Upbeat Greencore on course to beat earnings target
CONVENIENCE foods business Greencore expects to beat its earnings target this year, according to a statement from the company.
In an interim management statement for the period from April to July, the company said that sales from continuing operations were €281.2m or 7pc ahead of the same period last year. Trading has been "very positive" over the summer and the "group remains on track to record strong operating growth in full year 2010 in convenience foods". The company believes it will "modestly exceed" its previously guided earnings per share for 2010 of 16c.
In the UK, the company continued to gain market with chilled ready meals in particular growing by a third to 10.4pc in the year up to July 11. Sales growth across the UK portfolio was driven mainly by volume with pricing being flat overall.
Growth in Greencore's US business slowed down during the four months compared to the first half of the year, with the business recording constant currency sales growth of 20pc compared to 27pc for the previous six months. The company blamed the slowdown on lower than expected salad sales and the fact that there had been "a more demanding run rate in food to go than in the earlier part of the year".
Greencore added that is does not expect sales growth for 2011 to match growth over the previous 18 months. Converting operating profits into free cash flow remains a high priority for the firm with net debt at the end of the financial year expected to be lower than the €194.2m recorded at half year
Chief Financial Officer Geoff Doherty said the company was pleased with its performance so far this year and added that rising commodity prices would have a minimal effect on the company in the near term.
"Grain makes up less than 10pc of our input costs but in any case our forward trading means we have assured supply until the end of the year at least," he said.
"There has been a lot of focus on Russia banning wheat exports but we will not be able to measure the strength of the wheat harvest worldwide for another six to eight weeks so the market will not be able to make strategic decisions until then," he added.
Cathal Kenny, an analyst with Davy stockbrokers was satisfied with the statement.
"This is a good statement from Greencore. The summer trading season has worked out well and importantly, the margin trajectory for the convenience foods division is improving," he said.