Tuesday 22 October 2019

Greencore is back on track

The US can provide a growth path for chief executive Patrick CoveneyPeter Flanagan

GREENCORE is set to move into profit in the US this year, as it seeks to draw a line under the horse-meat scandal that had threatened to engulf it.

The ready-made meals and sandwiches maker lost some 20pc of its value overnight in February after ASDA said it had found traces of horse DNA in a spaghetti bolognese sauce that had been supplied by the Irish company.

All Greencore products have come back clean since then however, and the shares have now passed where they stood before the horse-meat scandal.

In a note to clients yesterday, Davy Stockbrokers' analyst Cathal Kenny said the company was on the verge of moving into the black across the Atlantic.

"After an indifferent initial foray in the US, Greencore is potentially on the cusp of an opportunity that could revise upward the earnings path of the business," Mr Kenny said.

Greencore, due to release fiscal first-half earnings next week, may report revenue that was slightly ahead of last year's £567.7m (€437.6m), with operating profit up 3.9pc at £33m, Davy's Kenny predicted. He has a neutral recommendation on the company, headed up by chief executive Patrick Coveney.

"The US looks set to take up the baton of growth this year," Nicola Mallard, an analyst at Investec with a 'buy' rating on the stock, said in a note to clients on May 10.

"The swing from the US from loss to profit could be in the region of £5m this year."

Greencore has started supplying chilled products to about 10pc of Starbucks' US outlets this year. The contract is worth about $50m in revenue in a full year, Mallard said. The Irish company's profit may be more biased toward the second half than usual, he wrote.

The shares have risen for 10 out of the last 11 days, and are up more than 70pc in the past year. In London, company shares fell 0.4pc to 115.5 pence. (Additional reporting by Bloomberg)

Irish Independent

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