Greencore's profits increase 32%

Greencore yesterday warned that higher food prices are inevitable as it published better than expected results showing a 32 per cent increase in pretax profit.

A strong recovery by its ingredients business more than offset a bad second half to the year for its convenience foods business, with the result that Greencore announced its first dividend increase for shareholders since 2000.

Operating profits in its consumer foods division declined 16 per cent in the second half of the year to the end of September as a result of the higher price of raw materials and unseasonable summer weather. Convenience food profits fell 7 per cent to €64 million over the full year.

But this was offset by a 372 per cent jump in profits in its continuing ingredients and related property businesses to €26.6 million, with malt the best performer in the division. Group operating profit before exceptional items rose 22 per cent to €91 million, with pre-tax profit before exceptional items at €75.1 million.

Greencore chief executive David Dilger said he was confident that the company would be able to recover an 8 to 10 per cent rise in its input costs next year by negotiating price increases in the order of 6 to 7 per cent with its customers. "No lag effects and no excuses," he said.

Greencore has identified an acquisition target of "modest" size in the US. But Mr Dilger said cracking this market would not be an overnight success and would not be a material influence on its 2008 results. "We're not going to bet the shop on entering the most competitive food market in the world," he said.

Greencore's latest figures show the company made a profit of €24.2 million from the sale of its 50 per cent share in milling company Odlums to Origin in August.

Shareholders will receive a final dividend of 8.21 cent, a 5 per cent increase on the previous year, and Mr Dilger indicated that they would continue to be rewarded in line with profit growth.

The company said it had made good progress on the development of its four major property assets, located in Carlow, Mallow, Athy and Littlehampton in the UK.

He said Greencore was pleased that its view on how EU sugar aid should be allocated appeared to have been vindicated by the High Court, which has ordered the Government to reassess how it will distribute the €145.5 million compensation for the closure of the industry.

"We have represented the interests of our shareholders and we make no apology for having done so." He said Greencore had not changed its view "one whit" in light of the Government's decision to appeal the ruling.