 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 of Tirlan, our largest shareholder. In total, the group repurchased and canceled approximately 4.9 million shares at an average price of EUR 20.49. And this completes our share buyback program for this year. As Hugh mentioned, we've upgraded our savings target for our group-wide transformation program from $60 million to $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 blending capacity and procurement effectiveness. We expect 40% of the 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 group-wide 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%. Now 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 1, Performance Nutrition like-for-like revenue growth is now expected to be in the range of 12% to 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 shipments 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 Optimum Nutrition brand have performed well, we are pragmatic and expecting some volume elasticity as the second half progresses as consumers adapt to higher prices on shelf. As a result, half 2 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. And consequently, we expect to increase prices further in late '26 or early '27. 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 from the sale of noncore brands last year. Should volume trends in half 2 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% to 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 1 benefited from some pipeline fill by certain customers as they expanded into new regions, and we, therefore, expect half 2 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 the range of 17% to 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 a strong first half, we now expect Dairy Nutrition EBITDA to be in a range of $170 million to $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. Therefore, 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% to 20% in constant currency. And 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, and 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 3 segments and the continued strong consumer demand for our Better Nutrition brands and ingredients. And with that, I would like to hand it over to the operator for questions.

[Operator Instructions] We will now take our first question from the line of Patrick Higgins from Goodbody.

A couple of questions for me on Performance Nutrition, if that's okay. Firstly, just on the Q2 print, I guess, incredible kind of 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 kind of 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 kind of buying patterns during the quarter or so far in Q3? And then my second question is just around, I guess, the moving parts of Optimum Nutrition growth during H1 and Q2. Maybe you could just unpick how much that's driven by category growth versus distribution gains. You mentioned increased shipments. Maybe you can just give a little bit more color there. And I guess, how much are you benefiting from some of your competitors, I guess, not being able to source supplies as consistently as you guys can?

So maybe I'll start with the first question in terms of -- look, very happy with, obviously, quarter 2 and half 1 performance, very strong growth. I think what we're seeing generally, I would say, 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. So 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 kind of in certain markets and certain channels and certain SKUs. Some will be where competitors haven't quite moved yet in some of the pricing. But certainly, in half 1, as you can see from our numbers, we've seen continued very strong consumer demand. And we continue to see that demand as well as we look out into half 2. 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 2 and additional price increase in quarter 3. So that's obviously been prudent as we look ahead. In terms of ON growth, look very happy. I'd say, what I'd say is a lot of it will be velocity. As 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. But also, I think we're showing clear category leadership as well in terms of our investment behind the brand. The -- our marketing now is more effective, better creative, better -- more efficient, better consumer targeting. I think the cautiousness we've taken or the pragmatic approach to pricing strategy in RGM, we've been 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. So we certainly see the benefit of that in terms of bringing in new consumers to our brand franchise, new consumers into the category. So that's a clear benefit. And 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. And as the world increasingly moves digital and AI and search, we're benefiting from that. We do regular audits and we continue to see Optimum Nutrition as #1 recommended brand and that's a key focus for us. So between -- if I just sum it all up, we're seeing very good category growth in health and wellness demand, and then we're seeing very good performance from our protein brands, Optimum Nutrition and Isopure, but particularly driven by Optimum Nutrition. In terms of shipments, very small. Look, that's primarily Middle East as we navigate conflict in the Middle East, where obviously, our inventory levels are higher there, getting products into our markets there takes a bit longer. And there was a little bit of quarter 3 into quarter 2 with Amazon Prime as well. And lastly, look, you have the competitor question you asked, not really. We're competing against scale 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 include plant protein, collagen proteins, et cetera. So very pleasing to see our brand do well across the broader protein category.

We will now take our next question from the line of David Roux from Morgan Stanley.

Congratulations on a very strong set of results. Just got 3 questions. Firstly, on reformulation, which you mentioned. How do you see reformulation to other sort of protein sources playing out across your portfolio? I mean, in particular, given your flagship product is way on the front. 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. Backing this out, this was still down quite a bit in the quarter, similar to last quarter. Maybe you can give us some color there. And 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. And then 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 this means top line tailwind from price?

