Monday 23 April 2018

Greencore to restructure US network as it warns on profits

Patrick Coveney, CEO of Greencore
Patrick Coveney, CEO of Greencore
Ellie Donnelly

Ellie Donnelly

Convenience food giant Greencore has issued a profit warning today as well as announcing that it plans to restructure its US network.

As part of the restructuring, CEO Patrick Coveney is to take a direct role in the strategic, organisational and commercial leadership of Greencore US.

Earnings per share at Greencore for the year are now expected to be between 14.7p-15.7p, with approximately two thirds of that contribution delivered in the second half of the year. This contrasts with current market expectations of earnings of 15.7p-16.6p.

In a trading update this morning the company said that the acquisition of Peacock Foods in 2016 had greatly enhanced the scale, operational capabilities and financial performance of Greencore US.

Since then the group has been actively seeking to align the manufacturing network with current and prospective commercial opportunities. However, in both its 2017 results and its trading update for the first quarter of 2018 Greencore had noted the continued low capacity utilisation at some of the original Greencore US sites.

“The group is now restructuring its US network to reflect the commercial pipeline and to address these utilisation challenges,” Greencore said.

As part of the restructuring, current fresh production at its Rhode Island facility will cease this month, with the facility being retained for potential repurposing. The facility represents approximately 4pc of the company’s US manufacturing.

Meanwhile at its Jacksonville site, the company said that it anticipates that new business wins will increase volumes and site utilisation in the latter half of this year. This follows an announcement from Greencore last August that it would repurpose the Jacksonville facility following the loss of a supply contract.

In addition, the group said it continues to make progress on its US commercial pipeline, most particularly with its current large Consumer Packaged Goods customers.

Along with Patrick Coveney’s increased involvement in the US – where he will now spend around half of his time – Chuck Metzger, COO of Greencore US, has assumed day-to-day responsibility for the US business and will report to Mr Coveney.

While Chris Kirke, outgoing CEO of Greencore US, is leaving the group to return to the UK.

"In the US, the core CPG business has continued to perform in line with expectations. The network and commercial developments announced in this update give the group confidence in improved financial performance through the second half of FY2018 and into FY2019," Greencore said.

"However, the weak performance of the group's underutilised original sites in the first half of FY2018, combined with the timing of new business contributions, and the current GBP/USD exchange rate, will reduce the expected rate of US profit growth in FY2018."

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