Wednesday 18 July 2018

Greencore shares dip due to US volatility

Greencore chief executive Patrick Coveney
Greencore chief executive Patrick Coveney
John Mulligan

John Mulligan

Shares in Irish food group Greencore fell over 3pc yesterday despite issuing what analysts said was a solid third-quarter update.

The company, which is headed by chief executive Patrick Coveney, also said that while the long term implications of the UK's exit from the EU remain unknown, the short-term effects are "likely to be modest".

The group's total revenue in the latest quarter rose 4pc on a reported basis to £360.4m (€430.8m). In the year to date, total revenue is up 6.7pc at £1.05bn (€1.25bn).

Greencore is the world's biggest maker of sandwiches and is heavily involved in the production of other food products, such as ready meals.

While the majority of its sales are generated in the UK, it has also been intensifying its presence in the United States.

In the UK, its third-quarter revenue rose 5.7pc in the third quarter, with growth driven by Greencore's food-to-go business.

It said that the segment has benefited from new business wins and the impact of new product launches. Greencore's products are sold by major retailers such as Tesco, M&S, and Sainsbury's.

In relation to Brexit, Greencore pointed out that its businesses in the UK import less than a quarter of their ingredients and packaging materials.

"Given forward purchase arrangements, the depreciation in sterling is not expected to impact profit delivery in the current financial year," it noted. "However, if current exchange rates persist, net debt at year end will be higher than expected at the half year due to translation of US dollar-denominated borrowings."

On Monday, Greencore announced that it had agreed to pay £15m to buy The Sandwich Factory, a unit of Cranswick. The unit generated revenue of £54m in the year to the end of March. Its net revenue from manufactured products was £42m.

In the United States, Greencore's reported revenue in the third quarter was up 4.1pc. In the year to date, revenue there is 12.4pc higher, and 6.5pc higher on a constant currency basis.

The company has invested heavily in new production facilities on the east and west coasts of the US. Its major clients there include Starbucks. It said its performance in the US during the third quarter was "encouraging".

However, Davy Stockbrokers' analyst Cathal Kenny said Greencore's US foray remains a work in progress. "The development of the US revenue base is proving more volatile than anticipated owing to customer concentration and lumpiness in the off-take," he said.

Greencore said it is on track to deliver a group performance "in line with market expectations".

Irish Independent

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