David, thank you. I'll answer the first 2 questions, David, and Mark address the margin point on PN. Yes, 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. It's got whey in the brand name. We won't be changing that. We won't be changing the quality. We won't be changing the formulation. And 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. So -- we have a number of innovations. We've already started that. We're launching products that contain clear protein and collagen. We're launching milk protein innovation as well. So 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 with great tasting, high-quality protein solutions that work functionally. And that's a mix also of whey, milk and plant protein solutions as well. So it's an increasing area of focus for the group, which has a protein powerhouse, just to ensure we have a broad base of protein solutions. In terms of Healthy Lifestyle, yes, that's -- if I look at Healthy Lifestyle, we've spoken about Optimum Nutrition, Isopure, very happy performance in Isopure. We're lapping a very strong performance in Serious Mass. You can see that in our NIQ data. We're just lapping a club channel delisting, which was margin dilutive. We lapped that as we head into quarter 4. And then the other primary driver of that decline will be think!, which we've spoken about as well that just lost distribution from the tail end of last year. And we do innovation, a complete relaunch of the think! high-protein bar proposition at the end of this year, which we're excited about. So we should see that trend change as we go into 2027.

Yes. And 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 and primarily because we're seeing more volumes come through. So 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. But 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. And also the transformation savings that we're seeing come through, they'll come through more in the second half as well. So it's just a level of progression. It's hard to fully predict right now, but we expect progression. And clearly, that's our goal as we sort of look to '28 to continue to see margin progression.

We will now take our next question. And the next question comes from Nicola Tang from BNP Paribas.

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. And 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. And I suppose, how are you thinking about that? Or how will you assess the magnitude of that relative to elasticity? And what are you seeing competitors doing around pricing or planned pricing and promotional activity? And then just maybe another one on the PN margins. I understand in terms of the whey cost headwinds and sort of how much you procured. But 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. And I heard you mention sort of marketing spend adjustments. What are your expectations in terms of spend for marketing this year?

Nicola, I might quickly answer the marketing question, and then I'll go to the first question on pricing and then Mark, you might answer the question on leverage margin. So look, marketing, what we said is we're more effective in terms of marketing spend, but still is -- we still continue to invest substantially behind the brand. So 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. I think 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 ensuring we navigate as we call this high growth in terms of significant record protein price inflation. But we want very good category growth, and we want to make sure we maintain our category leadership. So 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 2, that's in market now. Price increased in recent quarter 2, that's implemented with customers. We'll start to see that hit shelf probably late August, early September. It depends on how customers decide to put it through. And then depending on we watch elasticity carefully. As I said, it's been limited to date. I think category trends are very strong, and we'll watch that carefully, but we are planning for price increase in the back end of this year and early into 2027 as well. But that's also something we would keep under review as we watch raw material costs, as we watch elasticity and as we watch demand. In terms of competitors, look, everybody is moving in price. Given the scale of price increases, you're seeing all our competitors move. What we will often see is we are first to move, so there may be a lag that will sometimes cause a little bit of elasticity. But as soon as the competitive set has moved on price, we tend to see that elasticity wane. So a key focus for the business, Nicola, and lots of debate as we navigate this record inflation carefully.

Yes. Nicola, on the margin point, we are seeing operating leverage. We have transformation savings coming through. And we obviously have pricing as well coming through. We've got some benefit from the sale of noncore brands. Currently, they're offsetting the COGS increase we see in the first half. You'll see those more than offset in the second half. We rolled that through into the second half. And in terms of my comments around procurement for '27, 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 that we would expect.

We will now take our next question from Setu Sharda from Barclays.

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. And this cycle, however, demand has remained strong despite higher pricing. So 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 like can you help us think about the group's earnings bridge? Like if the whey remains high, the Dairy Nutrition clearly benefits from the higher whey prices, but the PN margins face pressure. Net-net, is high whey still positive for group earnings? Or does it become more of a constraint over time? And my third question is regarding the earnings upgrade. Like on the guidance upgrade, how much of the improvement should we think of as structural rather than any cyclicality into it? Like 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?

Setu, thank you for the questions. In your first question, which I'll answer and then Mark will answer the question on earnings. Yes, 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. So 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. So yes, 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 are -- that they will come off or decline. And 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. So I think the usability and the affordability are really important to our consumers as is the taste. And 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 strength of -- particularly for new consumers coming into the category. So we see that in pricing power. We've actually taken our third round of price increases. And yes, we are watching carefully for elasticity. I think there will be some elasticity this time with the cumulative effect, but 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. But the business is unique to Glanbia, the strength of our portfolio. We're playing broadly across all 3 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. And then we're one of the biggest in whey protein solutions to our Dairy Nutrition business. So certainly, there's a natural hedge across those 2 businesses, and it is a unique strength of our portfolio given the growth in health and wellness.

Yes. I would just add, Setu, that, look, we have 3 very strong businesses, as you have said. They stand on their own 2 feet 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. But 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. So I see a lot of strength coming through there in addition, frankly, to what we're seeing on the protein side. And 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.

We will now take our next question from Karel Zoete from Kepler Cheuvreux.

