Greencore shares fall 3.2% as loss of €251,000 recorded

SHARES IN convenience foods group Greencore fell by 3.2 per cent in Dublin yesterday as it posted a loss for the first six months of its trading year and cautioned that consumer buying would “remain subdued” throughout 2011.

Greencore recorded a loss of €251,000 for the six months to March 25th compared with a profit of €25.1 million in the same period of 2010.

The turnaround reflected an exceptional charge this year of €17.6 million and the stripping out of discontinued operations (it exited malt and bottled water), which contributed €16.4 million to Greencore’s bottom-line profit in the first half of last year.

Greencore’s exceptional charge included €13 million in costs associated with its unsuccessful attempt to acquire UK-based rival Northern Foods this year.

Greencore’s revenues rose by 7.9 per cent to €442 million while its operating profit, before exceptional items and acquisition-related amortisation, was up 1.7 per cent at €27 million.

Convenience foods turnover rose by 8.2per cent to €402.4 million while the operating profit was 4.9 per cent higher at €26 million. However the operating margin for this division declined by 20 basis points to 6.5 per cent.

In sandwiches, the value of sales rose by 8.4 per cent in the period compared with 2.6 per cent for the market as a whole. In chilled ready meals, Greencore achieved growth in value of 19.3 per cent against a market increase of 9.4 per cent.

Its US convenience foods “made considerable progress” in the period, Greencore said. In December, it acquired On A Roll Sales in Boston for a total consideration of €13.6 million.

Sales at its ingredients and property division rose 5.3 per cent to €39.5 million, but operating profit fell by 42.4 per cent to €1 million.

Greencore chief executive Patrick Coveney told The Irish Timesyesterday that the performance of its ready-meals division as "very good" while the sandwiches division was "solid". Its Yorkshire pudding and cake units saw sales soften but the harsh winter weather of December and January boosted its soup products, he said.

Mr Coveney added that input costs – raw materials and packaging – would rise 4-5 per cent this year and the company would seek to recover these through efficiency gains and price increases.

Greencore refinanced bank debt facilities after March 25th. The new facilities total €319 million with a maturity date of May 2016. This compares with existing facilities of €324 million with a maturity of April 2012.

“The big benefit [of the refinancing] is a significant extension to the security,” Mr Coveney said, while the five-year deal would also bring “security” to Greencore’s balance sheet.

He added that there was a “strong appetite” among financial institutions to participate in the financing, in spite of the negative image of Ireland abroad because of the financial crisis.

Stockbroker Davy described the Greencore results as “reasonable”. “We welcome the new financing package as this gives management greater flexibility in the medium term to explore corporate development,” Davy added.