Directors' Report: Group performance Glanbia plc Annual Report 2011Group Managing Director's reviewwww.glanbia.com9> Operational excellence is an intrinsic feature of how we run our business and we advanced this further in 2011 with the 'Glanbia Performance System', which seeks to optimise the effectiveness and efficiency of all our operations. These processes, developed centrally, were initially implemented in the US Cheese business and are already delivering real financial benefits and facilitating problem solving; and> Working with a number of parties we are building a new sustainability model for our Irish dairy operations. This has the potential to deliver competitive advantage and to align the business as a key supply partner for leading customers. Glanbia is also a member of the US Dairy Sustainability Committee and our US Cheese and Ingredient Technologies businesses will issue their first Sustainability Report this year. Group strategyGlanbia has invested significant resources to develop and enhance its US Cheese & Global Nutritionals division. Our key strategic investments and acquisitions in these areas have performed very well and underpin our strategic objective of delivering sustainable, profitable earnings growth. Disciplined strategic execution has developed market positions in important markets such as: > Leading US American-style cheddar cheese producer;> Global marketer of whey protein isolate; > Leading brand family in Performance Nutrition; and> Global supplier of micronutrient premixes.Our strategy is consistent and clear. It is set out on page 13 of this review which includes the key focus areas for the business in 2012. Our business models are outlined on pages 14 and 15 and show the integrated nature of the Group, with firm foundations and a long history in the dairy industry.The quality of our people is a core strength. We have further enhanced our capabilities again this year in key markets, including in Asia Pacific and Latin America where a billion new consumers are emerging in these developing economies.Our strategic objectives are to deliver attractive and growing returns to shareholders, excellent solutions and service to our customers, value adding routes to market for our milk suppliers and rewarding careers to our employees.Total Shareholder Return (TSR)In 2011, Glanbia delivered TSR of 27.8% and outperformed the ISEQ, the FTSE 300 Index and the FTSE 300 Food Producers Index. In a period of five years the Group has delivered TSR of 72%. Global dairy markets2011 was a positive year for global dairy markets. Despite a significant increase in global milk production, overall demand proved to be resilient, resulting in a modest market correction in the second half. Many of the 2011 demand characteristics, including demand from developing economies, are expected to prevail in 2012.There is strong growth currently in global milk production. The risk to forecast 2012 market dynamics is the significant concern around a global economic downturn and the impact this could have at the consumer level. John Moloney / Group Managing Director" The Group's focus on driving growth in nutritionals combined with deep dairy market expertise and strong execution capability, positions us well for the future."An integrated business2011 marked a decade of transformation for Glanbia. This journey has been mapped out with a strategic focus on nutritionals and cheese, as well as an unrelenting focus on growth customers in growth markets.Our strategy is built on a global dairy base and a specialist nutrition business, using advanced dairy and other ingredients. This means we play to our core strengths as an organisation with deep roots in the dairy sector.Our nutritional focus spans sports, fitness and healthy aging. Glanbia's product innovation targets health & wellness, convenience for busy lifestyles and healthy snacking. These 'lifestyle products' have a strong emotional bond for consumers and demand is resilient as a result.Global Nutritionals businessLarge scale dairy business

WheyWheyWheyWheyPerformance Nutrition includes three main brands. Optimum Nutrition are specialists in protein powders; ABB are high performance sports beverage experts; and BSN® are leaders in pre-workout energy products and have a strong position in blended protein products.Customised Premix Solutions specialise in creating micronutrient premixes utilising a wide range of specialty ingredients for applications which are tailor-made to customer specifications. Ingredient Technologies provides customers with:> Functional Ingredients designed to improve customers' product formulations, including clean labels, lower costs, better texture, longer shelf life and enhanced processing capability.> Whey Proteins, a superior, natural way to build muscle through efficient delivery of essential and branch chain amino acids. Easily added to food products and easily absorbed, whey proteins promote overall health & wellness while being essential building blocks for muscle development. > Bar Solutions are derived from whey proteins, modified whey protein isolates, milk proteins and whey/soya protein blends. They are designed to fortify nutritional content while improving functionality in nutrition bars and high-protein bars. > Amino Acids, Vitamins & Specialty Ingredients is an extensive range of individual ingredients that can be utilised in sports performance solutions. > Milk Proteins are derived from the freshest, ultra-filtered skimmed milk and provide the same ratio of micellar casein and whey protein found naturally in milk, but in a process-stable, superior-flavoured, easy-to-use powder format. > Flax Seeds have powerful antioxidant benefits and an abundance of essential Omega-3 fatty acids. MeadowPure® is a patented seed selection and cleaning process exclusive to Glanbia. The result is a superior flaxseed that delivers the full nutritional value of flaxseed where it's intended - in the food products that reach consumers.Directors' Report: Group performance 10Glanbia plc Annual Report 2011Group Managing Director's reviewwww.glanbia.comThe current view on global dairy market performance is that prices will soften further in the first half of 2012, relative to the second half of 2011, with increased milk and dairy product availability. The second half of 2012 is forecast to be moderately weaker again. Critical markets such as China, Russia and South East Asia are expected to remain solid throughout 2012, limiting market volatility. US Cheese marketsIn 2011, US cheese prices were strong for most of the year, due to a combination of market factors. US milk production increased 1.8% for the year and 3.7% in Idaho. However, higher prices from competing dairy products reduced milk volumes processed into cheese, thereby increasing prices. Retail cheese sales were down overall, mainly as a result of consumer resistance to retail price increases. This was more than offset by relatively strong demand from the foodservice sector and very strong export sales of American-style cheddar cheese, which increased over 30% in 2011. In 2012, US cheese prices have reduced year to date with the market currently driven by supply factors as milk production exceeds expectations. Global Nutritionals' brand and product portfolioOur cheese business gives us access to a large, high quality whey pool, which is a cornerstone of our Global Nutritionals' business.Glanbia whey pool