Yes. I have expected a question on pricing, but zooming out a bit, the whey prices have all been cyclical, supply comes on stream and prices go down. But the way you talk about it, it feels a bit that this time could be a bit different. Do you think that if you look back in 2, 3 years' time that this uptick in the whey cycle is really going to reshape your PN industry a bit? And then the other thing is regarding marketing spend. I think there's no longer a 10% of 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. So what have you done differently?

Maybe on the whey -- yes, look, if you look back, this is probably one of the things that changed for us in kind of '24 into '25. We've always had a traditional cycle in terms of whey demand. 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. So 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 has come on stream, and that's all been soaked up by demand. And we're certainly not seeing on either -- that's an advantage. We can see on both sides of the business, the demand, and we're not seeing either at the consumer or the customer level a lessening in demand for high-quality protein. Might that change with elasticity volumes come back, might that change as demand -- certainly, I think it's -- the demand generally for protein is very strong, and that looks like it's going to sustain. So as we look into next year, we're not -- we're certainly not planning for a decline in pricing for protein given the demand we're seeing. If you look at marketing spend, primarily digital, Karel. We -- while we 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 we've all -- I think the brand, Optimum Nutrition and Isopure doing particularly well in terms of investing in search, investing in engaging consumers online, and that's been a key strength of the business now for probably 15 years.

We will now take our next question from the line of Damian McNeela from Deutsche Bank.

A few for 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? Second one is just following on from Karel's question around the sort of supply environment. I think historically, you've spoken to sort of incremental 10% to 15% of incremental WPI coming into the market. Can you sort of provide any update on whether that's still the right number, if there are any more sort of supply side investments adding to that? And just to confirm whether your own investment will be completely taken up by yourselves, i.e., it's not going to be sold to any third parties when that comes on stream in '27. And then the final one is just on -- you've completed the buyback. I was just wondering -- you're obviously talking about retaining balance sheet flexibility for M&A. I was 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. There are 3 very quite varied questions. If I start with the first one in terms of -- like 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. Yes, we see it in Isopure as well if you exclude the [ jobs ] club channel. We do see customers expanding shelf space, both in terms of protein and creatine particularly. So we know that our brand and these categories are drivers of foot traffic in store and retailers know that as well. So you will be seeing increase in shelf space. Locally, these categories and our products have become mainstream. Look, turning to supply. Yes, the 10% to 15% we spoke about is coming on stream. Demand soaked that up. In fact, it's probably more than that has come on stream over the last 12 to 18 months. There is more supply coming on stream next year. So demand is definitely is -- given the pricing we're seeing, all of our suppliers are looking to increase their capacity in high-end whey protein, and that's a positive. If I look at our own supply, yes, that will either go to Performance Nutrition and in terms of supply in Optimum Nutrition or Isopure go to our protein solutions business. So it will remain within Glanbia. And lastly, just on M&A pipeline, yes, very active actually, very active and yes, primarily in Health & Nutrition.

We will now take our next question from Cathal Kenny from Davy. Cathal, can you unmute your line and ask your question, please? Cathal, your line is muted. Can you unmute and ask your question, please? As we are not getting a response, we'll move to the next question. And our next question comes from the line of Fatma Agnes Hamdani from ODDO BHF.

Yes. So I have 2 questions. Could you elaborate more on Isopure growth in H1 and how did the rest of the brand portfolio in the same period? And how are your expectations for all of them going forward? And the second question, could you provide some color on the raw material inflation seen in Health & Nutrition business during H1? What were the main drivers behind this inflation? And how do you expect it to evolve over '27? Should we expect more pricing to compensate next year?

I'll answer the Isopure question and Mark can answer the raw material question. So in terms of -- we're very happy with Isopure growth in half 1. As I said earlier in our briefing, the main double-digit good -- double -- very good double-digit growth in food drug mass convenience in the U.S. It's primarily -- Isopure is primarily a U.S. business for us. And the overall numbers have pulled back a little bit as we lap a club channel business, but strong growth in distribution in food drug mass, as I said, double-digit consumption, strong growth in household penetration as well. So very happy with that performance. And we will lap that lost distribution in club as we head into quarter 4 and certainly into 2027. As I spoke about the rest of the portfolio, look, the biggest brand there is think! brand, that's suffering from lost distribution at the tail end of last year. We have a major new relaunch of think! coming at the back end of this year as we go into 2027. It is one of the top high protein bars, 20 grams of great quality protein in a bar. So it's a priority for us, and that will be relaunched at the back end of the year.

In terms of the cost increases 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. But we still are very confident in our 17% to 19% margin overall for the business.

And for '27 next year, we see some...

Well for '27, 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'll look to pass those on in terms of pricing as well next year.

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. So just to say thank you very much for all your questions. Delighted with half 1 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.